consumer scores and price discrimination we study the implications of aggregating consumers purchase histories into scores that proxy for unobserved willingness to pay a long lived consumer interacts with a sequence of firms each firm relies on the consumer s current score a linear aggregate of noisy purchase signals to learn about her preferences and to set prices if the consumer is strategic she reduces her demand to manipulate her score which reduces the average equilibrium price firms in turn prefer scores that overweigh past signals relative to applying bayes rule with disaggregated data as this mitigates the ratchet effect and maximizes the firms ability to price discriminate consumers with high average willingness to pay benefit from data collection because the gains from low average prices dominate the losses from price discrimination finally hidden scores those only observed by the firms reduce demand sensitivity increase average prices and reduce consumer surplus sometimes below the naive consumer level

career concerns incentives and endogenous learning in labour markets models of career concerns provide a framework for analyzing the actions that may be taken by a manager in an attempt to influence performance signals that the market uses to update its beliefs on her productivity and the incentive problem that arises if such actions do not coincide with those that maximize the financial return to a firm s owner this survey provides a formal introduction to the main types of models of career concerns hidden action and hidden information and discusses some extensions of these models applications of the career concerns framework to explain aspects of managerial behavior and the form of labor market institutions are emphasized copyright 1992 by blackwell publishers ltd

price wars and price collusion in china s airline markets in the absence of an effective antitrust law both fare wars and price collusion have been pervasive in china s airline markets causing concern for both airlines and consumers a study of monthly airfare data from 2002 to 2004 confirms that fare wars occur periodically as well as price collusion both tend to be short lived the fact that collusion is more likely to occur in january and april when demand is high as revealed by china eastern s and china southern s price war and collusion models has been confirmed by interview information obtained from the airlines sales managers however there is also evidence in these models suggesting that collusion can be more easily formed when demand is low high airport concentration measured by the hhi may facilitate collusion in certain circumstances but it may also lead to more price wars under other conditions concentration in both airports and routes does not appear to systematically affect the occurrence of fare wars and collusion in all the models estimated we also reject the possibility that mutual forbearance due to multimarket contact plays any important anti competitive role in china s airline markets

research note optimal selling in dynamic auctions adaptation versus commitment this paper analyzes optimal selling strategies of a monopolist facing forward looking patient unit demand bidders in a sequential auction market such a seller faces a fundamental choice between two selling regimes adaptive selling that involves learning about remaining demand from early prices and commitment selling that forgoes such learning and makes all selling decisions in the beginning of the game a model of the game between the seller and the bidders is proposed to characterize the optimal regime choice the model implies that the relative profitability of the two regimes depends on the expected gains from trade when the expected gains from trade are low commitment dominates adaptation and vice versa

performance comparisons and dynamic incentives it is well known that comparative performance information cpi can enhance efficiency in static principal agent relationships by improving the trade off between insurance and incentives in the design of explicit contracts in dynamic settings however there may be implicit as well as explicit incentives for example managerial career concerns and the ratchet effect in regulation we show that the dynamic effects of cpi on implicit incentives can either reinforce or oppose the familiar static insurance effect and in either case can be more important for efficiency the overall welfare effects of cpi are thus ambiguous and can be characterized in terms of the underlying information structure

intergenerational aspects of ecotax reforms an application to germany in a model of overlapping generations and majority voting we analyze an ecotax reform consisting of the tax rate and the budgetary rule revenue can be recycled through a lump sum transfer or a reduction in pension contributions our theoretical results as well as the calibration of our model to the german economy show that the median voter s preferred tax rate may exceed the efficient rate this holds whenever income of the decisive voter is sufficiently high compared to the average income as rich individuals benefit more from a reduction in pension contributions than they are harmed by an increase in ecotaxes the calibration confirms that the median voter prefers the earmarking of tax revenue for reductions in pension contributions to the alternative lump sum transfer this is quite an accurate prediction of the situation in germany aging of society as expected for germany lowers the ecotax in the political equilibrium below its optimal level

environmental tax policy and intergenerational distribution abstract we study the effects of environmental taxation within the context of an overlapping generations model the quality of the environment is modelled as a durable consumption good introduction of the environmental tax harms old existing generations and benefits young existing generations as well as all future generations increasing the tax in a pareto improving manner is easier the higher the pre existing tax the reverse holds if tax policy is decided by majority rule a suitably designed bond policy can be used to redistribute the efficiency gains due to the internalisation of environmental externalities across the generations

planning under incomplete information and the ratchet effect abstract central planning of production is usually performed under asymmetric information the firm in general has more information about its productive possibilities than the central planner from now on for short cp this justifies the use of incentives schemes in which the cp does not directly fix activity levels casual observation of such existing schemes suggests that the time dimensions is crucial for their working typically the cp revises the incentive scheme over time to take into account the information provided by the firm s performance managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future this is the ratchet effect it is purpose of the present paper to study the ratchet effect under the non commitment assumption which we believe to be more realistic the inadequacy of conceptual tools made if difficult in the past to consider such an assumption now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem

airport congestion when carriers have market power this paper analyzes airport congestion when carriers are nonatomistic showing how the results of the road pricing literature are modified when the economic agents causing congestion have market power the analysis shows that when an airport is dominated by a monopolist congestion is fully internalized yielding no role for congestion pricing under monopoly conditions under a cournot oligopoly however carriers are shown to internalize only the congestion they impose on themselves a toll that captures the uninternalized portion of congestion may then improve the allocation of traffic the analysis is supported by some rudimentary empirical evidence

should congestion tolls be set by the government or by the private sector the knight pigou debate revisited this paper clarifies issues debated by a c pigou and frank knight about correcting inefficient use of congestible resources focusing for concreteness on their original example of road congestion instead of government imposed pigouvian access fees knight favoured access fees set by private toll setters we consider the case of n 2 congestible roads and an uncongestible road of arbitrary speed knight argued that in the case of a single congestible road a private toll setter would always choose the toll that pigou recommended hence the allocation would minimize aggregate commute time without government meddling we find instead that two or more toll setters would never choose pigouvian tolls except in the special case of a sufficiently fast uncongestible road moreover for uncongestible roads of slower speed the allocation of motorists under knight s proposal is almost never efficient whenever it is inefficient motorists are strictly worse off when they pay tolls set by private firms instead of paying government imposed tolls and aggregate toll revenue is also lower nevertheless if the private sector does set tolls then the full cost to motorists can be limited if the government provides an uncongestible alternative such as a train to offer potential competition along the same route

the ratchet tautness and managerial behavior in soviet type economies suppose a manager receives a fixed bonus for reaching a target plus an overfulfillment reward each period the target is fixed by the manager s superiors in a manner that takes into account past performance this is the ratchet managers facing this incentive scheme will choose an activity level which takes into account the dynamic effects of current behavior on future earnings the conventional wisdom contends that managers will understate capacity by producing below maximum potential we show that this behavior occurs only under certain conditions more importantly we also show that the ratchet can be used to induce managers to reveal the growth rate of average capacity

distributional consequences of airport congestion pricing abstract imposition of airport congestion pricing redistributes welfare among commercial regional and general aviation this article extends daniel s econometrica63 327 370 1995 stochastic bottleneck model with dynamically adjusting traffic rates queuing delays and congestion fees to include elastic demand heterogeneous operating time preferences and heterogeneous layover and queuing time values using parameters from minneapolis st paul airport simulations of congestion pricing determine its effects on equilibrium traffic patterns queuing delays schedule delays airport revenues and social welfare gains by commercial aviation common travelers and airport authorities exceed losses by general and regional aviation the article evaluates several price and rebate programs and proposes several that are self financing and pareto improving

ex post redistribution in a federation implications for corrective policy abstract this paper analyzes whether changes in the timing of equalizing transfers to state governments necessitate an adjustment in federal corrective policy according to the existing literature assuming an ex ante choice of transfers the corrective grant is equal to the marginal damage benefit inflicted by externality generation when the federal government accommodates state finances ex post the grant differs in formula from existing prescription allocative federal policy corrects state policy incentives twofold it entails a correction for the distortion in the marginal benefit of state spending as in earlier literature and for the distortion in the marginal cost of public funds induced by the ex post provision of transfers the required grant rule is generically disproportionate to the equilibrium externality even with lump sum taxation furthermore the ex post provision of transfers is critical for the nature of the equilibrium inefficiency equalizing transfers at least partly internalize consumption spill overs but simultaneously establishes a new source of inefficiency as a final result the existing prescription for allocative federal policy continues to apply if the public good is pure

inter linking issues and dimensions in sustainability reporting during the last decade sustainability reporting sr has been increasingly adopted by corporations worldwide this is evidenced by the adoption of several guidelines such as the iso 14000 series the social accountability 8000 standard and the gri sustainability guidelines sr shows promise to help corporate leaders and their employees to contribute towards achieving sustainable societies however most of the guidelines and standards address sustainability issues through comparmentalisation thereby leading to the separation of the economic environmental and social dimensions due to these divisive approaches holistic assessments of the effects of their efforts are seldom properly integrated into coporate decisions and procedures to make improvements for example through cleaner production worker health and safety consumer safety and reductions in the negative short and long term social and environmental impacts this paper analyses sr reports from three companies with the help of grounded theory s constant comparative analysis this analytical framework helped the authors to systematically assess the degree to which the companies addressed economic ecological and social issues separately or in an integrated and inter linked manner from the inter linkages found a new category is proposed to be added to future sr this new category can help corporate sr planners and researchers on sustainability reports to better understand how the company leaders understand their responsibilities with regard to sd these inter connectednesses are highly relevant in many short and long term dimensions of supply chain management global warming ecological disruption and societal equity issues especially with regard to the local national and global energy issues of fuels and oils the central themes of the conference at which this paper was originally presented it also plays a key role in real long term changes towards sustainability where the time dimension plays a key role in human survival on planet earth

incentives in principal agent relationships this article identifies some of the major issues that have been examined in the literature on incentives the article begins by discussing the frictions that lie at the heart of incentive problems next the principal s optimal response to these frictions is explored taking as given the characteristics of the agents with whom the principal interacts in a nonrepeated setting the design of individualized contracts contests and tournaments is analyzed then the principal s task of selecting the best agent is addressed and repeated agency relationships are considered

efficiency analysis of cournot competition in service industries with congestion we consider cournot competition in the presence of congestion effects our model consists of several service providers with differentiated services each competing for users who are sensitive to both price and congestion we distinguish two types of congestion effects depending on whether spillover costs exist that is where one service provider s congestion cost increases with the other providers output level we quantify the efficiency of an unregulated oligopoly with respect to the optimal social welfare with tight upper and lower bounds we show that when there is no spillover the welfare loss in an unregulated oligopoly is limited to 25 of the social optimum even in the presence of highly convex costs on the other hand when spillover cost is present there does not exist a constant lower bound on the efficiency of an unregulated oligopoly even with affine cost we show that the efficiency depends on the relative magnitude between the marginal spillover cost and the marginal benefit to consumers this paper was accepted by christian terwiesch operations management

congestion pricing and capacity of large hub airports a bottleneck model with stochastic queues this paper models and estimates congestion prices and capacity for large hub airports the model includes stochastic queues time varying traffic rates and endogenous intertemporal adjustment of traffic in response to queuing delay and fees relative costs of queuing and schedule delays are estimated using data from minneapolis st paul simulations calculate equilibrium traffic patterns queuing delays schedule delays congestion fees airport revenues airport capacity and efficiency gains the paper also investigates whether a dominant airline internalizes delays its aircraft impose it tests game theoretic specifications with atomistic nash dominant stackelberg dominant and collusive airline traffic

a simple auction mechanism for the optimal allocation of the commons efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators e g cost of pollution abatement this paper proposes a simple mechanism that implements the first best for any number of firms a uniform price sealed bid auction of an endogenous number of transferable licenses with a fraction of the auction revenues given back to firms paybacks which rapidly decrease with the number of firms are such that truth telling is a dominant strategy regardless of whether firms behave non cooperatively or collusively the mechanism also provides firms with incentives to invest in socially optimal r d jel d44 d62 d82 q28 regulatory authorities generally find that part of the information they need for implementing an efficient regulation is in the hands of those who are to be regulated regulating externalities such as access to common resources e g clean air water streams fisheries etc is a good example environmental regulators for example know little about firms pollution abatement costs so without communicating with firms they would be unable to establish the efficient level of pollution a number of mechanisms have been proposed for inducing firms to reveal their private information but for different reasons

two sided learning and the ratchet principle i study a class of continuous time games of learning and imperfect monitoring a long run player and a market share a common prior about the initial value of a gaussian hidden state and learn about its subsequent values by observing a noisy public signal the long run player can nevertheless control the evolution of this signal and thus affect the market s belief the public signal has an additive structure and noise is brownian i derive conditions for an ordinary differential equation to characterize equilibrium behavior in which the long run player s actions depend on the history of the game only through the market s correct belief using these conditions i demonstrate the existence of pure strategy equilibria in markov strategies for settings in which the long run player s flow utility is nonlinear the central finding is a learning driven ratchet principle affecting incentives i illustrate the economic implications of this principle in applications to monetary policy earnings management and career concerns

incentive plans for productive efficiency innovation and learning in many industries where production or sales is delegated to a number of subunits the central management faces the classical problem how to induce continuous efficiency improvements organizational learning and transfer of knowledge with a minimum of control exercised this paper draws on recent results regarding regulatory frameworks to construct simple yet powerful incentive schemes for decentralized production under asymmetric information the theoretical foundation is based on principal agent theory cf laffont and tirole econometrica 56 1986 614 641 and extensions to production theory by bogetoft management science 40 1994 959 968 the proposed incentive system is operational and makes use of available information to provide positive incentives for participation in the dynamic development of the entire organization

third degree price discrimination in the presence of congestion externality this paper analyzes third degree price discrimination of a monopoly airline in the presence of congestion externality when all markets are served the model features the business passenger and leisure passenger markets where business passengers exhibit a higher time valuation and a less price elastic demand than leisure passengers our main result is the identification of the time valuation effect of price discrimination which can work in the opposite direction as the well known output effect on welfare this time valuation effect clearly explains why discriminating prices can improve welfare even when this is associated with a reduction in aggregate output

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

congestible facility rivalry in vertical structures abstract this paper investigates rivalry between congestible facilities and its effects on facility charges capacities and congestion delays by incorporating the downstream carriers into the analysis we find that i the duopoly facilities have lower prices than the monopolist but they offer lower service quality only if capacity decisions are made prior to facility price decisions when the capacity and price decisions are made simultaneously the duopolists will provide the same service quality as the monopolist ii conditional on facility charges the monopolist will have the same capacity investment rules as the central planner if and only if the downstream carrier markets are perfectly competitive at both facilities if there is one carrier market that is imperfectly competitive the monopoly capacity rules will be different from the socially optimal capacity rules iii the monopolist will offer the same service quality at a facility as the central planner if the carrier market is perfectly competitive otherwise the monopolist offers a higher service level than the central planner we also find that for given capacities a the duopolists equilibrium prices increase with the time costs of either consumers or carriers b entrance of a new carrier to any of the facilities depresses the prices charged by both facilities and c lower marginal cost of the carriers at one facility induces a higher price at that facility but a lower price at the other facility

services trade protection and economic isolation poor connectivity is conventionally blamed on difficult geography and low income but economic isolation could also result from policy choices in key linking services such as air transportation and telecommunications a new database on applied services trade policies reveals that many countries restrict trade in the very services that connect them with the rest of the world we present evidence that restrictive policies lead to more concentrated market structures and limited access to services even after taking into account the influence of geography and income moving from an intermediate level of restrictiveness to an open regime could lead to a 20 percentage point increase in cellular teledensity in the telecommunications sector and to a 25 per cent increase in flight connections per airline in the aviation sector respectively

an investigation into the givings by large corporate donors to uk charities 1979 86 this paper the first study of its kind to date carried out for the uk is concerned with the scale and determinants of charitable givings by large corporate donors in the uk the investigation is carried out using pooled information on 53 companies over the 8 years from 1979 to 1986 during which period the rate of corporation tax fell from 52 to 35 a result of particular interest is that contributions were related positively to the rate of tax

monopoly regulation under asymmetric information prices versus quantities we compare two instruments to regulate a monopoly that has private information about its demand or costs fixing either the price or quantity for each instrument we consider sophisticated screening and simple bunching mechanisms we characterize the optimal mechanisms and compare their welfare performance with unknown demand and increasing marginal costs the sophisticated price mechanism dominates that of quantity whereas the sophisticated quantity mechanism may prevail when marginal costs decrease the simple price mechanism dominates that of quantity when marginal costs decrease but the opposite may arise if marginal costs increase with unknown costs both instruments are equivalent

optimal pricing of flights and passengers at congested airports and the efficiency of atomistic charges abstract this paper investigates and compares airport pricing policies under various types of competition considering both per passenger and per flight charges at congested airports we show that an airport requires both pricing instruments to achieve the first best outcome and we distinguish their role by showing that congestion externalities need to be addressed through per flight tolls whereas the inefficiency caused by airlines market power exertion must be corrected with per passenger subsidies we also show that bertrand competition with differentiated products a type of behavior recently pointed out by the empirical literature as pertinent has policy implications that diverge from analyses that assume cournot competition the welfare gains and congestion reductions of congestion pricing would be higher than what has been advanced before the degree of self financing of airport infrastructure under optimal pricing would be increased and may approach exact self financing and the implied differentiation of charges between asymmetric airlines would be significantly smaller presumably enhancing the political feasibility of welfare maximizing congestion pricing as the potential distributional concerns would be decreased finally we numerically analyze second best policies and find that atomistic pricing may offer a relatively attractive alternative to first best congestion pricing

trends and determinants of corporate non financial disclosure in greece an increasing number of business organizations around the world engage in the accounting for and reporting on non financial aspects of performance mainly within the domains of social and environmental responsibility using a composite disclosure index this study investigates the status of the non financial disclosure practices of the top 100 companies operating in greece a number of determinants which potentially drive greek firms to publicly disclose such information are examined an investigation of the reporting practices of a subgroup of firms which is on the spotlight regarding their environmental performance is performed while overlapping perspectives for the greek case are outlined the analysis suggests that only a small group of leading greek firms appears to endorse a meaningful business and society dialogue as an instrument for stakeholder communication and the discharging of organizational accountability most other corporations still tend to treat such practices superficially and in an imprecise manner

arm s length relationships without moral hazard i show that cutting the flow of information between a principal and an agent can increase the power of the incentives of the agent to reveal private information jel d23 d82 d86 l20

congestion agglomeration and the structure of cities abstract congestion costs in urban areas are significant and clearly represent a negative externality nonetheless economists also recognize the production advantages of urban density in the form of positive agglomeration externalities the long run equilibrium outcomes in economies with multiple correlated but offsetting externalities have yet to be fully explored in the literature therefore i develop a spatial equilibrium model of urban structure that includes both congestion costs and agglomeration externalities i then estimate the structural parameters of the model using a computational algorithm to match the spatial distribution of employment population land use land rents and commute times in the data policy simulations based on the estimates suggest that congestion pricing may have ambiguous consequences for economic welfare

the political economy of market based environmental policy the u s acid rain program the u s acid rain program enacted in 1990 gave valuable tradable sulfur dioxide emissions permits called allowances to electric utilities we examine the political economy of this allocation though no senate or house votes were ever taken hypothetical votes suggest that the actual allocation would have beaten plausible alternatives while rent seeking behavior is apparent statistical analysis of differences between actual and benchmark allocations indicates that the legislative process was more complex than simple models suggest the coalition of states that produced and burned high sulfur coal both failed to block acid rain legislation in 1990 and received fewer allowances than in plausible benchmark allocations some of these states may have received additional allowances to cover 1995 99 emissions by giving up allowances in later years and some major coal producing states seem to have focused on benefits for miners and on sustaining demand for high sulfur coal

atomistic congestion tolls at concentrated airports seeking a unified view in the internalization debate abstract the goal of this paper is to bring some unity to the theoretical side of the debate on internalization of airport congestion by showing that all the literature s theoretical results can be derived within one simple and unified framework the analysis starts by replicating the results of brueckner brueckner j k 2002 airport congestion when carriers have market power american economic review 92 1357 1375 who showed that because airlines behaving in cournot fashion internalize congestion they should be charged low congestion tolls the analysis then validates the findings of daniel daniel j i 1995 congestion pricing and capacity of large hub airports a bottleneck model with stochastic queues econometrica 63 327 370 who argued that larger atomistic tolls are required in a model where a stackelberg leader interacts with competitive fringe airlines however it is shown that this result only holds approximately when the carriers outputs are imperfect substitutes

frontiers in the economics of energy efficiency abstract energy efficiency has become an essential instrument to obtain effective greenhouse gas mitigation and reduced energy dependence this introductory article contextualizes the contributions of the supplemental issue by showing the new setting for energy efficiency economics and policy discussing the role of price instruments to promote energy savings presenting new approaches for energy efficiency policies and placing energy efficiency within a wider energy and environmental framework

the political economy of an energy tax the united kingdom s climate change levy energy taxes designed to control energy consumption and to assist the achievement of climate change control targets under the kyoto protocol are fairly common in european union countries yet many of these taxes bear little resemblance to the design guidance that is given in economics textbooks political economy analysis in which the interaction of economics and political reality is emphasised explains the gap between theoretical ideals and practical reality a closer look at the factors that influence real world policy design should help policy oriented economists in designing measures that have a greater chance of adoption the end result may well be nth best solutions which simply have to be lived with but there may also be room for design improvements that still honour the political constraints of policy design this paper illustrates these issues in the context of one tax the uk climate change levy

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

comparison of three empirical models of airport congestion pricing abstract we compare three empirical models of airport congestion pricing a standard peak load pricing model with econometrically estimated demand and delay functions morrison 7 morrison and winston 8 a deterministic bottleneck model with traffic adjusting intertemporally to congestion prices vickrey 9 arnott et al 2 and a bottleneck model with time dependent stochastic queuing daniel 4 when implemented using daniel s airport traffic data the models produce similar traffic patterns under weight based pricing but differ significantly under congestion pricing we conclude that structural modeling of stochastic traffic queues and intertemporal substitution is necessary to produce realistic responses of traffic patterns to congestion pricing

the dynamics of incentive contracts the paper studies a simple two period principal agent model in which the principal updates the incentive scheme after observing the agent s first period performance the agent has superior information about his ability the principal offers a first period incentive scheme and observes some measure of the agent s first period performance cost or profit which depends on the agent s ability and unobservable first period effort the relationship is entirely run by short term contracts in the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit the strategies are required to be perfect and updating of the principal s beliefs about the agent s ability follows bayes rule the central theme of the paper is that the ratchet effect leads to much pooling in the first period first for any first period incentive scheme there exists no separating equilibrium second when the uncertainty about the agent s ability is small the optimal scheme must involve a large amount of pooling the paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty

resale markets and the assignment of property rights the consumption of an indivisible good causes identity dependent externalities to non consumers we analyse resale markets where the current owner designs the trading procedure but cannot commit to future actions we ask the following questions 1 doer the identity of the initial owner matter for the determination of the final consumer 2 is the outcome always efficient the major conclusion of our paper is that the irrelevance of the initial structure of property rights arises in resale processes even if there are transaction costs that hinder efficiency this result complements the coasian view where the irrelevance of the assignment of property rights is a consequence of efficiency

congestion pricing of canadian airports abstract under congestion pricing canadian airports would annually save between 72 and 105 million social costs per landing and takeoff decrease about 300 at toronto and vancouver and 50 at calgary and montreal slot constraints fail to eliminate this airport congestion congestion prices are lower on average than existing weight based prices current airport capacity accommodates at least five more years of traffic growth before congestion reaches current levels substantial welfare gains occur even if dominant airlines already internalize their self imposed delays this article calculates equilibrium congestion pricing schedules traffic rates queuing delays layover times and connection times by time of day

pricing the major us hub airports abstract implementing congestion pricing at 27 major us airports would reduce delays by 13 passenger years and 1000 aircraft hours every day saving 3 5 million dollars daily chicago and atlanta would save about 1000 dollars per aircraft airport revenues would increase about 11 million dollars daily a bottleneck model with stochastic queues estimates substantial welfare gains whether or not airlines internalize self imposed delays erroneously imposing fees from the non internalizing specification on internalizing airlines however would be a costly mistake the model calculates equilibrium traffic rates queuing delays layover times connection times and congestion fee schedules by minute of the day

effects of asymmetric information on airport congestion management mechanisms abstract we study and compare three different mechanisms for capacity slot allocation in a congested airport when airlines have one dimensional private information direct allocation of slots differentiated tolls and slot auctions with perfect information direct allocation is a first best policy which can be implemented through pigouvian taxes or slot auctions the mechanisms are equivalent in terms of social welfare with the introduction of asymmetric information this equivalence is lost direct allocation is always ex post inefficient and in some cases tolls and subsequent quantity delegation is a better alternative social welfare wise auctions may be superior or inferior to tolls we further show that naive application of pigouvian tolls is sub optimal when imperfect information exists

sorting by foot travel for local public goods and equilibrium stratification we re examine tiebout s hypothesis of endogenous sorting in a competitive spatial equilibrium framework by considering both income and preference heterogeneity and by allowing agents to decide endogenously the number of visits to a travel for local public good the equilibrium configuration may be completely segregated incompletely segregated or completely integrated depending on relative market rents and income preference local tax parameters a segregated equilibrium may feature endogenous sorting purely by income or by both income and preferences while the rich need not be closer to the local public facility site multiple equilibria may arise when the equilibrium configuration is incompletely segregated jel classification d50 h41 classification par deplacement biens publics locaux accessibles par deplacement et stratification d equilibre les auteurs reexaminent l hypothese de tiebout de classification endogene dans un cadre d equilibre spatial concurrentiel en tenant compte a la fois de l heterogeneite des revenus et des preferences ainsi qu en permettant aux agents de decider de maniere endogene du nombre de visites pour se procurer un bien public local par deplacement il peut s ensuivre des equilibres de segregation complete de segregation incomplete ou d integration complete selon les rentes relatives et les parametres de revenus de preferences ou de fiscalite locale un equilibre de segregation peut entrainer une classification endogene sur la base seulement des revenus ou sur la base des revenus et des preferences alors que les riches n ont pas besoin d etre plus proches du site du bien public local des equilibres multiples peuvent surgir quand la configuration d equilibre en est une de segregation incomplete

the economics of airport congestion pricing abstract conventional economic wisdom suggests that congestion pricing would be an appropriate response to cope with the growing congestion levels currently experienced at many airports several characteristics of aviation markets however may make naive congestion prices equal to the value of marginal travel delays a non optimal response this paper develops a model of airport pricing that captures a number of these features the model in particular reflects that 1 airlines typically have market power and are engaged in oligopolistic competition at different sub markets 2 part of external travel delays that aircraft impose are internal to an operator and hence should not be accounted for in congestion tolls and 3 different airports in an international network will typically not be regulated by the same authority we present an analytical treatment for a simple two node network and some numerical results to illustrate our findings some main conclusions are that second best optimal tolls are typically lower than what would be suggested by congestion costs alone and may even be negative and that cooperation between regulators need not be stable but that non cooperation may lead to welfare losses also when compared to a no tolling situation

the capital energy substitutability debate a new look over the last twenty years many studies have been made of the elasticity of substitution between capital and labor the reported estimates are highly variable and reveal an apparent dichotomy between cross sectional and time series studies the former suggest that capital and energy are substitutes while the latter suggest the converse all these studies reported allen partial elasticities of substitution we suggest that the morishima elasticity may be a more useful measure for the issues of concern to capital energy substitution we calculate the morishima elasticities from parameters estimated in a selection of earlier studies and find no excessive variability nor any evidence of the time series cross section dichotomy capital and energy are morishima substitutes copyright 1995 by mit press

disease forecasts and livestock health disclosure a shepherd s dilemma we analyze how to induce sellers to disclose food safety with repeated interactions and safety correlated over time cash transfers alone do not ensure disclosure perfect but costly testing ensures disclosure with a complex lottery that may be difficult to implement in practice in contrast even a noisy quality forecast allows the buyer to induce perfect disclosure with a simple pricing scheme forecast introduction may benefit or harm sellers after introduction sellers may suffer from increases in forecast precision as an illustration we cast our model in the context of rift valley fever in an east african livestock market copyright 2010 oxford university press

airlines strategic interactions and airport pricing in a dynamic bottleneck model of congestion abstract this paper analyzes efficient pricing at a congested airport dominated by a single firm unlike much of the previous literature we combine a dynamic bottleneck model of congestion and a vertical structure model that explicitly considers the role of airlines and passengers we show that a stackelberg leader interacting with a competitive fringe partially internalizes congestion and that there are various toll regimes that induce the welfare maximizing outcome widening the set of choices for regulators in particular charging the congestion toll that would apply for fully competitive carriers and that ignores any internalization to both the leader and the fringe yields the first best outcome

weitzman revisited emission standards versus taxes with uncertain abatement costs and market power of polluting firms studies dealing with the optimal choice of pollution control instruments under uncertainty have invariably taken it for granted that regulated firms face perfectly competitive markets by introducing the product market into the stochastic framework of weitzman rev econ stud 41 477 491 1974 this paper shows for the case of a polluting symmetric cournot oligopoly that weitzman s policy rule for choosing emission standards versus taxes with uncertain abatement costs is biased in the presence of market power since the oligopolists take into account their influence on the market price their total abatement effort including the restriction of output is less vulnerable to miscalculations of the tax rate compared to price taking firms consequently the comparative advantage of instruments is shifted in favour of taxes in a further step the provided policy recommendations are generalised by abolishing the assumption that firms are symmetric

price vs quantity based approaches to airport congestion management abstract this paper analyzes price and quantity based approaches to management of airport congestion using a model where airlines are asymmetric and internalize congestion under these circumstances optimal congestion tolls are differentiated across carriers and a uniformity requirement on airport charges as occurs when slots are sold or tolls are uniform distorts carrier flight choices flight volumes tend to be too low for large carriers and too high for small carriers but quantity based regimes where the airport authority allocates a fixed number of slots via free distribution or an auction lead carriers to treat total flight volume and thus congestion as fixed and this difference generates an efficient outcome as long as the number of slots is optimally chosen

learning about the future and dynamic efficiency we analyze the conditions under which an efficient allocation of resources is achievable in a dynamic private values setting where the designer gradually learns about the distribution of agents values as an application consider the sequential allocation of scarce spectrum to emerg ing technologies whenever a new technology appears a benevolent designer is faced with a problem should he allocate a valuable chunk of spectrum right now while forfeiting for a long period of time the option of allocating it to a possibly superior future technology it makes sense to assume here that current firms have a better knowledge of their technological prow ess than the designer and that the designer s assessment of future technological possibilities is improved by observing the current technology if technology owners are strategic we show below that the learning process about the future disturbs the ability to extract the information necessary for efficient decision making another good example is hiring by an organization that fills positions at different hierarchy levels over time while all candidates prefer higher level positions some aspect of their ability to perform the needed tasks at each level is privately known to the candidates if contracts with current employees are difficult to adjust the designer must carefully compare the quality of present candidates which can serve as a signal about the market to the expected quality of candidates that may become available in the future finally consider a firm allocating franchises in a country where it did not operate before and where contractual clauses or other impediments prevent reallocation during a significant period of time local potential franchisees may have some superior information regarding future prof itability in the respective market and hence the elicitation of private information is crucial for a franchisor that is supposed to get a share of the future profits

the target incentive system vs the price incentive system under adverse selection and the ratchet effect abstract in a dynamic adverse selection type of principal agent relationship where the principal is committed over time to a particular incentive system with fixed structure but variable parameters but not to any intertemporal incentive scheme with both fixed structure and parameters the ratchet effect arises but varies with different incentive systems we show that compared with using prices as the sole planning mode the principal can attenuate the ratchet effect by stipulating targets as well as a result the target incentive system entails higher expected welfare than the price incentive system in a perfect bayesian equilibrium

factors influencing voluntary annual report disclosures by u s u k and continental european multinational corporations this study examines factors influencing the voluntary disclosures of three types of information strategic nonfinancial financial contained in the annual reports of mncs from the u s u k and continental europe while company size country region listing status and to a lesser extent industry are the most important factors explaining voluntary disclosures overall the importance of the factors varies by information type

does voluntary carbon reporting meet investors needs abstract through initiatives such as the carbon disclosure project investors have encouraged companies to report on their climate change related risks and opportunities their greenhouse gas emissions and their climate change management systems and processes despite the large number of companies that now report climate change related information investors have consistently criticised companies for not providing information that can be readily used in investment decision making companies in turn have criticised investors for not utilising the information that they provide this article taking the case of the uk retail sector analyses the reasons for this debate between companies and their investors it concludes that there are two factors at play the first is that while investors have encouraged companies to report they have at least to date paid much less attention to the quality of the reported information the second is that company reporting on climate change falls far short of the quality required for investors to make meaningful comparisons between companies this in turn has limited investor interest in these data the article considers the potential for mandatory reporting to address these problems and concludes that mandatory reporting is at best a partial solution and that it is a combination of voluntary and mandatory reporting underpinned by active investor interest in the data being reported that offers the greatest potential for progress

sequential peak load pricing the case of airports and airlines we investigate airport peak load pricing using a vertical structure of airport and airlines we find that a profit maximizing airport would charge higher peak and off peak runway prices and a higher peak off peak price differential than a public airport consequently airport privatization would lead to both fewer total passengers and fewer passengers in the peak period although peak travelling passengers benefit from fewer delays this low level of peak congestion is not efficient suggesting that airport privatization cannot be judged based on its effect on congestion alone we also examine pricing behaviour of a public airport constrained to charge a time independent price on etudie la tarification de pointe dans une structure verticale d aeroports et de compagnies d aviation on decouvre qu un aeroport qui maximise ses profits chargerait des prix plus eleves pour l usage des pistes tant aux heures de pointe qu en autre temps qu un aeroport public ainsi qu un differentiel plus grand entre ces differents moments en consequence la privatisation des aeroports va entrainer a la fois moins de passagers et moins de passagers aux heures de pointe meme si ceux qui voyagent aux heures de pointe vont devoir subir moins de delais cette moindre congestion n est pas efficace voila qui suggere qu on ne doit pas evaluer la privatisation des aeroports seulement a l aune de l impact sur la congestion les auteurs examinent aussi les strategies de tarification d un aeroport public contraint a imposer une tarification qui ne peut varier selon le moment d usage dans le temps

manipulable congestion tolls the recent literature on congestion pricing with large agents contains a remarkable inconsistency though agents are large enough to recognize self imposed congestion and exert market power over prices they do not take into account the impact of their own actions on the magnitude of congestion tolls when large agents are confronted with tolls derived under this parametric assumption but understand the rule used to generate them the toll system will no longer guide the market to the social optimum to address this problem the present paper derives alternate manipulable toll rules which are designed to achieve the social optimum when agents anticipate the full impact of their actions on toll liabilities

environmental abatement and intergenerational distribution this paper employs an overlapping generations model to explore the impact of public abatement on private investment and the intergenerational distribution of welfare whereas public abatement benefits old generations in terms of non environmental welfare future generations gain most in terms of environmental welfare the overall benefits tend to be smallest for generations born at the time of the unanticipated policy shock public debt policy however can be employed to ensure that welfare gains are distributed more equally across the various generations such a policy implies that natural capital crowds out man made capital

planes ships and taxes charging for international aviation and maritime emissions international aviation and maritime transport account for a significant and growing share of global carbon emissions yet they are not only excluded from the kyoto agreement and all current carbon pricing schemes but do not even pay fuel excises of the type standard for other transport activities moreover each sector benefits from preferential tax treatment failure to charge vat on international aviation and the application of tonnage tax regimes rather than the normal corporate tax in maritime this paper considers the design of fuel charges in these sectors to address these distortions and quantifies their impact on emissions revenue and welfare showing amongst other things that the gain from offsetting the pre existing tax distortions may be as significant as those from reducing emissions it shows too how compensation schemes can be designed to protect the poorest countries a key ingredient in the politics of the issue given the practical need for wide applicability of such charges the real challenge is to amass the degree of international cooperation required especially strong for maritime failure of which to some degree explains their current under taxation and unsurprisingly to decide who gets the money technically these charges should if anything be rather easy to implement michael keen ian parry and jon strand

an integrated economic and distributional analysis of energy policies most public policies particularly those in the energy sphere have not only efficiency but also distributional effects however there is a trade off between modelling approaches suitable for calculating those impacts on the economy for the former most of the studies have been conducted with general equilibrium models whereas partial equilibrium models represent the main approach for distributional analysis this paper proposes a methodology to simultaneously carry out an analysis of the distributional and efficiency consequences of changes in energy taxation in order to do so we have integrated a microeconomic household demand model and a computable general equilibrium model for the spanish economy we illustrate the advantages of this approach by simulating a revenue neutral reform in spanish indirect taxation with a large increase of energy taxes that serve an environmental purpose the results show that the reforms bring about significant efficiency and distributional effects in some cases counterintuitive and demonstrate the academic and social utility of this approximation

intertemporal common agency and organizational design how much decentralization abstract in common agency where one agent contracts with several principals to what extent should the principals cooperate and centralize provision of incentives if the agency is over contract complements where an increase in activity for one principal increases the marginal value of contracting with other principals complete centralization seems optimal since this internalizes all externalities we show that this intuition is not generally valid for dynamic agency situations for although centralization provides more accurate incentives to the agent it also aggravates the ratchet effect and this negative effect may dominate the optimal degree of decentralization is discussed and partly characterized

network effects congestion externalities and air traffic delays or why not all delays are evil we examine two factors that explain air traffic congestion network benefits due to hubbing and congestion externalities while both factors impact congestion we find that the hubbing effect dominates empirically hub carriers incur most of the additional travel time from hubbing primarily because they cluster their flights in short time spans to provide passengers as many potential connections as possible with a minimum of waiting time non hub flights at the same hub airports operate with minimal additional travel time these results suggest that an optimal congestion tax might have a relatively small impact on flight patterns at hub airports jel l2 l5 l9 d6

favoring the winner or loser in repeated contests should a firm favor a weaker or stronger employee in a contest despite a widespread emphasis on rewarding the best employees managers continue to tolerate and even favor poor performers contest theory reveals that evenly matched contests are the most intense which implies that a contest designer can maximize each player s effort by artificially boosting the underdog s chances we apply this type of handicapping to a two period repeated contest between employees in which the only information available about their abilities is their performance in the first period in this setting employees are strategic and forward looking such that they fully anticipate the potential impact of the first period contest result on the second period contest and thus adjust their behaviors accordingly the manager also incorporates these strategic behaviors of employees when determining an optimal handicapping policy if employees abilities are sufficiently different favoring the first period loser in the second period increases the total effort over both periods however if abilities are sufficiently similar we find the opposite result occurs total effort increases the most in response to a handicapping strategy of favoring the first period winner

intergenerational effects of a green tax reform for a more sustainable social security system abstract green tax reforms are popular in some circles not only because of their direct effect on reducing pollution but also because their revenue capacity may allow to reduce other more distortionary taxes despite their potential benefits the political implementation of green tax reforms is not straightforward changes in environmental taxes have different intergenerational effects which need to be taken into account when considering their political support among a country s population in this paper we analyze the economic and intergenerational welfare effects of introducing a green tax reform to ameliorate the spanish social security system we consider two types of energy taxes an energy consumption tax and an energy input tax we find that both types of reforms are favored by young individuals but rejected by older generations the number of generations supporting the reform depends crucially on the disutility that individuals derive from pollution suggesting that an increase in environmental awareness may be needed for green tax reforms to be politically viable

competitive markets without commitment in the presence of a time inconsistency problem with agency contracts we show that competitive markets can implement allocations that pareto dominate those achieved by a benevolent government and they induce more effort we analyze a model with moral hazard and a two sided lack of commitment after agents have chosen their work firms can modify contracts and agents can switch firms if the ex post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals it is pareto superior to a government s allocation with a complete breakdown of incentives moreover competitive markets without commitment implement more effort in equilibrium under general conditions

regulating a monopolist with unknown demand the authors analyze the optimal regulatory policy when the firm has better information about demand than the regulator from the outset of their relationship the firm s cost structure is common knowledge but monitoring of output is prohibitively costly the authors find that when marginal production costs increase with output the firm command s no rents from its private information and the efficient price is established for each realization of demand in contrast with declining marginal costs the same price is established by the regulator for all demand realizations and the firm s rents can be substantial overall major qualitative differences in the optimal regulatory policy arise when the firm s private information concerns demand rather than costs copyright 1988 by american economic association

another look at airport congestion pricing we study alternate approaches to implement congestion pricing at us airports conventional formulations toll all aircraft without determining whether a plane operated by a given airline delays other planes that it operates or planes operated by other airlines recent work points out optimal pricing calls for carriers to be charged only for the delay they impose on other airlines we find a small difference between the net benefits generated by the two congestion pricing policies because the bulk of airport delays are not internalized and because the efficiency loss from pricing internalized congestion is small jel l11 l93 r41

the multiperiod principal agent problem in repeated principal agent models long term contracts can improve on short term contracts only if they commit either principal or agent to a payoff in some future circumstance lower than could be obtained from a short term contract negotiated if that circumstance occurs we show that efficient contracting under moral hazard alone does not require long term commitment from the principal provided a short term contract can punish the agent sufficiently in a sense made precise it requires no commitment from the agent either then linking payoffs in one period to outcomes in previous periods does not improve the tradeoff between incentives and risk sharing

do carriers internalize congestion costs empirical evidence on the internalization question abstract economists have long suggested overhauling the existing u s airport landing departure fees to reflect market valuations of scarce runway capacity economists however do not agree on the optimal congestion based pricing scheme while some researchers advocate for a uniform congestion fee regardless of a carrier s airport market share others suggest that airport tolls should only reflect the congestion costs imposed on other carriers this paper uses ten years of ontime performance data to empirically determine if carriers internalize congestion costs while previous researchers e g mayer christopher sinai todd 2003a network effects congestion externalities and air traffic delays or why all delays are not evil american economic review 93 4 1194 1215 use excess travel time to measure flight delays the contribution of this paper is the addition of on time arrival and delay measures based on actual versus scheduled arrival and departure times we find that estimates based on these new delay measures reverse earlier findings by mayer and sinai 2003a network effects congestion externalities and air traffic delays or why all delays are not evil american economic review 93 4 1194 1215 and hence imply that carriers are not internalizing flight congestion costs

political economy of mechanisms we study the optimal mirrlees taxation problem in a dynamic economy in contrast to the standard approach where the taxation mechanism is operated by a benevolent planner with full commitment power we focus on economies in which policy decisions are made by self interested politicians who cannot commit to policies the society controls politicians using elections we show that the provision of incentives to politicians can be partly separated from redistribution across agents and that political economy constraints can be modeled as introducing additional aggregate distortions in the dynamic mirrlees problem we provide conditions under which the political economy distortions persist or disappear in the long run if the politicians are as patient as the agents the best sustainable mechanism leads to an asymptotic allocation where the aggregate distortions arising from political economy disappear in contrast when politicians are less patient than the citizens positive aggregate labor and capital taxes remain even asymptotically we conclude by providing a brief comparison of centralized

the life cycle of regulatory agencies dynamic capture and transaction costs the dynamics of regulation is analysed in a model where regulatory capture comes from the repeated interaction between an interest group and a regulatory agency regulatory institutions offer a framework for this dynamic process they put constraints on the interest group s influence the dynamics of regulation and its long run outcome depend on the political principal s the regulator s and the regulated firm s time preferences and their information some foundations for the transaction costs of side contracting used in the standard literature on collusion are provided those transaction costs are linked to the precise nature of regulatory institutions

regulation of road accident externalities when insurance companies have market power abstract accident externalities that individual drivers impose on one another via their presence on the road are among the most important external costs of road transport we study the regulation of these externalities when insurance companies have market power some of the results we derive have close resemblance to the earlier literature on externality regulation with market power in aviation and private roads but there are important differences too using analytical models we compare the first best public welfare maximizing outcome with a private profit maximizing monopoly and oligopoly we find that insurance companies will internalize some of the externalities depending on their degree of market power we derive optimal insurance premiums and regular parametric taxes as well as manipulable ones that make the companies set socially optimal premiums the latter take into account that the firm tries to exploit knowledge of the tax rule applied by the government finally we also study the taxation of road users rather than that of firms

consumer lock in with asymmetric information abstract a two period version of the rothschild and stiglitz 1976 model of competitive screening in an insurance market is presented its features include repeat purchase of insurance among consumers no commitment among insurers or consumers asymmetric information among insurers about a consumer s accident history and state contingent contracts an equilibrium may exist in this model with full pooling in period one and consumer lock in in period two in such an equilibrium high risk consumers are experience rated and firms earn negative profits in period one and positive profits in period two