the environmental kuznets curve environmental protection policy and income distribution abstract the effect of economic growth on pollution emissions differs substantially among high income countries i address this issue by analyzing public environmental policy decisions individual heterogeneity relative income effect and the political framework in which policy decisions are taken determine the emergence of the downward sloping segment of the environmental kuznets curve ekc income inequality produces a gap between the country s ability to pay for environmental protection and a country s willingness to pay i test this result by using oecd data on public r d expenditure for environmental protection the conclusion is that contrary to the ek hypothesis moments of the income distribution function other than the mean may be important for the emergence of a virtuous path of sustainable growth in high income countries

single crossing random utility models we propose a novel model of stochastic choice the single crossing random utility model scrum this is a random utility model in which the collection of preferences satisfies the single crossing property we offer a characterization of scrums based on two easy to check properties the classic monotonicity property and a novel condition centrality the identified collection of preferences and associated probabilities is unique we show that scrums nest both single peaked and single dipped random utility models and establish a stochastic monotone comparative result for the case of scrums

public provision of private child goods abstract this paper analyzes the public provision of private goods for children in a politico economic model with endogenous fertility the government provides every child with goods that can also be purchased by parents in private markets and the level of provision is determined by majority rule households with many children benefit from the public provision more than those with fewer children thus a political conflict arises between them the distribution of the number of children across households which is a crucial factor for determining which group is politically dominant is endogenously determined by households fertility decision the sequential interaction between fertility and political decisions might lead to multiple equilibria equilibrium with high fertility and low private public spending ratio and equilibrium with low fertility and high private public spending ratio our model could explain the large differences in fertility and structure of child related spending across countries

comparing optima do simplifying assumptions affect conclusions consider a family of maximization models in which the optimum trades off beneficial and costly effects then comparative statics derived under many kinds of simplifying assumptions about the benefits technology are also true for general convex and nonconvex technologies for example any comparative statics conclusion about investment by a risk averse decision maker under uncertainty that holds when expected returns are described by a general linear function also holds for an arbitrary nonlinear expected return function

on the endogenous allocation of decision powers in federal structures abstract this paper provides a political economy explanation of the degree of centralization in economic policy making to determine which policies are to be centralized regions select representatives who then negotiate the degree of centralization and the regional cost shares of centrally decided policies we show that the resulting degree of centralization is suboptimally low voters strategically delegate to representatives who are averse to public spending and hence prefer decentralized decisions in order to reduce their region s cost share when spillovers are asymmetric strategic delegation is stronger at the periphery than at the center

income distribution police expenditures and crime a political economy perspective in this paper i present a structural approach to investigate empirically the relation between income distribution police expenditures and crime the approach is based on the estimation of an equilibrium model where heterogeneous individuals choose whether to engage in criminal activities and expenditures on police to apprehend criminals are determined endogenously through majority voting i discuss the identification and estimation of the parameters of the structural model using data for the united states jel d72 d78 k42

an economic rationale for public education the value of commitment abstract this paper offers an explanation for the widespread phenomenon of uniform public schooling which is viewed here as a way for the government to precommit itself to restraints on future income redistribution such precommitment is likely to enhance accumulation of human capital to bolster economic growth and under certain circumstances to constitute a preferred choice for a majority of voters

real time dynamic pricing with minimal and flexible price adjustment we study a standard dynamic pricing problem where the seller a monopolist possesses a finite amount of inventories and attempts to sell the products during a finite selling season despite the potential benefits of dynamic pricing many sellers still adopt a static pricing policy because of 1 the complexity of frequent reoptimizations 2 the negative perception of excessive price adjustments and 3 the lack of flexibility caused by existing business constraints in this paper we develop a family of pricing heuristics that can be used to address all these challenges our heuristic is computationally easy to implement it requires only a single optimization at the beginning of the selling season and automatically adjusts the prices over time moreover to guarantee a strong revenue performance the heuristic only needs to adjust the prices of a small number of products and do so infrequently this property helps the seller focus his effort on the prices of the most important products instead of all products in addition in the case where not all products are equally admissible to price adjustment due to existing business constraints such as contractual agreement strategic product positioning etc our heuristic can immediately substitute the price adjustment of the original products with the price adjustment of similar products and maintain an equivalent revenue performance this property provides the seller with extra flexibility in managing his prices

analysis of deterministic lp based booking limit and bid price controls for revenue management we study the performance of two popular and widely used heuristics for revenue management known as the booking limit and bid price controls in contrast to a recent result in the literature where frequent re solvings of a certain heuristic are shown to significantly reduce revenue loss we show that the asymptotic revenue loss of either booking limit or bid price control cannot be reduced regardless of the choice of re solving times and the frequency of re solving moreover we also show that further variations within the policy classes such as nested instead of partition booking limit or certainty equivalent instead of additive bid price are simply indistinguishable in terms of their order of revenue loss under frequent re solvings this negative result highlights the limitation of re solving deterministic linear programs when the solution is interpreted as either a booking limit or a bid price finally we briefly discuss how to modify the traditional booking limit control to make it more responsive

revealed political power this paper adopts a revealed preference approach to the question of what can be inferred about bias in a political system we examine a dynamic environment in which individuals dier by income each period long run preference profiles are unobserved to an outside observer but are known to belong to a well behaved class in which individual preferences are ordered by income in each state policy data is summarized by a markov policy rule the observer makes inferences about the underlying distribution of political power as if political power were derived from a wealth weighted voting system with weights that can vary across states the weights determine the nature and magnitude of the wealth bias positive weights on relative income in any period indicate an elitist bias in the political system whereas negative weights indicate a populist one we ask what class of weighted systems can rationalize a given policy rule as a weightedmajority outcome each period our first result shows that without further knowledge all forms of bias are possible any markov policy rule can be shown to be rationalized by any system of wealth weighted voting an additional single crossing restriction on preferences can however rule out certain weighting systems we then augment policy data with polling data and show that the set of rationalizing wealth weights are bounded above and below in some cases polls can provide information about the change in political inequality across time

tax evasion across italy rational noncompliance or inadequate civic concern the paper suggests anexplanation for the geographical dimensionof tax evasion that focuses on thestructure of territorial government taxesadministered by the central government arenot differentiated by regions poor areasmay prefer a combination of lower taxes andlower levels of public services at both thecentral and the local level this isespecially true when income and wealthlevels differ among the areas and thedemand for publicly provided goods iscorrelated to these levels but the use ofnationally uniform tax schedules imposes awelfare burden on poorer areas while thetax rates of local taxes can be adjusted tolocal preferences tax evasion may betacitly accepted as a compensation for thewelfare loss deriving from too highcentrally set tax rates

from theory to practice canadian economists contributions to public finance we survey canadian economists contributions to the field of public finance from the mid 1980s to 2016 we highlight the development and extension of the models and tools of public economics and the empirical studies that have deepened our understanding of the efficiency and distributional issues over a wide range of public finance issues we also highlight contributions to the development of policies through commissioned reports and the important role that canadian institutions the canadian tax foundation the think tanks and the federal and provincial departments of finance have played in shaping tax and fiscal policies de la theorie a la pratique contributions des economistes canadiens a la finance publique on examine les contributions des economistes canadiens au domaine de la finance publique du milieu des annees 1980 a 2016 on souligne le developpement et l extension des modeles et des outils d economie publique et les etudes empiriques qui ont aide a approfondir notre comprehension des enjeux d efficacite et de distribution dans un vaste eventail de questions de finance publique on souligne aussi les contributions des rapports commandites au developpement de politiques publiques ainsi que le role important d institutions canadiennes l association canadienne d etudes fiscales les groupes d experts ainsi que les ministeres des finances du gouvernement federal et des gouvernements provinciaux dans le design des politiques fiscales

performance of an lp based control for revenue management with unknown demand parameters we consider a standard network revenue management rm problem and study the performance of a linear program lp based control the probabilistic allocation control pac in the presence of unknown demand parameters we show that frequent re optimizations of pac without re estimation suffice to shrink the asymptotic impact of estimation error on revenue loss if in addition to re optimizations we also frequently re estimate the parameters we prove that the performance of pac in the unknown parameters setting is almost as good as the performance of pac in the known parameters setting our numerical experiments show that pac yields a revenue improvement of order 0 5 1 5 relative to lp based booking limit and bid price in most cases given the small margin in rm industries such as the airline industry about 2 this level of improvement can easily translate into a significant increase in profit

a new bid price approach to dynamic resource allocation in network revenue management abstract firms selling perishable products use a variety of techniques to maximize revenue through the dynamic control of their inventories one of the most powerful and simple approaches to address this issue consists of assigning threshold values bid prices to each resource and to accept requests whenever their revenue exceeds the sum of the bid prices associated with its constituent resources in this context we propose a new customer choice based mathematical program to estimate time dependent bid prices in contrast with most approaches from the current literature ours is characterized by its flexibility indeed it can easily embed technical and practical constraints that occur in most central reservation systems crs to solve the model we develop a column generation algorithm in which the np hard subproblem is addressed via an efficient heuristic procedure our computational results illustrate the performance of the method through comparisons with alternative proposals

learning public good provision and the information trap abstract we consider an economy with uncertainty about the true production function for a public good by using bayes rule the economy can learn from experience we show that it may learn the truth but that it may also converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap we also show that our results are robust with respect to small experimentation

single crossing conditions in comparisons of tax progressivity statements to the effect that one tax is more progressive than another are frequently made but seldom explained starting from a criterion of lorenz domination this paper shows how an intuitively appealing single crossing condition on appropriately normalized tax schedules may be used in progressivity comparisons this condition is closely related to and illuminates the necessary and sufficient condition derived by jakobsson 1976 for the distributional implications of alternative taxes to be inferred from their schedules alone

on the faustian dynamics of policy and political power this paper examines the faustian dynamics of policy and power we posit a general class of dy namic games in which current policies affect the future distribution of political power resulting in the following faustian trade off if the current ruler chooses his preferred policy he then sacrifices future political power yet if he wants to preserve his future power he must sacrifice his present policy objec tives the trade off comes from the fact that the current political ruler pivotal voter cannot uncouple the direct effect of his policy from its indirect effect on future power a policy endogenous pe equilibrium describes this endogenous transfer of power and the resulting evolution of policy and political power over time we show that the faustian trade off in a pe equilibrium is decomposed into two basic rationales the political preservation effect induces more tempered policy choices than if one s policy choice did not affect one s political fortunes however the reformation effect induces more aggressive policies in order to exploit the productivity gains from policies chosen by even more aggressive successors we distinguish between political systems that give rise to monotone faustian dynamics political power that progressively evolves towards more fiscally liberal types of leaders and cyclical faustian dynamics political power that oscillates between liberal and conservative types of leaders in each case we show that the faustian trade off moderates the choices of each type of leader

unequal societies income distribution and the social contract this paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political fundamentals can sustain such different systems of social insurance fiscal redistribution and education finance as those of the united states and western europe with imperfect credit and insurance markets some redistributive policies can improve ex ante welfare and this implies that their political support tends to decrease with inequality conversely with credit constraints lower redistribution translates into more persistent inequality hence the potential for multiple steady states with mutually reinforcing high inequality and low redistribution or vice versa

search and taxation in a model of underground economic activities i introduction it is widely recognized that one major effect of taxation is to stimulate activities in the so called underground or shadow economy indeed the extent of underground activities even in the western countries is by no means negligible schneider and enste 2000 report that the size of the shadow economy as percent of gross domestic product gdp in the organisation for economic co operation and development oecd countries in 1996 ranged from 7 5 in switzerland to 28 5 in greece this existence of underground activity is a significant source for concern the possibility of evading taxes makes taxation less efficient by undermining the tax base this possibility may jeopardize long run scope for financing adequate public services furthermore it implies that official measures of for example income and unemployment which form the basis for policy will necessarily be biased the purpose of this article is to suggest a simple micro founded framework for studying the relationship between tax policy and underground economic activities a defining characteristic of the latter is that they are illegal 1 the traditional approach starting with the seminal contribution of allingham and sandmo 1972 characterizes tax evasion as an activity for which there is a risk of detection 2 this approach however does not particularly highlight that underground economic activity involves trade we argue that although underground economic activities and regular activities are similar and can coexist one effect of the illegal status of the former is to differentiate the amount of information that is available in the two market segments whereas information about trading opportunities in regular markets can be assumed to be perfect because underground activity is by definition furtive information about trading opportunities in this segment will be less than perfect traditionally search theory has been used to capture the notion of imperfect information in markets this has a natural interpretation in the current context though trading in the regular market can be regarded as frictionless an agent wishing to trade in the underground sector must devote some time and effort to locating trustworthy trading partners with whom he or she can trade illegally at no risk hence we model underground trade as the outcome of a standard bilateral search process where buyers and sellers devote some time to locating each other and implicitly verifying each others trustworthiness 3 this process individually rational when facing taxes is a socially wasteful activity because it subtracts effort from physical production the model identifies a natural link between participation in the underground economy and individual characteristics this is important for analysis of micro level data our model suggests that individuals with lower earnings capacity are more active in underground economic activities hence the model predicts a negative correlation between individual participation in the underground economy and for example hourly wage and education from the evidence that is available this seems consistent with the data 4 the current model can be used as a framework for future empirical work using micro data because it can fairly easily be extended to include other features such as unemployment and variation across industries in the technology available for underground production to make further predictions about individual involvement in underground activities the systematic relation between earnings capacity and participation in the underground economy is also relevant for policy design consider the implementation of a redistributive tax although the tax aims at improving the welfare of the individuals with low earnings capacity the same individuals can benefit from trading in a relatively large underground economy if the tax is only mildly enforced

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

majority voting and the welfare implications of tax avoidance abstract a benchmark result in the political economy of taxation is that majority voting over a linear income tax schedule will result in an inefficiently high tax rate whenever the median voter has a below average income the present paper examines the role of tax avoidance for this welfare result for a right skewed distribution of taxed income we show that the political distortion from majority voting is increasing in the median voter s avoidance vice versa keeping the decisive voter s avoidance constant the political inefficiency is decreasing in the average level of avoidance in the economy

local inequality and project choice theory and evidence from ecuador this paper provides evidence consistent with elite capture of social fund investment projects in ecuador exploiting a unique combination of data sets on village level income distributions social fund project administration and province level electoral results we test a simple model of project choice when local political power is unequally distributed in accordance with the predictions of the model poorer villages are more likely to receive projects that provide excludable private goods to the poor such as latrines controlling for poverty more unequal communities are less likely to receive such projects consistent with the hypothesis of elite capture these results are sensitive to the specific measures of inequality and elite power used in the empirical analysis and are strongest for expenditure shares at the top of the distribution

voting under ignorance of job skills of unemployed the overtaxation bias abstract usual models on voting over basic income flat tax schedules rest on the assumption that voters know the whole distribution of skills even if at equilibrium some individuals do not work if individuals productivity remains unknown until they work it may be more convincing to assume that voters have only beliefs about the distribution of skills and that a learning process takes place in this paper at each period individuals vote according to their beliefs which are updated when getting new information from the job market the voting process converges towards some steady state equilibrium that depends on both the true distribution of skills and the initial beliefs the equilibrium tax rate is higher than or equal to the tax rate achieved in the perfect information framework an illustration is provided on french data if voters are over pessimistic as to the potential productivity of unemployed people majority voting may lock the economy in an informational trap with a high tax rate and a high level of inactivity

dynamic stability and reform of political institutions abstract this paper examines endogenous institutional change in a class of dynamic political games the political aggregation rules used at date t 1 are instrumental choices under rules at date t effectively rules are players who can strategically delegate future policy making authority to different rules a political rule is stable if it selects itself a reform occurs when an alternative rule is selected the stability of a political rule is shown to depend on whether its choices are dynamically consistent for instance simple majority rules can be shown to be dynamically consistent in many common environments where wealth weighted voting rules are not the result extends to political rules that incorporate private activities such as extra legal protests threats or private investment the approach is one way of understanding various explanations of institutional change proposed in the literature a parametric model of public goods provision gives an illustration

the political economy of sin taxes we analyse the determination of taxes on harmful goods when consumers have self control problems we show that under reasonable assumptions the socially optimal corrective tax exceeds the average distortion caused by self control problems further we analyse how individuals with self control problems would vote on taxes on the consumption of harmful goods and show that the equilibrium tax is typically below the socially optimal level when the redistributive effects of sin taxes are taken into account the difference between the social optimum and equilibrium is small at low levels of harm but becomes more pronounced when consumption is more harmful

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

voting on income tax exemptions most itemized tax exemptions lead to significant deductions for a minority of the population only this raises the question why the majority does not vote for the abolition of these tax privileges in exchange for lower tax rates in this paper we show that a reform proposal may be voted down even when the majority uses the exemption at stake below the average turning to an empirical application we simulate the voting outcome on the proposal to abolish the tax deductibility of commuting expenses in germany our model predicts that this proposal would be rejected even though a comfortable majority has below average deductions

a median voter model of health insurance with ex post moral hazard abstract one of the main features of health insurance is moral hazard as defined by pauly pauly m v 1968 the economics of moral hazard comment american economic review 58 531 537 people face incentives for excess utilization of medical care since they do not pay the full marginal cost for provision to mitigate the moral hazard problem a coinsurance can be included in the insurance contract but health insurance is often publicly provided having a uniform coinsurance rate determined in a political process is quite different from having different rates varying in accordance with one s preferences as is possible with private insurance we construct a political economy model in order to characterize the political equilibrium and answer questions like under what conditions is there a conflict in society on what coinsurance rate should be set and which groups of individuals will vote for a higher and lower than equilibrium coinsurance rate respectively we also extend our basic model and allow people to supplement the coverage provided by the government with private insurance then we answer two questions who will buy the additional coverage and how do the coinsurance rates people are now faced with compare with the rates chosen with pure private provision

ends against the middle determining public service provision when there are private alternatives abstract public provision of a service coexists with private market provision the quality of public provision is determined by majority vote preferences are not single peaked owing to the presence of private alternatives we identify two cases in one majority voting equilibrium always exists and the median income voter is pivotal in the other a necessary condition for equilibrium indentifies the pivotal voter who must have income below the median when equilibrium exists a coalition of middle income households who consume the public alternative will be opposed by a coalition of rich and poor households with the rich choosing private consumption

labor union objectives and collective bargaining we consider a model oflabor union behavior in which workers make decisions about wages and employment by simple majority rule we show that under general conditions such a union has a well behaved objective function different from those previously postulated in the literature we then show that the union s majority preferences generally lack a von neumann morgenstern utility representation and thus cannot be inserted into traditional bargaining models we then develop and characterize the solutions to a new bargaining model that is consistent with the structure of union preferences several comparative statics results are presented

remittances and the brain drain revisited two of the most salient trends in migration and development over the last two decades are the large rise in remittances and in the flow of skilled migrants however recent literature based on cross country regressions has claimed that more educated migrants remit less leading to concerns that further increases in skilled migration will impede remittance growth microdata from surveys of immigrants in 11 major destination countries are used to revisit the relationship between education and remitting behavior the data show a mixed pattern between education and the likelihood of remitting and a strong positive relationship between education and amount remitted intensive margin conditional on remitting at all extensive margin combining these intensive and extensive margins yields an overall positive effect of education on the amount remitted for the pooled sample with heterogeneous results across destinations the microdata allow investigation of why the more educated remit more showing that the h

an analysis of bid price controls for network revenue management bid prices are becoming an increasingly popular method for controlling the sale of inventoryin revenue management applications in this form of control threshold or bid prices are set for the resources or units of inventory seats on flight legs hotel rooms on specific dates etc and a product a seat in a fare class on an itinerary or room for a sequence of dates is sold only if the offered fare exceeds the sum of the threshold prices of all the resources needed to supply the product this approach is appealing on intuitive and practical grounds but the theory underlying it is not well developed moreover the extent to which bid price controls represent optimal or near optimal policies is not well understood using a general model of the demand process we show that bid price control is not optimal in general and analyze why bid price schemes can fail to produce correct accept deny decisions however we prove that when leg capacities and sales volumes are large bid price controls are asymptotically optimal provided the right bid prices are used we also provide analytical upper bounds on the optimal revenue in addition we analyze properties of the asymptotically optimal bid prices for example we show they are constant over time even when demand is nonstationary and that they may not be unique

economic and social class voting in a model of redistribution with social concerns we investigate how concerns about social status may affect individuals preferences for redistribution in our model agents are heterogeneous across two dimensions productivity and social class and an individual s social status is de ned as his relative standing in terms of a weighted average of these two components the weight on each component depends positively on its standard deviation redistribution thus simultaneously affects labor supply and the weights that determine social status as such taxation not only redistributes resources from the rich to the poor but also becomes a way of preserving or modifying social status thus individuals who have the same productivity but belong to different social classes support different tax rates we characterize the equilibrium of the political game as the solution of a system of non linear equations and identify the interclass coalition of voters who support the equilibrium tax rate

voting over selfishly optimal nonlinear income tax schedules abstract majority voting over selfishly optimal nonlinear income tax schedules proposed by a continuum of individuals who have quasilinear in consumption preferences is considered roell 2012 has shown that individual preferences over these schedules are single peaked in this article a complete characterization of selfishly optimal schedules is provided each selfishly optimal schedule has a bunching region in a neighborhood of the proposer s skill type coincides with the maxi max schedule below this region and coincides with the maxi min schedule above it using techniques introduced by vincent and mason 1967 the bunching region is identified by solving an unconstrained optimization problem information about the optimal schedules is used to provide a relatively simple proof of single peakedness the condorcet winning tax schedule features marginal tax rates that are negative resp positive on the maxi max resp maxi min part of the schedule except at the endpoints of the skill distribution where they are zero

the politics of progressive income taxation with incentive effects this paper studies majority voting over quadratic taxation and investigates under which conditions marginal progressivity emerges as a voting outcome in our model with endogenous income there is no majority condorcet winning tax schedule we then investigate less demanding political equilibrium concepts in order to see under which conditions the set of equilibria is composed only of progressive tax functions we follow three strategies i reduction of the policy space to the tax functions that are ideal for some voter ii elimination of weakly dominated strategies and the use of mixed strategies in a standard downsian two party competition game iii assumption that political parties interact repeatedly and care about the size of their majority although each approach captures a different aspect of political behavior they point to the same simulation based conclusion that progressivity is more likely to emerge for most distributions of abilities and that it is actually the only possible voting outcome if the distribution is sufficiently concentrated at the middle

media as watchdogs the role of news media in electoral competition abstract we develop an equilibrium model to analyze the role of the media in electoral competition when policy payoffs are state dependent party policies do not converge to the median voter s ideal policy if the media report only party policies news analysis about the state though possibly biased can discipline off equilibrium deviations and make the parties adopt more centrist policies since voters are rational the party favored by the media need not win with a higher probability instead media bias may reduce the effectiveness of electoral competition and lead to more polarized policies

taxes budgetary rule and majority voting this paper studies majority voting outcomes fora specific class of two dimensional policies one policyinstrument influences efficiency and the other redistribution absent the political process the two dimensions can beaddressed separately with a two dimensional vote the twoaspects will interact in a non trivial way the illustrativepolicy we consider requires taxing an externality generatinggood and determining a budgetary rule which specifies theproportions of the tax proceeds that go to wage earners and tocapital owners we show first a sequential vote wherein thetax rate is determined first and the budgetary rule second always possesses an equilibrium and that this equilibrium isthe median endowed individual s most preferred policy second the reverse sequential choice implies that the median endowedindividual may but need not be decisive third the shepsle procedure also implies that the equilibrium is thepolicy most favored by the median individual fourth thisequilibrium constitutes under certain circumstances thecondorcet winner for the unrestricted simultaneous votinggame

reoptimization and self adjusting price control for network revenue management we consider a standard dynamic pricing problem with finite inventories finite selling horizon and stochastic demands where the objective of the seller is to maximize total expected revenue we introduce a simple improvement of the popular static price control known in the literature the proposed heuristic only requires a single optimization at the beginning of the selling horizon and does not require any reoptimization at all this provides an advantage over the potentially heavy computational burden of reoptimization especially for very large applications with frequent price adjustments in addition our heuristic can be implemented in combination with a few reoptimizations to achieve a high level revenue performance this hybrid of real time adjustment and reoptimization allows the seller to enjoy the benefit of reoptimization without overdoing it

international environmental agreements and strategic voting two anonymous referees have provided very valuable comments and suggestions we have also benefited from discussions at seminars at the universities of bonn dortmund and dresden and at the conferences of euresco the european economic association and the verein fur socialpolitik this paper was partly written while haupt was visiting the economics department at the university of colorado at boulder he is very grateful to the members of the department particularly to eckhard janeba for their hospitality and for stimulating discussions and to the fritz thyssen stiftung for funding his research visit we also thank the deutsche forschungsgemeinschaft dfg for financial support

over incarceration and disenfranchisement this article presents a model wherein law enforcers propose sentences to maximize their likelihood of reelection and shows that elections typically generate over incarceration i e longer than optimal sentences it then studies the effects of disenfranchisement laws which prohibit convicted felons from voting the removal of ex convicts from the pool of eligible voters reduces the pressure politicians may otherwise face to protect the interests of this group and thereby causes the political process to push the sentences for criminal offenses upwards therefore disenfranchisement further widens the gap between the optimal sentence and the equilibrium sentence and thereby exacerbates the problem of over incarceration moreover this result is valid even when voter turnout is negatively correlated with people s criminal tendencies i e when criminals vote less frequently than non criminals

social security and family support this paper shows how the role of the market the state and the family in providing financial support at old age has evolved over time with changes in factors such as the reliability and the effectiveness of family support the rate of interest the cost of public funds and earning inequality we model a society in which agents with different productivity are asked to vote over the existence of a beveridgian pension system we show that when children assistance is certain and large agents may rely exclusively on family to finance old age consumption and prefer to vote for a zero tax rate only if income inequalities are very large a majority will be in favor of a pension system however when the size and the likelihood of family generosity decreases a pension system is more likely to emerge in that case agents supplement children assistance with pension benefits a pension system is also more likely to emerge when the cost of public fund is small and the return from private savings is high

union leaders as experts wage bargaining and strikes with union wide ballot requirements to avoid strikes and to curb labour militancy some governments have introduced legislation stating that union leadership as well as wage offers should be decided through union wide ballots this paper shows that members still have incentives to appoint militant union leaders if these leaders have access to information critical for the members voting decisions furthermore conflicts may arise in equilibrium even though the contract zone is never empty and there is an option to resolve any incomplete information ballot requirements hence preclude neither militant union bosses nor inefficient conflicts

pareto efficiency and majority voting why high taxes on the middle class may be desirable in this paper we use a simple median voter model to analyze the effects of tax systems with differing degrees of progressivity we find that relatively high taxes on middle incomes have two important advantages on the one hand they help to ensure that all citizens are better off than they would be in a world without government and on the other hand they reduce the tax level chosen in the election therefore the progression in the middle income range not only ensures that wicksell s requirement of ex post efficiency of the tax system is achieved it may also increase social welfare

inequality and market concentration when shareholding is more skewed than consumption economic theory suggests that monopoly prices hurt consumers but benefit shareholders but in a world where individuals or households can be both consumers and shareholders the impact of market power on inequality depends in part on the relative distribution of consumption and corporate equity ownership across individuals or households the paper calculates this distribution for the united states using data from the survey of consumer finances and the consumer expenditure survey spanning nearly three decades from 1989 to 2016 in 2016 the top 20 per cent consumed approximately as much as the bottom 60 per cent but had 15 times as much corporate equity because ownership is more skewed than consumption increased mark ups increase inequality moreover over time corporate equity has become even more skewed relative to consumption

committees with supermajority voting yield commitment with flexibility abstract a fundamental problem for government is how to combine commitment to certain policies with the flexibility required to adjust them when needed rogoff 1985 rogoff k 1985 the optimal degree of commitment to an intermediate monetary target q j econ 100 4 1169 1189 showed that a way to strike the right balance is to appoint an optimally conservative policy maker in real life however policy makers also have power over decisions where optimal plans are time consistent so delegating to a conservative person could be undesirable a flexible delegation device can be found in a large committee of randomly appointed members voting over policy after observing a shock when facing dynamic inconsistency under a single crossing property there exists a supermajority rule that implements the population median s optimally conservative policy maker with certainty another single crossing property guarantees that if simple majority voting is used to select the voting rule that will govern policy choice the supermajority preferred by the median is chosen for problems where dynamic inconsistency vanishes the committee will choose to make decisions by simple majority implementing median outcomes an application to monetary policy is developed we show that the optimal supermajority is higher when dynamic inconsistency is more severe when preferences are more homogeneous and when the economy is less volatile

voting on meritocracy abstract this paper considers a setting where a resource such as education budget is to be distributed among agents the latter differ in their ability to make use of the resource and the issue is that of determining the allocation rule whereby the individual shares of the resource may depend on their relative efforts of obtaining it the paper s focus is on endogenous determination through voting of the degree of meritocracy in the resource allocation system which determines the marginal productivity of one s effort it is found that a meritocratic system is expected to be supported by highly productive individuals and opposed by those with low productivity when the decision making becomes less elitist and involves broader participation of population groups the support for meritocracy decreases

trade unions nonneutrality and stagflation the claim that in policy games nonneutrality and a stagflation bias emerge in equilibrium if the unions care about inflation per se is discussed this assumption is shown to be not necessary to obtain a stagflation bias the same applies to nonneutrality if a government acts in the economy the question of whether unions should be envisaged as institutions i e interested in variables unrelated to wages and employment is also addressed two model based alternatives providing microeconomic foundations versus macroeconomic foundations to unions behaviour are presented the conclusion is that the modelling of unions remains an unsettled problem

valence characteristics costly policy and the median crossing property a diagrammatic exposition voters value valence characteristics such as honesty and competence in this paper we consider the situation where candidates may have more than one valence characteristic of importance to the voters at the same time we introduce a new concept the median crossing property which differs from single peakedness and is less restrictive than the single crossing property if indifference curves satisfy the median crossing property then voting is transitive and the majority s preference rankings coincide with those of the median voter if the indifference curves violate the median crossing property then intransitivity may arise the framework also allows us to consider elections with costly policy

airline seat allocation with multiple nested fare classes this paper addresses the problem of determining optimal booking policies for multiple fare classes that share the same seating pool on one leg of an airline flight when seats are booked in a nested fashion and when lower fare classes book before higher ones we show that a fixed limit booking policy that maximizes expected revenue can be characterized by a simple set of conditions on the subdifferential of the expected revenue function these conditions are appropriate for either the discrete or continuous demand cases these conditions are further simplified to a set of conditions that relate the probability distributions of demand for the various fare classes to their respective fares the latter conditions are guaranteed to have a solution when the joint probability distribution of demand is continuous characterization of the problem as a series of monotone optimal stopping problems proves optimality of the fixed limit policy over all admissible policies a comparison is made of the optimal solutions

dynamics and stability of constitutions coalitions and clubs a central feature of dynamic collective decision making is that the rules that govern the procedures for future decision making and the distribution of political power across players are determined by current decisions for example current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations we develop a general framework for the analysis of this class of dynamic problems under relatively natural acyclicity assumptions we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness we show how this framework can be applied in political economy coalition formation and the analysis of the dynamics of clubs the explicit characterization we provide highlights two intuitive features of dynamic collective decision making 1 a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society 2 efficiency enhancing changes are often resisted because of further social changes that they will engender

social conflict and gradual political succession an illustrative model this paper studies the evolution of political institutions in the face of conflict we examine institutional reform in a class of pivotal mechanisms institutions that behave as if the resulting policy were determined by a pivotal decision maker drawn from the potential population of citizens and who holds full policy making authority at the time a rule ofsuccession describes the process by which pivotal decision makers in period t 1 are themselves chosen by pivotal decision makers in period t t wo sources of conflict class conflict arising from differences in wealth and ideological conflict arising from differences in preferences are examined in each case we characterize the unique markov perfect equilibrium of the associated dynamic political game and show that public decision making authority evolves monotonically downward in wealth and upward in ideological predisposition toward the public good we then examine rules of succession when ideology and wealth exhibit correlation

the politics of infrastructure investment the role of product market competition abstract in spatial competition public infrastructure plays a crucial role in determining product market outcomes in our model consideration of infrastructure s impact on the product market drives the preferences of consumers in their dual role as voter taxpayers the spatial heterogeneity of consumers produces conflicting political interests and in many cases inefficient outcomes however across both exogenous and endogenous market environments product market competition consistently leads to higher levels of publicly funded infrastructure than monopoly collusion furthermore competition s boost to the popular support for infrastructure investment is often excessive while monopoly leads to underinvestment

the customs union issue why do we observe so few of them the number of preferential trade agreements has greatly increased over the past two decades yet most existing bilateral arrangements take the form of free trade areas and less than ten percent can be considered to be fully edged customs unions this paper develops a political economy model of trade policy under imperfect competition to provide a positive explanation for the prevalence of free trade areas in a three country setting a representative from each prospective member is elected to determine the tarifis to be applied on imported goods under a customs union the necessity to coordinate tarifis leads voters to strategically delegate power to more protectionist representatives contrary to most of the existing literature we show that strategic delegation may imply that free trade areas increase welfare compared to customs unions moreover the model also indicates that free trade areas are more likely to be politically viable than customs unions