sequential search with a budget constraint abstract for a buyer who searches sequentially for the lowest price from a known distribution but subject to a budget constraint the optimal policy will no longer have the reservation price property

alcohol prices consumption and traffic fatalities we examine the relationships among alcohol prices consumption and traffic fatalities using data across u s states from 1982 to 2000 some previous studies have found large negative associations between alcohol taxes and fatalities however commonly used price data suggest little or no connection between alcohol prices and fatalities these apparently conflicting findings may result from measurement error and or endogeneity in the price data which biases ordinary least squares estimators toward a finding of no price effects using alcohol taxes as instrumental variables fatali ties are found to be negatively related to prices in addition alcohol consumption is strongly posi tively related to fatalities however biases may still remain because taxes are not entirely suitable as instruments

the effect of initial lease periods on price discovery in laboratory tradable fishing allowance markets abstract newly established tradable fishing allowance markets are often accompanied by a period of high price volatility these fluctuations complicate capital investment decisions and play a significant role in determining outcomes for the traders involved this paper reports an evaluation of two market design features that may reduce volatility during price discovery a uniform price auction in which all trades within a period take place at the same price and an initial lease period which prohibits permanent allowance transfers at the beginning of the program we find that initial lease periods effectively reduce volatility once permanent trading is introduced

spatial differences in the demands for local public goods differences in the mix of public goods across locations are apparent particularly sharp are the differences between public spending habits of central cities and suburbs for 37 of the largest smsas in 1977 the ratio of per capita educational expenditures in central cities to the per capita education expenditures in suburban areas was 93 and the comparable ratio for per capita noneducational expenditures was 2 01 1 relative to suburban areas central cities have spent more of their revenue on noneducational public goods and less on education although these differences have been attributed to various demandand supply side factors analysts have placed considerable emphasis on the demand side determinants of local expenditures researchers such as borcherding and deacon 1972 have estimated the demands for local public goods by focusing on the consumption behavior of the median voter the partial equilibrium nature of these earlier models however missed the potential interdependencies between the demands for public and private goods more recently there have been attempts to develop a more complete general equilibrium model of public choice which incorporates the interaction between public and private goods perkins 1977 presents a general equilibrium extension of the borcherding and deacon framework by testing the cross price effects between various local public goods his empirical results strongly suggest that there is substitutability among certain local public

does information matter in the commons experimental evidence abstract common pool resources cprs typically involve interaction where precise information about payoffs is absent however all experimental studies of cprs we are aware of study environments where the payoff structure is known in this paper we address the behavioral consequences of two degrees of information on the mapping between decisions and payoffs we run two treatments one with complete information on the payoff structure and one with none remarkably aggregate behavior is not significantly different between the two treatments in both cases the aggregate tendencies converge to the nash equilibrium furthermore the best reply dynamics organize individual behavior in both treatments remarkably well

search and consumer theory a consumer faces list prices for commodities but can buy one at a discount discounts vary randomly between sellers the number of quotations sought depends on list prices search costs and wealth this function is homogeneous of degree zero and provided some sufficient conditions are satisfied is increasing in wealth decreasing in search cost independent of the list price of the discounted commodity if indirect utility is multiplicatively separable increasing in the list price if the commodity is a necessity increasing in the list price of substitutes slutsky s equation is generalized to include search

can baumol s model of unbalanced growth contribute to explaining the secular rise in health care expenditure an alternative test in a recent paper i argued that baumol s model of unbalanced growth offers a ready explanation for the observed secular rise in health care expenditure hce in rich countries baumol s model implies that hce is driven by wage increases in excess of productivity growth i tested this hypothesis empirically using data from a panel of 19 organization for economic cooperation and development oecd countries and found robust evidence in favour of baumol s theory an alternative way to test baumol s theory is to check whether its implication that variations in the relative price of medical care contribute significantly to explaining variations in health expenditure in the same direction has an empirical grounding earlier studies although mostly not in an explicit attempt to test baumol s theory have occasionally rejected this hypothesis despite poor data quality of the available medical price indices i perform the alternative test using data for nine oecd countries my findings suggest that the relat

sustainable management of renewable resources an experimental investigation in continuous time abstractthis study addresses one of the most basic questions in renewable resource management the ability of economic agents to exploit a renewable resource in an efficient and sustainable manner in a laboratory experiment subjects are presented with renewable resource extraction problems where optimal management will lead to a stable steady state a test of sustainability of the extraction practices shows that extraction behaviour results in steady states only 56 of the time the mode of the steady state distribution coincides with the optimal steady state extraction the trade off between accruing a higher payoff in the present and sustaining the resource for future exploitation leads to suboptimal behaviours such as initial overextraction of the resource compared to the optimal extraction policy costly downward adjustment of the extraction later in time and settling down for lower long run resource and extraction the suboptimal behaviours lead to 17 loss in efficiency on average in terms of th

an experimental analysis of optimal renewable resource management the fishery this paper experimentally studies the extraction decisions of a sole owner in a fishery the population dynamics of which behave according to the standard deterministic logistic growth model four treatments were implemented which differed in the level of information supplied to the subjects compared to the theoretic benchmark the data reveal that efficiency losses increase as the information on population dynamics and stock size deteriorates three common patterns of behaviour are identified the distribution of these patterns is significantly affected by the informational setting

sequential search without reservation price abstract for a consumer who searches sequentially from a known distribution but subject to a budget constraint the optimal search policy does not necessarily have a reservation price and may generate demand curves with positively sloped segments however absence of risk aversion and inferiority is sufficient to avoid these implications

optimal adaptive price search consider the problem of a consumer desiring to buy a good which is sold at a variety of prices such a buyer will be able to obtain a sequence of price quotations from various sellers when should the buyer stop searching for a lower price if he continues he may obtain a lower price but he incurs additional time effort and expense in searching the optimal price search decision is one of balancing the expectation of a possibly lower price obtained by continued search against cumulative costs from search when the prices arise from a known probability distribution the optimal search strategy has certain well defined and desirable properties in the more realistic case that the buyer has only partial information about the price distribution and must update his beliefs after observing prices in the marketplace the problem becomes more complex and search strategies become less well behaved the major purpose of this article is to determine new conditions under which optimal policies have these desirable characteristics in the case where the consumer possesses only incomplete information about the distribution of prices price quotations he receives in addition to providing him with price possibilities provide him with information about that distribution rothschild 151 in citing an unpublished paper of gastwirth has noted that small specification errors for an assumed distribution can lead to substantial changes in expected number of searches and expected cost consequently the assumption of a known distribution of prices can have a profound effect on total cost 1 0022 053 l 8 l 040001 20 02 00 o

overexploitation of renewable resources the role of misperceptions abstract numerous renewable resources have been exploited beyond limits for sustainable and economic development at times over exploitation has been observed even in cases where management regimes have been in place thus it seems pertinent to search for explanations beyond the theory of the commons an experiment is performed where subjects set reindeer quotas in a district where lichen has been severely depleted by preceding overgrazing all subjects err on the side of over exploitation behavior seems to be dominated by inappropriate static mental models and inefficient heuristics hence a subtle information problem is revealed

decision making in patchy resource environments spatial misperception of bioeconomic models abstract we investigate the performance of subjects in a patchy resource environment in the experimental laboratory to expand the concept of stock misperception into spatial and non spatial components results indicate that substantial heterogeneity exists in the decision heuristics employed that can be used to identify subject types steady state and pulse fishing strategists while steady state strategists are only subject to spatial misperceptions pulse strategists are subject to both forms of misperception both subject groups overallocate effort to regions within the fishery that possess the highest rates of emigration inducing a spatial externality these spatial misperceptions are exacerbated by the spatial structure present

reply to jonathan gruber and michael frakes we address gruber and frakes s criticisms that 1 the state excise tax on a package of cigarettes is a more exogenous measure of the cost of cigarettes than the state specific price of a package of cigarettes and 2 that it is preferable to control for the effects of unmeasured variables that vary over time with the use of time dummies instead of with a quadratic time trend we also point out that our specification of the cost effect differs from theirs because we allow it to be nonlinear while they force it to be linear

uncertain measurements of renewable resources approximations harvesting policies and value of accuracy abstract this paper deals with the management of renewable resources subject to measurement error the method stochastic optimization in policy space sops allows for more general solutions to problems that are not lq than earlier attempts measurement errors are found to be more important for quota policies than natural stochastic variation with little error filtering in time or in policy space is important with considerable error caution becomes important various approximations are compared policies based simply on historical measurements are found to give higher expected values than policies based on advanced kalman filter estimates values of measurement accuracy are estimated

short run marginal medical costs from booze and butts evidence from the states this article uses a panel data set of u s states over the 1980 to 2007 period to estimate the demands for medical care cigarettes and beer the estimation process generates own price income and cross price elasticities for all three goods implied per capita beer and cigarette consumption elasticities of per capita health care expenditures suggested by our baseline estimates are 0 83 and 0 14 respectively these results are robust to a number of specification tests simulations suggest that yearly marginal medical costs amount to approximately 12 per bottle and 27 cents per cigarette in the short run in 2012 dollars these results are likely to be driven by the much larger corresponding increases in the consumption of binge drinkers and heavy smokers

mitigating the tragedy of the commons through cooperation an experimental evaluation abstract in a commons each firm s costs rise with industry output this externality can be mitigated if firms jointly restrict harvests but higher prices result repeated interaction usually facilitates cooperation that lowers harvest rates increased cooperation suggests there should be more firms in the socially optimal market structure using experimental markets with two to five firms we observe the influence of industry size on harvest rates cooperation increases the socially optimal number of firms in markets when there are static externalities but not for dynamic externalities finally even when the initial stock is low there is little tendency toward resource extinction

spatial externalities and the common pool resource mechanism abstract this paper expands the common pool resource cpr game of walker et al 1990 to incorporate spatial structure with two spatially linked common pool resources subjects participated in a five player common pool resource game under three alternative spatial structures non spatial bi directional and uni directional linkages within the experiment results indicate that behavior in the uni directional cpr game yielded the highest average yields whereas those in the bi directional game were lower than in the non spatial game furthermore investment patterns in the uni directional game were proportionally lower in the sink cpr than those in the source cpr this behavior is consistent with the individual incentives of the game and highlights the importance of understanding the spatial structure present within our natural resources

not only the tragedy of the commons misperceptions of bioeconomics an exploratory search for explanations of mismanagement of renewable resources other than the theory of the commons was performed by an experiment eighty three subjects mostly recruited from the fisheries sector in norway were asked to manage the same simulated virgin fish stock one subject at a time exclusive property rights were granted to rule out the commons problem despite perfect property rights subjects consistently overinvested leading to an average overcapacity of 60 the resource was reduced by an average of 15 below its optimal level overcapacity and tough quotas resemble the situation in norwegian and other fisheries during the past few decades the likely explanation of the observed behaviour is misperception of feedback a phenomenon that occurs in many experimental studies of dynamically complex systems such misperceptions add a new and important dimension to the problem of renewable resource management beyond the commons problem

the virtuous tax lifesaving and crime prevention effects of the 1991 federal alcohol tax increase the last time that federal excise taxes on alcoholic beverages were increased was 1991 the changes were larger than the typical state level changes that have been used to study price effects but the consequences have not been assessed due to the lack of a control group here we develop and implement a novel method for utilizing interstate heterogeneity to estimate the aggregate effects of a federal tax increase on rates of injury fatality and crime we provide evidence that the relative importance of alcohol in violence and injury rates is directly related to per capita consumption and build on that finding to generate estimates a conservative estimate is that the federal tax which increased alcohol prices by 6 initially reduced injury deaths by 4 5 6480 deaths in 1991 and had a still larger effect on violent crime