distribution of research gains in multistage production systems research irrespective of the incidence of the levy and benefits no longer is valid we have no disagreement with this important observation but we are concerned about the lack of reliable estimates of the elasticity of substitution building on muth s analysis for which we suggest some changes we explore further the sensitivity of the effects of the distribution of benefits of research to different ways in which research can impact on a multistage production system and to the effects of the elasticities

interpreting tests of school vam validity abstract we develop over identification tests that use admissions lotteries to assess the predictive value of regression based value added models vams these tests have degrees of freedom equal to the number of quasi experiments available to estimate school effects by contrast previously implemented vam validation strategies look at a single restriction only sometimes said to measure forecast bias tests of forecast bias may be misleading when the test statistic is constructed from many lotteries or quasi experiments some of which have weak first stage effects on school attendance the theory developed here is applied to data from the charlotte mecklenberg school district analyzed by deming 2014

ex ante consumer welfare evaluation in cost benefit analysis abstract public projects and policies are normally evaluated ex ante i e while consumers may still be uncertain about future prices income levels interest rates and preferences this paper extends the theory of ex ante consumer welfare evaluation by developing a 2 period model with multiple sources of uncertainty it provides insights into the influence of temporal uncertainty on the empirical measurement of ex ante willingness to pay

economic welfare evaluations for producers under uncertainty the validity of producer and consumer surplus measures of firm welfare under risk is examined under constant absolute risk aversion and output price uncertainty only these measures are an exact measure of firm welfare as defined by compensating variation equivalent variation or the change in the certainty equivalent under decreasing absolute risk aversion qualitative comparisons of various measures are discussed for example producer s surplus as measured by the area above the uncompensated risk averse supply curve overstates the compensating variation of a change in expected price of output procedures for calculating firm welfare under production uncertainty and a variety of economic environments are proposed generally these procedures are applicable only when absolute risk aversion is constant

intertemporal consumer surplus in lagged adjustment demand models an application to natural gas pricing abstract applied welfare analyses of policy options typically measure surplus as a single period snapshot or a flow over time assuming stationary supply and demand curves these curves however generally are not independent of time therefore the effects of various policy changes are likely to differ in type and magnitude over time as adjustments are made this paper presents an algorithm for calculating the welfare effects of a policy change in the context of commonly used lagged adjustment demand models an example involving natural gas price decontrol is presented in this example assuming stationary demand curves would overestimate lost consumer surplus by 15

optimal production with learning by doing abstract this paper characterizes optimal production over time when production cost is a decreasing function of past accumulated output when production exhibits learning by doing monopolistic competitive and socially optimal solutions are considered

lagged beliefs and reference dependent utility abstract models of expectation based reference dependent preferences proposes that the reference point to which consumption outcomes are compared is endogenously determined as a function of lagged probabilistic beliefs this paper presents an experiment designed to test some predictions of expectation based reference dependence models the design induces a stochastic reference point via a lottery and then measures valuations for a commodity the experimental results find no effect of the first stage lottery on commodity valuation

divergence in alternative hicksian welfare measures the case of revealed preference for public amenities this paper investigates the divergence between the two hicksian welfare measures of non traded amenity improvement associated with housing first the hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures a hedonic two stage approach is then applied to empirically show that for quantity changes in contrast to hypothetical markets divergence in real market is small the paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect the greater the substitution effect the smaller the divergence between the two measures copyright 2002 john wiley sons ltd

buyers pricing behavior for risky alternatives encoding processes and preference reversals numerous studies have examined individuals minimum selling prices or certainty equivalents for lotteries as measures of preference but few have examined maximum buying prices because every transaction involves a buyer as well as a seller buyers pricing behavior is of interest in its own right two prospect theory based descriptive models of maximum buying prices the integration and segregation models are developed from different assumptions about cognitive encoding processes the models were tested experimentally using an incentive compatible cash payoff scheme in which maximum buying prices for bets and choices between bets were elicited from subjects surprisingly observed maximum buying prices were far below expected values even for bets with probabilities of winning near 1 0 this suggests buyers are strongly influenced by loss aversion and that the conventional assumption that the buying price for a risky alternative is a reduction in the alternative s payoffs fails to describe behavior instead it appears subjects predominately employed a segregation encoding process in which the buying price was encoded separately from the bet s payoffs and treated as a sure loss however an additional result was not explained adequately by either encoding model buying prices were less risk averse than choices for 3 expected value bets creating preference reversals of the standard kind lichtenstein and slovic 1971 but more risk averse for 100 expected value bets creating reverse preference reversals casey 1991 implications for the scale compatibility principle tversky et al 1988 are discussed two theoretical approaches are outlined which offer promise in the development of a unified model of price judgments and choice preferences under risk

application of sample selection model to double bounded dichotomous choice contingent valuation studies modeling households behavior with the data from a contingentvaluation cv survey is often complicated by samplenon response which can cause non response bias and sampleselection bias leading to inconsistent parameter estimates and adistorted mean willingness to pay estimate this paper reportsthe results of empirical tests for both biases using householdsurvey data in which the double bounded dichotomous choice cvquestion involved the benefit of a tap water quality improvementpolicy in korea no non response bias but sample selection bias is detected in the sample to correct for sample selection bias a sample selection model is employed the authors also discusshow failure to correct for bias may distort aggregate benefitestimates

randall and stoll s bound in an inverse demand system abstract this letter extends randall and stoll s and hanemann s results into a complete inverse demand system it provides a theoretically consistent framework for welfare measurement under quantity restrictions and free adjustment of prices in an equilibrium it is found that randall and stoll s and hanemann s results should be modified to fit into the complete inverse demand system since they may give misleading interpretation of empirical studies in some cases

consumer choice and competition policy a study of uk energy markets consumer choice is increasingly recognised as a crucial factor in competition policy to illustrate the implications of such choice we present an investment model of the switching choice in the uk residential natural gas market and examine responses to a specially commissioned survey of nearly seven hundred consumers identifying search and switching costs through an assessment of the savings which consumers say they require to switch supplier together with an evaluation of consumer switching behaviour we deduce that the incumbent retained considerable market power suggesting that some continued regulation may be necessary

contingent valuation a practical alternative when prices aren t available a person may be willing to make an economic tradeoff to assure that a wilderness area or scenic resource is protected even if neither that person nor perhaps anyone else will actually visit this area this tradeoff is commonly labeled passive use value contingent valuation studies ask questions that help to reveal the monetary tradeoff each person would make concerning the value of goods or services such surveys are a practical alternative approach for eliciting the value of public goods including those with passive use considerations first i discuss the exxon valdez oil spill of march 1989 focusing on why it is important to measure monetary tradeoffs for goods where passive use considerations loom large although discussions of contingent valuation often focus on whether the method is sufficiently reliable for use in assessing natural resource damages in lawsuits it is important to remember that most estimates from contingent valuation studies are used in benefit cost assessments not natural resource damage assessments those working on benefit cost analysis have long recognized that goods and impacts that cannot be quantified are valued implicitly by giving them a limitless value when government regulations preclude certain activities or giving them a value of zero by leaving certain consequences out of the analysis contingent valuation offers a practical alternative for reducing the use of either of these extreme choices i put forward an affirmative case for contingent valuation and address a number of the concerns that have arisen

consumer s surplus versus compensating variation revisited consumer s surplus and a second order approximation to compensating variation are compared to the exact compensating variation for a subsystem of several commodities an empirical application to the relative retail price distortions created by the u s dairy program is presented in the application a new specification for weakly integrable incomplete demand models is developed and estimated the integrable demand model has sufficient flexibility that it is not rejected by the data both welfare approximations are found to introduce large errors in the measurement of deadweight losses

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

can weak substitution be rehabilitated this paper develops a graphical analysis and an analytical model that demonstrate how weak substitution can be used for non market valuation weak complementarity and weak substitution represent preference restrictions that allow us to develop equivalent price changes to describe quantity or quality changes in non market goods the price changes are hicksian equivalents in that they yield the same utility changes as would the quantity or quality changes after discussion of several potential applications of weak substitution the paper develops the parallel between the restriction and recent strategies from modeling differentiated goods

presidential address antitrust restrictions on single firm strategies this article offers an overview of selected developments in the law and economics of antitrust regulation of single firm strategies the strategy generating the most cases historically is resale price maintenance here the law has moved sharply in both canada and the u s towards more solid economic foundations yet a gap between the law and economics remains the economics of resale price maintenance is reviewed within a framework that is much simpler and more general than the existing literature the law on a second strategy predatory pricing represents in my view a success story for the influence of economic theory in spite of the absence of a single accepted theory of predatory pricing the remaining single firm strategies are concerned largely with the exclusion by a dominant firm of rivals from a market i review with application to cases the two most basic questions concerning exclusionary strategies are exclusionary anticompetitive contracts ever entered into voluntarily by market participants on the other hand is complete or substantial foreclosure of a market through exclusionary strategies necessarily anticompetitive cette allocution presidentielle a l association canadienne d economique presente une vue d ensemble des developpements dans le droit et l economie de la reglementation antitrust sur les strategies d une firme unique la loi sur la strategie qui genere historiquement le plus de cas le maintien du prix de revente a change dramatiquement au canada et aux etats unis et derive vers une politique qui a des assises economiques solides mais il reste un ecart entre le droit et l economie on reexamine l economie du maintien du prix de revente a l aide d un cadre d analyse qui est a la fois plus simple et plus general que ce qui existe dans la litterature specialisee la loi pour ce qui est d une seconde strategie prix d eviction est a mon avis une grande reussite pour la science economique malgre l absence d une seule theorie du prix d eviction generalement acceptee un troisieme ensemble de strategies concerne l exclusion de ses rivaux d un marche par la firme dominante l auteur reexamine avec un recours extensif aux cas les deux questions de base pour ce qui est des strategies d exclusion est ce que les participants sur un marche entrent jamais volontairement dans un arrangement contractuel qui exclut et est anticoncurrentiel d autre part est ce que la saisie complete ou substantielle d un marche par des man uvres d exclusion est necessairement anticoncurrentielle

regulation by price adjustment the regulatory price adjustment process originally proposed by vogelsang and finsinger has been shown to be vulnerable to strategic manipulation by the regulated firm this article proposes several modifications to that scheme which improve its performance and broaden its applicability inclusion of a monopoly franchise market and the firm s past prices and earnings in the price adjustment constraints are shown to ensure efficient production by the firm and convergence to ramsey prices regardless of the firm s cost structure

surplus maximization and optimality i identify assumptions under which policies that maximize expected surplus are pareto optimal even when expected consumer surplus does not even locally represent preferences over price income lotteries besides the oft made partial equilibrium assumptions that only one price varies and that income changes do not aect demand the two other assumptions are that every consumer s indirect utility function is supermodular in price and income and policies order prices by a single crossing property supermodularity holds precisely if relative risk aversion exceeds the income elasticity of demand a mild condition the single crossing property appears strong but holds in many applications that use expected surplus

rent seeking and x inefficiency this paper discusses the social cost of monopoly with special attention given to the geometric representation of that social cost notably rent seeking and x inefficiency the possibility of an overlap between these two measures is examined in particular the paper addresses a problem of measure identification which highlights the need to reconsider the normative microfoundations of rent seeking

public and private returns from joint venture research an example from agriculture public research institutions are turning increasingly to the private sector for additional financial support such a trend in the short run lessens the need for public research expenditures but may in the long run prove to be very costly to the economy as a whole this is because private funding increases the chance that the direction of research will shift so that private benefits are enhanced such a shift is especially costly if public research funds are then not forthcoming that would have the potential of producing the maximum level of benefits to the economy as a whole a case study of canadian barley research is used to illustrate this problem

health insurance tradeoffs revisited abstract in two recent papers journal of health economics 18 2 141 152 journal of health economics 18 6 811 824 nyman raised some questions about the welfare calculations and conclusions in our earlier paper manning and marquis health insurance the tradeoff between risk pooling and moral hazard vol 15 1996 this note discusses the erroneous criticisms in his papers first although we estimated a marshallian demand curve our calculations are based on compensating variations that incorporate the gains from risk pooling second our estimates of second best insurance plans indicate that some cost sharing is optimal in contradiction to his assertion that our results raise questions about the desirability of insurance coverage the comment also deals with other issues raised by nyman

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

the economic benefits of surface water quality improvements in developing countries a case study of davao philippines two nonmarket valuation techniques the contingent valuation method and travel cost model are used to estimate the economic value that people in davao philippines place on improving the water quality of the rivers and sea near their community the contingent valuation and travel cost estimates are very close to each other and are quite low both in absolute terms and as a percentage of household income these findings suggest that water pollution control is simply not a high priority for davao s residents and support the argument that households willingness to pay for environmental amenities such as improved water quality is low

dealing with censored data from contingent valuation surveys symmetrically trimmed least squares estimation the purpose of this paper is to explore the use of a consistent and robust estimator when estimating a willingness to pay wtp equation using the censored data collected by a contingent valuation survey 1 mitchell and carson s payment card format 11 12 strongly encourages the respondent to give a wtp value that is zero or greater because payment cards do not normally include any negative values but some respondents who answer with a zero wtp may in fact have negative wtp as a simple example if people are asked about improving a salt water pond s water quality to the point that shellfish taken from it would be edible there may be individuals in the sample who use the pond for other recreational activities that would be hindered by the presence of people shellfishing in addition anyone who enjoys quietness around and on the pond also might want to be paid a certain amount to allow the ponds to be made shellfishable in brief not every public effect on net is a good to every affected person but anticipating the varieties of reasons for negative valuation is at least difficult if not impossible this was true in our research aimed

a multicommodity analysis of trade policy effects the case of nicaraguan agriculture agricultural trade policies for a small country are analyzed using a simple multicommodity quadratic programming agricultural sector model the policy conditions simulated include a quantitative trade restrictions given an uncertain world market b export taxation and c import subsidies the multicommodity sectoral wide coverage permits analysis of the factor product market linkages and enables identification of the distributional consequences

precommitments for financial self control micro evidence from the 2003 korean credit crisis we analyze high frequency micro panel data on customers of a major korean credit card company before and after the 2003 korean credit crisis and find evidence of pervasive precommitment behavior that is difficult to explain using standard economic theories 1 customers voluntarily reduce their credit card borrowing limits without any compensation 2 customers turn down interest free installment loan offers with high probability and 3 of the small fraction of customers who do accept interest free loan offers most precommit to pay off the loan over a shorter term than the maximum allowed term under the offer

distributive consequences of a property tax revolt voters who support tax limitations measures such as california s proposition 13 seem to feel that their expected gains more than compensate for whatever costs may follow from a successful tax revolt costs can arise from a decline in government services or from an increase in some replacement tax if service levels are maintained this paper estimates the perceived and actual incidence of a property tax revolt under alternative assumptions about voter perceptions and eventual outcomes our results suggest that the most visible benefits of a tax cut favor low income homeowners in the event of government budget cutbacks it is possible that the distribution of services is sufficiently skewed toward low income groups to reverse the incidence of a property tax revolt

the demand function for residential heat through district heating system and its consumption benefits in korea abstract the demand for residential heat rh through a district heating system dhs has been and will be expanded in korea due to its better performance in energy efficiency and the abatement of greenhouse gas emissions than decentralized boilers the purposes of this paper are two fold the first is to obtain the demand function for dhs based rh in korea and investigate the price and income elasticities of the demand employing the quarterly data covering the period 1988 2013 the short run price and income elasticities are estimated as 0 700 and 0 918 respectively moreover the long run elasticities are 1 253 and 1 642 respectively the second purpose is to measure the consumption benefits of dhs based rh employing the economic theory that they are the sum of the actual payment and consumer surplus for the consumption considering that the average price and estimated consumer surplus of the dhs based rh use in 2013 are computed to be krw 87 870 usd 84 1 and krw 62 764 usd 60 1 per gcal the consumption benefits of the dhs based rh are calculated to be krw 150 634 usd 144 2 per gcal this information can be beneficially utilized to conduct an economic feasibility study for a new dhs project related to rh supply

compensating variation consumer s surplus and welfare the compensating variation was defined by j r hicks 1942 as the amount one would have to deduct from a person s income to make him just as well off after a change in prices and income as he had been in the initial situation if the compensating variation is positive the individual is better off under the new situation since the compensating variation furnishes a uniquely defined numerical cardinal indicator of welfare improvement it provides an implicit ranking of alternative prospective situations not only relative to the initial situation but also relative to each other in practice this appears to be how this and other tools of cost benefit analysis are actually used one is interested in knowing not only whether a particular bridge or a particular excise tax will lead to an improvement in welfare but which out of a set of alternative bridges or alternative tax systems will improve welfare the most 1 in this paper we analyze conditions under which the compensating variation can be validly used in this generalized sense these turn out to be precisely the same as conditions previously derived see our 1976 paper for the valid use of consumer s surplus as a welfare measure in our final section we analyze the problem of deriving the generalized equivalent and compensating variations either exactly or approximately from observable demand functions by means of generalizations of or alternatives to consumer s surplus

welfare implications of community forest plantations in developing countries the orissa social forestry project community forest plantations are a common intervention in developing countries we use household and remote sensing data from orissa india to estimate welfare effects of community forest plantations in terms of the value of decreased collection times plantations afford users a selection model accounting for possible jointness in site location and productivity is used to estimate collection production functions for different household labor categories in natural and community forests two measures of an opportunity cost of time are used to determine welfare effects of time saved due to community forests we find access to community forests is important to marginal productivity of different labor categories but to different degrees highlighting the need to disaggregate household data when analyzing these interventions we also find substantial welfare improvements from time savings for many households and villages

what do income tests tell us about the gap between wta and wtp for public goods abstract theory relates the gap between wta willingness to accept compensation and wtp willingness to pay to the income elasticity of wtp it has been suggested that empirical estimates of the income elasticity of wtp can therefore be used to test whether an observed gap between wta and wtp is consistent with rational behavior we examine this issue for the case of non market public goods we identify the theoretically appropriate tests of income sensitivity and examine conditions for valid income sensitivity tests we show that income tests may provide false signals in common settings indicating an inconsistency where none exists

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

romania s accession to the eu short term welfare effects on food consumers this paper focuses on estimation of the welfare effects on different romanian households of assumed food price changes as a result of eu accession using the slutsky compensating variation approach results suggest that these changes affect welfare differently for various categories of households although on average the welfare loss is 2 6 a higher impact is estimated for low income groups however the relatively high share of home produced consumption of food diminishes these impacts in particular for rural households and somewhat smaller monetary amounts would be required if compensation is paid

welfare measurement in the household production framework the household production approach to consumer behavior developed from the work of gary becker william gorman and kelvin lancaster has considerable descriptive appeal in modelling the decisions of households the approach derives from the observation that households frequently purchase market goods that do not yield utility directly but are combined to produce commodity service flows which the household values thus observed behavior is determined by household production technology as well as by tastes the advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology though we rarely possess useful a priori information regarding tastes the putative advantages of the household production approach are questioned on empirical and conceptual grounds by robert pollak and michael wachter 1975 they show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology raising serious econometric difficulties in the estimation of commodity demand functions in addition since commodity prices become functions of the commodity bundle consumed the analogy to traditional demand theory breaks down joint production occurs when a good enters several production processes simultaneously or equivalently when a good in one production process also enters directly into the individual s utility function the most common example is time which provides the context for all production processes and is often associated with the production of several commodities simultaneously since joint production in the household is likely to be pervasive the critique by pollak and wachter cannot be ignored in response to the comment by william barnett pollak and wachter 1977 suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices this approach confounds tastes and technology but it eliminates the troublesome concept of commodity prices as parameters when in fact they are likely to be endogenous in this paper we show that results from positive analysis such as the critique by pollak and wachter have implications for the use of the household production framework for welfare analysis the household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas gardner brown john charbonneau and michael hay elizabeth wilman yet traditional approaches to welfare measurement are frequently inapplicable we argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology we extend pollak and wachter s results by demonstrating that marshallian demand functions for commodities cannot be uniquely defined thus marshallian functions cannot be used to derive exact compensated functions in the manner of jerry hausman and of george mckenzie and i f pearce nor can compensating and equivalent variation measures be bounded by marshallian consumer s surplus estimates following robert willig in fact duality results that normally allow us to move between marshallian and hicksian functions are not assistant and associate professors respectively department of agricultural and resource economics university of maryland college park md 20742 this paper is scientific article no a3404 contribution no 6476 of the maryland agricultural experiment station we wish to thank darrell hueth james opaluch v kerry smith and elizabeth wilman for comments on an earlier draft

contingent valuation techniques for assessing environmental impacts further evidence abstract this paper provides further evidence on the development and application of the iterative bidding technique used to assess environmental impacts three specific issues the hypothetical nature of the survey technique the questionnaire information structure and the bidding procedure starting point are examined theoretically and empirically to determine their effect on individual bid behavior the empirical results indicate that the importance of these influences may have been overstated in earlier studies

how do landowners price their lands during land expropriation and the motives behind it an explanation from a wta wtp experiment in central beijing compensation paid to property owners for land expropriation is always a controversial topic partly due to the difficulty in revealing households true valuation of their housing this paper estimates and discusses the widely observed willingness to accept willingness to pay wta wtp gap for surveyed residents of their own houses during land expropriation by testing several hypotheses interpreting the wta wtp disparity from previous studies the paper tries to establish the incentive for households decision making the paper employs a contingent valuation method with data from 315 household interviews in central beijing china the paper reports an average wta wtp ratio of 3 74 and reaches the conclusion that in our case the high compensation required by property owners largely derives from opportunistic pricing behaviour rather than sentimental attachment to the dwellings that is unobservable in the market price and that the wta of the residents is intentionally overpriced

exports as a signal of quality a new approach to dumping abstract dumping namely selling abroad at a price below the marginal cost of production is the result of the monopolist s profit maximizing behavior this result is obtained when the firm takes into account the informative role played by exports in the domestic market the level of exports serves as a signal of the quality of the new product

axiomatic foundations of hicksian measures of welfare change abstract the aggregate hicksian measures i ev i and i cv i are characterized by three simple properties one property concerns the ranking of two states the measures are paretian a second property expresses the postulate that welfare changes are to be evaluated in money the third one deals with redistributions of incomes distributional considerations are taken into account by employing variable distributional weights i

value of recreational fishing in the brazilian pantanal a travel cost analysis using count data models abstract recreational fishing value of the brazilian pantanal is measured using travel cost method tcm we compare non linear poisson and negative binomial count data models to estimate recreational fishing trip demands the count data and truncated models are used primarily to account for non negative integer and truncation properties of recreational fishing trips as suggested by the recreation valuation literature the results reveal that non linear and truncated count data models perform relatively well in our study the economic values of recreational fishing in terms of consumer surplus cs are derived using non linear and truncated models we estimate the cs values from 540 54 to 869 57 per trip resulting in the total social welfare estimate range from 35 to 56 million the study demonstrates a relatively high value of recreational fishing in the pantanal in comparison to similar studies conducted in other parts of the world the findings of this study would be important for resource management decisions in the pantanal and could serve as a reference in valuing similar resources in other ecosystems around the world

comparing open ended choice experiments and experimental auctions an application to golden rice we use two experimental valuation methods to estimate consumer demand for genetically modified golden rice the first is an open ended choice experiment oece where participants name the quantities of golden rice and conventional rice demanded at each of several price combinations one of which will be randomly chosen as binding this allows us to estimate market demand by aggregating demand across participants this estimate of market demand also allows us to estimate own price elasticity and consumer surplus for golden rice comparing willingness to pay wtp estimates from the oece with those from a uniform price auction we find that oece wtp estimates exhibit less affiliation across rounds and the effects of positive and negative information under the oece are more consistent with prior expectations and existing studies we also find that while auction wtp estimates more than double across five rounds oece wtp estimates are stable across rounds and are always roughly equal to those from the final auction round

on measuring the value of a nonmarket good using market data we use line integral theory to lay out in a more general theoretical framework the conditions under which it is possible to measure with market data the welfare effects of a change in a nonmarket good we present in detail a numerical method of measuring the value of nonmarket goods using market data under either weak neutrality or weak complementarity our numerical method is more flexible than the existing analytical method because it can be used with any well behaved marshallian demand function and can be used even when the willig condition does not hold

efficiency and equity in natural resources pricing a proposal for urban water distribution service this paper focuses on the design of optimal prices for urban water distribution service in this context pricing should be aimed at achieving efficiency equity financial aspects and or public acceptability and transparency the proposed tariffs are based on the theoretical frameworks suggested by ramsey 1927 and feldstein 1972 as a prior step estimations of urban water demands and water costs are carried out for the spanish municipality of seville finally an empirical comparison in welfare terms is conducted between the proposed tariffs and those applicable in the year 2000

markets and the measurement of value consumer s surplus and the hicksian measures of compensating and equivalent variation have a long history in empirical economic analysis however at both the theoretical and the empirical level economists psychologists and public choice theorists have not been able to reach a significant consensus regarding the usefulness of these measures economic theorists have only recently dissected the differences which exist between alternative welfare measures in a systematic and transparent fashion in willig 1976 hausman 1981 and takayama 1984 the role of income in determining the correct theoretical measurements of compensating and equivalent variations was exposed during this same period of time theoretical results obtained by the psychologists kahneman and tversky 1979 indicated that the fundamental structure of preferences upon which the theoretical economic results are based is flawed the so called prospect theory of decision developed by these authors indicated that measured of welfare based upon payment will differ from measures of welfare based upon compensation because of the fact that individuals will value losses at a greater marginal rate than gains this difference was then predicted to dominate any income effect important in the economist s model finally this period recorded the emergence of many demand revealing processes which provide individuals with appropriate incentives to accurately reveal their preferences as summarized in coursey and schulze 1986 one interpretation of the literature on incentive compatibility suggests a set of well defined guidelines for improving both the accuracy and validity of compensating and equivalent variation measures these differences in professional preferences regarding what is important in improving the accuracy of economic welfare measurements led john

estimating demand under block rates electricity and water many empirical studies of the demand for electricity under declining block tariffs have been conducted but few have produced results consistent with traditional demand theory nordin bell j economics 7 719 21 1976 explains this in part by pointing out that most of those studies failed to take into account the income effects caused by intramarginal price differences the authors show here that nordin s suggestion involves the inappropriate use of ordinal level statistics ols they propose a method by which consistent estimates of the demand parameters can be obtained when a household s rule for selecting a block can be estimated 19 references 1 figure

welfare losses due to market power hicksian versus marshallian measurement this paper warns against the use of marshallian welfare loss in applied analysis of market power we show how to compute the hicksian deadweight loss from an ordinary demand then from an experiment using real data on twenty one sectors of the french food industry we find that the marshallian deadweight loss poorly approximates the exact hicksian measure hence it is advisable to use the latter in applied welfare analysis copyright 2001 oxford university press

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

measuring welfare changes when quantity is constrained in this article we propose a simple and efficient method of estimating welfare measures in an n equation consumer demand system when some quantities are constrained or rationed we also estimate the variance of these measures the method is evaluated using monte carlo studies of two demand systems we also use the method to analyze the welfare costs of constraining the hours worked by married women in canada the gauss code for implementing the method is included

what marshall didn t know on the twentieth century s contributions to economics some of this century s many valuable contributions to economics like macroeconomics econometrics and game theory are widely recognized however arguably equally important is the enhanced role of empirical study permitted by more abundant data and improved methods also insufficiently recognized are the increased rigor and use of applied economics in public finance regulation corporation finance etc employing abstract theory and sophisticated data analysis the striking contrast with earlier intuitively based applied economics and empirical study is illustrated comparison with marshall s principles also indicates that except for macroeconomics remarkably little space in today s texts deals with some of the rich contributions of this century what has twentieth century economics accomplished a great deal as will be shown here but the discussion needs an illuminating starting point in 1946 after arriving at the london school of economics as an entering graduate student 1 i soon found that in

welfare and distribution effects of water pricing policies in this paper distribution and welfare effects of changes in block price systems are evaluated a method is discussed to determine for a marshallian demand function equivalent variation in case of a block price system the method is applied to compare for the metropolitan region of sao paulo alternative pricing policies on the basis of their demand welfare and distribution effects of changing water prices results show that there is a trade off between average welfare and income distribution a pro poor price system may result in lower average welfare than a flat price system but in higher individual welfare for the poor moreover there is a trade off between revenues for the water company and income distribution even though pro poor price systems may not be as good for average welfare as flat price systems their direct effects on poverty are important introducing pro poor price systems however may have financial consequences for the water companies

willingness to pay and willingness to accept how much can they differ comment i agree with the point made by edoh y amiran and daniel a hagen 2003 that there can be a substantial or even infinite divergence between the wta and wtp for a public good even where there is a nonzero elasticity of substitution between market goods and the public good provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe this is an important point they are also correct to point out that the elasticity of substitution is a local concept whereas their asymptotic boundedness condition applies also for discrete changes my 1991 paper used a local analysis because it was following the structure of the analysis in robert d willig 1976 and alan randall and john r stoll 1980 i wanted to show that while randall and stoll appeared to extend willig s local result on wta versus wtp from price changes to changes in the quantity of a public good the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity i view these points by amiran and hagen as not two separate results but essentially the same result their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes the asymptotic boundedness condition can be expressed as follows assuming a bivariate utility function u x q and given a reference point x q associated with a reference utility level u u x q there exists some q q such that for all q q there exists no x such that u x q u in other words no amount of x can substitute for the reduction in public good from q to q q in the case of a zero elasticity of substitution q q but as amiran and hagen show in their theorem 1 this is unnecessarily restrictive when dealing with a discrete reduction in q furthermore their theorem 2 can be viewed as a special case of their theorem 1 in which q 0 which makes q an essential commodity it is well known in consumer theory that the wta to avoid the loss of an essential market good is infinite their theorem 2 extends this result to the case of an essential nonmarket good but as their theorem 1 shows essentialness is not necessary for an infinite wta the boundedness condition is the key and this implies a fundamental lack of substitutability between money market goods and the public good

public monopoly and economic efficiency evidence from the pennsylvania liquor control board s entry decisions we estimate a spatial model of liquor demand to analyze the impact of government controlled retailing on entry patterns in the absence of the pennsylvania liquor control board the state would have roughly 2 5 times the current number of stores higher consumer surplus and lower payments to liquor store employees with just over half the number of stores that would maximize welfare the government system is instead best rationalized as profit maximization with profit sharing government operation mitigates but does not eliminate free entry s bias against rural consumers we find only limited evidence of political influence on entry jel d42 d72 l11 l12 l43 l81

theory and estimation of the household production function for wildlife recreation abstract the household production function is an intuitively appealing way to model man s interaction with nature this paper models the interaction between the household s behavior and publicly provided inputs into wildlife recreation the paper shows how to compute benefits assuming that the household production function is known the household production function approach collapses to the simple travel cost approach when households are unable to substitute their own inputs for publicly provided inputs in addition the paper demonstrates the conditions under which the parameters of cost and preference functions can be identified the conditions for identification are quite restrictive when several choices are endogenous

understanding how income influences willingness to pay for joint programs a more equitable value measure for the less wealthy the preponderance of evidence from many studies is that less wealthy households are subjected to greater exposure per capita and in aggregate to air pollution water pollution and toxic wastes it also is the case that the less wealthy are provided with a disproportionately low amount of other programs to enhance amenities provided by the natural environment such as recreational resources and high quality esthetic opportunities both quality and quantity however to date no study has quantified the scale of this effect on the less wealthy as compared to their more wealthy counterparts when it comes to policy choices made on the basis of benefits analysis this study provides a new equity adjustment method to measure quantitatively the effect of this inequity in the case of public goods

compensating variation consumer s surplus via succesive approximations many economists agree that the best measure of consumer s surplus is the compensating variation consumer s surplus cvcs howerver because the compensated demand function is not observable there are problems in using this measure in emperical applications there are ways around this limitations that work well under certain circumstances however until now there has been no solution that always works well we introduce a sucessive approximations method of calculating compensating variation consumer s surplus using data from the ordinary demand curve in doing so we numerically identify the compensated demand fuction over the price interval involved this procedure can be made extremely small we also use our method to calculate cvcs for three applications in the literature where marshallian surplus was reported

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

the relative burden of monopoly on households with different incomes this paper examines the relative burden of monopoly measured as the static loss of con sumers surplus for different household income levels australian household expenditure survey data are used to generate demand elasticities for 14 commodity groups and to obtain estimates of the relative welfare loss for households with different income levels the welfare loss associated with monopoly power is found to be higher for low income households such as households that depend on government pensions and benefits for their principal source of income compared with high income households the results provide an indication that what ever the size of the absolute welfare loss arising from monopoly there may be a substantial effect on the distribution of welfare this paper examines the relationship between the level of household income and the burden of monopoly while there have been numerous studies of the aggregate welfare losses associated with monopoly the relationship between welfare loss and household income has not previously been examined the approach taken in this paper involves combining the static net consumers loss method of assessing the cost of nmonopoly with a method of linking demand elasticities to income levels welfare loss is aggregated over commodity groups for households at different income levels and the loss of consumers surplus is then compared with households in other income groups the reason for emphasizing the relative measure of welfare loss is that a number of problematic assumptions are made in the course of the analysis they are made explicit at each point in the argument and impart some bias into the absolute measure of welfare loss for any income group however it is suggested that the bias is similar for all income groups so that the measures of relative welfare loss presented in the paper are not affected section i begins by discussing the standard method of identifying the static welfare loss associated with monopoly and shows that under certain assump tions this loss is inversely proportional to the own price elasticity of demand the section then shows how this result can be used to investigate the relation ship between welfare loss and household income section ii uses data from the australian household expenditure survey and shows how in the absence of direct evidence on the price elasticities of demand cross sectional information on the composition of household expenditure can be used to generate a set of estimates of the relative welfare loss for households with different levels of

approximating compensated income from ordinary demand functions abstract this paper proposes a re versible s econd or der t aylor resort approximation to compensated income from ordinary demand functions resort yields the malmquist vartia m v algorithm as a first order case using the slutsky equation resort obtains the substitution matrix and checks it for symmetry and negative semi definiteness to validate compensated income this validation procedure is an improvement over m v

inverse demand systems and welfare measurement in quantity space most studies of welfare or cost benefit analyses are concerned with the welfare effects of price changes 11 19 27 33 50 there are however many situations in which policy options are directly related to quantity changes the welfare effects of price changes are analyzed with the traditional demand system in which commodity quantities are determined as functions of their prices the welfare effects of quantity changes on the other hand are associated with the inverse demand system in which commodity prices are dependent on their quantities in conventional welfare analysis of price change prices are taken to be exogenous or predetermined while quantities are endogenous in contrast in welfare analysis of quantity changes quantities are exogenous while prices are endogenous price based or dual welfare measures are relevant when there are well functioning competitive markets and quantities are fully adjusted to changes in prices on the other hand quantity based or primal welfare measures are useful in situations where there are constraints on commodity quantities or when transaction costs impede consumers from fully adjusting to changes in prices the choice between priceand quantity based welfare measures is empirical and proper measurement of welfare effects requires the knowledge as to which variable price or quantity is the exogenous one for individual consumers it may be reasonable to assume that the supply of commodities is perfectly elastic and therefore prices can be taken as exogenous but this assumption may not be tenable for consumers in the aggregate or if highly aggregated economy wide data are used to estimate demand relations at the aggregate level quantities are more properly viewed as exogenous than are prices although individual consumers make their consumption decisions based on given prices the quantities of commodities are predetermined by production at the market level and prices must adjust so that the available quantities are consumed 28 1 2

paired comparison estimates of willingness to accept versus contingent valuation estimates of willingness to pay estimating empirical measures of an individual s willingness to accept that are consistent with conventional economic theory has proven difficult the method of paired comparison offers a promising approach to estimate willingness to accept this method involves having individuals make binary choices between receiving a particular good or a sum of money willingness to accept can be inferred from the ranking of dollar amounts and the good of interest using the paired comparison approach mean median willingness to accept for a private good is estimated at 59 52 contingent valuation estimate of willingness to pay for the same good yields a mean median of 28 28 while these estimates are statistically different the ratio of willingness to accept to willingness to pay is less than in most previous studies and closer to ratios found in actual cash experiments

on market equilibrium analysis in this paper we develop the implications of competitive market equilibrium for production and household behavior when some prices are endogenously determined the properties of market equilibrium functions are explored including the effects of pricing policy a slutsky type equation relating compensated and uncompensated market equilibrium functions is derived implications for multimarket welfare analysis are presented focusing on the effects of pricing policy and technical change

despairing over disparities explaining the difference between willingness to pay and willingness to accept this paper examines the three major explanations for the disparity between willingness to pay wtp and willingness to accept wta observed in contingent value surveys and laboratory experiments a belief that the results must be biased in some fashion hanemann s 1991 substitutes hypothesis and the loss aversion model proposed by tversky and kahneman 1991 starting from the assumption that individuals make utility maximizing choices we develop structural equations that yield parametric tests of the hypotheses within a single non experimental framework the approach is flexible enough to incorporate a variety of functional form and distributional assumptions and can be applied to either data from either open ended bids or dichotomous choice questions the usefulness of the approach is demonstrated using data from a survey that asked both wtp and wta questions the results provide weak support for loss aversion

the movement from real to abstract value theory 1817 1959 general value theory has become a nonagenda item for orthodox economics determination of exchange value is the only value questio n asked value theory is synonymous with price theory bounded by representative classical works of david ricardo and gerard debreu this involved a process wherein the inclusive real value base of classical political economy is replaced by reductionis t abstract value the thesis is grounded on three classical value questions the determinants the measure and the source s of value it is developed in discussion of classical real value the half way house of neoclassicism and post neoclassical closure of the abstract equilibrium based value system copyright 1988 by oxford university press

analysing rationing policies drought and its effects on urban users welfare analysing rationing policies during drought the aim of this paper is to study the impact on consumers of rationing policies implemented during water shortages water scarcity gives rise to the need for rationing and various methods including supply cutoffs can be used a model is devised to quantify the welfare losses associated with qualitive and quantitive restrictions based on virtual prices and using the consumer surplus as a welfare measurement welfare variations for different users have been calculated to achieve the aim information relative to seville spain has been used analysing the drought period that took place in the first half of the 1990s it has been possible to observe the main source that led to welfare losses for each kind of user

quadratic voting and the public good introduction this introduction to the public choice special issue on quadratic voting qv and the public good provides an opinionated narrative summary of the contents and surveys the broader literature related to qv qv is a voting rule proposed by one of us weyl quadratic vote buying http goo gl 8yeo73 2012 lalley and weyl quadratic voting https papers ssrn com sol3 papers cfm abstract id 2003531 2016 building off earlier work by groves and ledyard econometrica 45 4 783 810 1977a hylland and zeckhauser a mechanism for selecting public goods when preferences must be elicited kennedy school of government discussion paper d 70 1980 where individuals buy as many votes as they wish by paying the square of the votes they buy using some currency an appreciation of the history of research in the field suggests that qv is uniquely practically relevant compared to the other approximately pareto efficient mechanisms economists have proposed for collective decisions on public goods however it faces a number of sociological and ethical concerns regarding how a political system organized around qv would achieve the efficiency aims stated in abstract theory and whether the pure aggregate income maximizing definition of efficiency qv optimizes in its simplest form is desirable the papers in this volume flesh out and formalize these concerns but also provide important responses in two ways by suggesting domains where they are unlikely to be applicable primarily related to survey research of various kinds and versions of qv using an artificial currency that maintain many of qv s benefits while diffusing the most important critiques together this work suggests both a practical path for applying qv in the near term and a series of research questions that would have to be addressed to broaden its application

contingent valuation in korean environmental planning a pilot application to the protection of drinking water quality in seoul this paper describes the application of the contingent valuation cv or willingness to pay wtp survey technique to a problem of public policy evaluation in seoul korea matters of principal interest include the definition of the problem and policy protection of seoul s drinking water supply from disruption by slugs of contaminants in the source river the han adjustments to standard cv techniques and assumptions required by the cultural and physical reality of seoul the representativeness of the spatially drawn sample estimation of the willingness to pay equation as a check on theoretical validity and the policy implications of the results the bottom line is asserted to be that cv may be especially valuable in countries such as korea that have serious environmental problems and a history of not producing data that might be used in alternative indirect benefit estimation exercises further it appears that if care is exercised in adjusting to local reality the method can be made as successful as it has been in the u s and northern europe

urban cassava markets the impact of fresh root storage abstract the authors explain how although fresh cassava is important in rural nutrition its importance in urban areas is limited and declining in colombia the third most important cassava producing country in latin america both the structure of the marketing channel and consumer preferences are considered in explaining this difference the principal factor limiting urban market volume and demand is identified as the rapid root post harvest deterioration which necessitates high margins to cover marketing risks appropriate storage techniques which overcome this problem are evaluated and their possible positive impact through reduction of marketing margins on retail and farmgate prices and on urban consumption is estimated a strategy for storage technology adoption is discussed

a review article the case against the use of the sum of compensating variations in cost benefit analysis this paper presents a case against the use of the sum of compensating varia tions as a cost benefit test we argue that 1 the ethical judginents implied by the test are not defensible 2 positive sums of compensating variations occur without potential pareto improvements resulting in social preference reversals without simultaneous scitovsky re versals 3 when lump sum transfers are feasible a positive sum of compensating variations is necessary but not sufficient for a potential pareto improvement 4 in order to eliminate preference reversals and intransitivities all households must have almost identical quasi homothetic preferences a condition that is not satisfied in real economies