portfolio optimisation and the design of latin american export diversification policies this article applies portfolio optimisation analysis to assess the risk and return characteristics of commodity export structures of selected countries in latin america the analysis is conducted both for the export structure of traditionally exported commodities and for the non traditional agricultural commodities that are being promoted as part of recent export diversification efforts in these countries the results show that portfolio optimisation analysis can provide a valuable tool for the improvement of the risk return properties of various export structures

a utility consistent combined discrete choice and count data model assessing recreational use losses due to natural resource damage abstract a two stage budgeting approach can often be taken when analyzing consumer choice situations in this paper we examine the particular situation where a consumer makes purchases of a discrete commodity of which there are a number of brands in the first stage the consumer decides how many purchases to make in the second stage the consumer decides how to allocate these purchases across brands our econometric approach to this type of situation uses a utility consistent combined discrete choice and count data model the second stage which is specified as a multinomial choice model produces a price index for the commodity which is used to estimate the first stage which is specified as a count data model we apply the model to recreational demand behavior in alaska in order to estimate the welfare losses suffered by recreational users due to the exxon valdez oil spill these results may provide useful input to government agencies attempting to estimate the appropriate level of taxes fines or regulations for deterring damage to the environment

a stochastic equilibrium model of internet pricing abstract perhaps the greatest technological innovation of the next several decades will be universal access and utilization of the internet already congestion is becoming a serious impediment to efficient utilization we introduce a stochastic equilibrium concept for a general mathematical model of the internet and demonstrate that the efficient social welfare maximizing stochastic allocation of internet traffic can be supported by optimal congestion prices we further demonstrate that approximately optimal prices can be readily computed and implemented in a decentralized system by constructing a large computer simulation model we also address the alternative of building excess capacity to avoid congestion

spatial boundaries and choice set definition in a random utility model of recreation demand we are concerned with the definition of choice set used in random utility models of recreation demand in particular we are concerned with the spatial boundaries used to define choice sets in this paper using a model of day trip fishing in maine we examine the sensitivity of parameter and welfare estimates to changes in the spatial boundary we find that there exists some threshold distance beyond which adding more sites to the choice set has negligible effects on the estimation results

revealing preferences for leisure time from stated preference data when consumer choice is constrained by time as well as money willingness to pay can be defined with respect to either numeraire the two measures can be related formally within a utility consistent model of choice subject to two constraints furthermore when information is collected on both the respondent s marginal value of time can be identified a system of willingness to pay time and money and the marginal value of leisure time is estimated jointly in an application to california whalewatching and whale stock enhancement the empirical approach can be applied with only minor additions to survey techniques for nonmarket valuation

export diversification through resource based industrialization the case of natural gas for small resource rich developing economies specialization in raw exports is usually considered to be detrimental to growth and resource based industrialization rbi is often advocated to promote export diversification this paper develops a new methodology to assess the performance of these rbi policies we first formulate an adapted mean variance portfolio model that explicitly takes into consideration i a technology based representation of the set of feasible export combinations and ii the cost structure of the resource processing industries second we provide a computationally tractable reformulation of the resulting mixed integer nonlinear optimization problem finally we present an application to the case of natural gas comparing current and efficient export oriented industrialization strategies of nine gas rich developing countries

the individual travel cost method with consumer specific values of travel time savings the treatment of the opportunity cost of travel time in travel cost models has been an area of research interest for many decades our analysis develops a methodology to combine the travel distance and travel time data with respondent specific estimates of the value of travel time savings vtts the individual vtts are elicited with the use of discrete choice stated preference methods the travel time valuation procedure is integrated into the travel cost valuation exercise to create a two equation structural model of site valuation since the travel time equation of the structural model incorporates individual preference heterogeneity the full structure model provides a travel cost site demand model based upon individualized values of time the methodology is illustrated in a study of recreational birdwatching more specifically visits to a stork village in poland we show that the usual practice of basing respondents vtts on 1 3 of their wage rate is largely unfounded and propose alternatives including a separate component of the travel cost survey aimed at valuation of respondents vtts or as a second best asking if they wish if their journey was shorter and for those who do use full hourly wage as an indicator of their vtts

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

estimation and welfare analysis with large demand systems we develop an approach for estimating individual or household level preferences for a large set of quality differentiated goods and for constructing hicksian welfare measures within the demand system framework our approach uses a maximum simulated likelihood procedure to recover estimates of the structural parameters and a multistage monte carlo markov chain algorithm for constructing hicksian consumer surplus estimates we illustrate our approach with a recreation dataset consisting of day trips to 62 mid atlantic beaches

applied welfare economics with discrete choice models economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices such models are potentially very important in evaluating the impact of government programs upon consumer welfare but very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations this paper shows how the conventional methods of applied welfare economics can be modified to handle such cases it focuses on the computation of the excess burden of taxation and the evaluation of quality change the results are applied to stochastic utility models including the popular cases of probit and logit analysis throughout the emphasis is on providing rigorous guidelines for carrying out applied work this abstract was borrowed from another version of this item

the opportunity cost of travel time as a noisy wage fraction few issues are more important to welfare estimation with recreation demand models than the specification of the opportunity cost of travel time the two most common approaches to specifying this cost treat it as a fixed fraction of the recreationist s wage and either estimate the fraction done infrequently or assume it takes some value done commonly with references to results from the commute time literature used to justify the latter however these approaches lack firm conceptual rationales and the consequences of using them are not fully understood recognizing that information limitations often preclude more general approaches we use a joint recreation travel labor supply model to show that under relatively modest assumptions the opportunity cost of travel time can be expressed as a wage fraction with noise this formulation is straightforward to implement as part of random parameters based recreation demand models we then evaluate the welfare consequences of using the two approaches noted above which are special cases of the noisy wage fraction specification our results suggest that the more critical restriction to relax in opportunity cost of travel time specifications is the absence of noise rather than the specific level of the wage fraction

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

estimation of combined site choice and trip frequency models of recreational demand using choice based and on site samples abstract concentrated log likelihood functions are derived for combined site choice and trip frequency models under choice based and on site sampling results show that they are equal to log likelihood functions derived conditional on explanatory variables a new estimator for estimation of population welfare measures is proposed

recreation demand choices and revealed values of leisure time i introduction at least since the work of becker 1965 it has been recognized widely that time may play an important role in consumer demand one of the areas where this may be most significant empirically is in the valuation of natural resource amenities through their associated recreation demands a principal reason is that recreation is a time intensive commodity so that the value of the time spent in recreation would be expected to play a large role in its overall value the potential bias to consumer s surplus estimates of the net economic value of recreation from excluding time prices from the demand model has been recognized from the outset for example by knetsch 1963 and clawson 1959 to incorporate time into recreation demand models researchers have generally adopted the practice suggested by mcconnell 1975 of defining the full price of recreation as the money cost of a trip plus its monetized time cost though the use of full budgets also called for by the becker approach is less widespread bockstael et al 1987 pointed out quite clearly that both full budgets and full prices are required in the demand function if the recreationist is jointly choosing labor supply with recreation at an exogenous marginal wage but that the structure of demand was unclear if the individual was not making such marginal labor supply choices i e if he or she was working fixed hours subsequently larson and shaikh 2001 showed that the full prices full budgets specification is sufficient to satisfy the constraints on demand parameters that arise because choice is made subject to two binding constraints regardless of the individual s position in the labor market they also pointed out that models that use full prices but only money income in effect ignoring the role of time as a resource constraint cannot be consistent with the requirements of choice subject to two constraints although the outlines of how time should enter the structure of demand are becoming clear a major unresolved issue is how to determine its value in practice several studies have followed the basic logic of becker s early work assuming that the opportunity cost of recreation time i e the value of other time forgone in favor of recreation is an exogenous parameter such as the average wage rate or more commonly some fraction thereof this fraction is either chosen arbitrarily or estimated as part of the recreation demand model as in cesario 1976 mcconnell and strand 1981 and smith et al 1983 such assumptions may be erroneous for a variety of reasons assuming the average wage is the appropriate opportunity cost of time presumes that the individual faces no constraints on hours worked derives no utility or disutility from work and has a linear wage function as has been noted by chiswick 1967 bockstael et al 1987 and smith et al 1983 this is unlikely to be true for many people assuming some constant fraction of the wage is the opportunity cost of time especially an arbitrarily chosen fraction also seems likely to be incorrect for most people for all of these reasons an individual s average wage does not necessarily reveal anything about the shadow value of discretionary leisure time either as an upper or lower bound in a recent advance feather and shaw 2000 adapted the heckman 1974 labor supply model to include information supplied by recreationists about their labor supply status in particular whether they felt under or over employed relative to their desired number of hours this information is used to identify subgroups in the data for which the shadow value of leisure time is less than the wage or more than the wage which helps in the estimation of both a wage function and a shadow value of leisure time function this approach produces individual specific estimates of the opportunity cost of leisure time based on their demographics and labor market decisions which are used in a subsequent recreation demand analysis

portfolio models and planning for export diversification malawi tanzania and zimbabwe evidence is presented regarding strengths and limitations of portfolio approaches as applied to diversifying export earnings an empirical application using data from malawi tanzania and zimbabwe is used to demonstrate these strengths and limitations modifications of the typical portfolio approach to export diversification are presented these modifications help make the approach more plausible for use in developing countries the modified approach is shown to provide guidance to policymakers who seek simultaneously to increase export earnings and reduce their instability

a supply chain network economic model with time based competition abstract this paper presents an integrated model for time cost competition between supply chains with heterogeneous customers the firms in our model can offer various time options for their production service to time sensitive customers this gives rise of a new concept of time based supply chain which we call t chain to be the basic element in the competition and extends the inter supply chain competition to a new dimension of time assuming the customers are heterogeneous in time cost bi criteria decision making we integrate the discrete choice theory into supply chain network competition and formulate the equilibrium conditions as a multinomial logit based variational inequality problem numerical examples are presented for model illustration and managerial insights such as profit maximization for a firm who participates in this supply chain network

a new look at the benefits of diversification lessons from central america recent trends of export diversification in central america may lower foreign exchange earnings instability there four countries costa rica el salvador honduras and guatemala are analysed across a twenty year period the paper uses united nations commodity trade statistics to explain why costa rica and honduras have enjoyed greater earnings stability in recent years despite the fact that honduras has not greatly diversified its export products and markets despite the growth of new agricultural and manufacturing goods traditional primary products still dominate the countries export portfolios specific products within each of the four broad product category groups contribute to the varied country outcomes summary statistics from the united nations panel data suggest newer agricultural exports have not stabilized guatemalan and salvadoran export earnings while honduras has enjoyed relatively stable banana export revenues and costa rica has benefited from the smooth flow of microelectronic product

effects of regulations on expected catch expected harvest and site choice of recreational anglers the use of public lands and waterways is often subject to environmental regulations designed to limit the depletion of resource stocks such regulations may influence expectations of quality destination choice and consumer surplus this paper examines the effects of environmental regulations on recreational anglers the empirical application develops a joint model of expected catch and expected harvest in conjunction with a random utility model of site choice findings for maine anglers indicate that regulations have sizable effects on catch and harvest site choice and welfare

a dual approach to modeling corner solutions in recreation demand abstract the dual approach of lee and pitt to estimating demand systems for which individuals often choose not to consume one or more of the available goods provides a utility consistent framework for estimating preferences over visits to recreation sites because of the complexity of the model however this approach has not been applied in the recreation demand literature this paper provides the first application of the model to recreation demand and develops a methodology for conducting welfare analysis relying on monte carlo integration to derive estimates of compensating variation the methods are applied to the demand for fishing in the wisconsin great lakes region

primary commodity prices manufactured goods prices and the terms of trade of developing countries what the long run shows the authors revisit in this article the empirical foundation of the alleged secular decline in the prices of primary commodities relative to those of manufactures they use a newly constructed index of commodity prices and two modified indexes of manufactured good prices and find that from 1900 to 1986 the relative prices of all primary commodities fell on trend by 0 5 percent a year and those of nonfuel primary commodities by 0 6 percent a year they thus confirm the sign but not the magnitude of the trend implicit in the work of prebisch but even the more limited secular decline shown by their relative price indexes may be magnified by an incomplete account of quality improvements in manufactures they then show that the evolution of terms of trade of nonfuel primary commodities is not the same as that of the net barter terms of trade of non oil exporting developing countries finally they find that despite the decline that has probably occurred during the current century in the terms of trade of nonfuel primary commodities the purchasing power of total exports of these products has increased considerably similarly the fall that may have occurred after world war ii in the net barter terms of trade of developing countries seems to have been more than compensated for by the steady improvement in their income terms of trade

an empirical investigation of the welfare effects of banning wholesale price discrimination rand 054 rand2007 cls 1994 07 13 v1 2u standard latex document class rand rand 054 dispatch 12 7 2008 ce n a journal msp no no of pages 26 pe sharon rand journal of economics vol 40 no 1 spring 2009 pp 20 45 an empirical investigation of the welfare effects of banning wholesale price discrimination sofia berto villas boas economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination if downstream cost differences exist then discrimination shifts production inefficiently toward high cost retailers so a ban increases welfare if differences in price elasticity of demand across retailers exist discrimination may increase welfare if quantity sold increases so a ban reduces welfare using retail prices and quantities of coffee brands sold by german retailers i estimate a model of demand and supply and separate cost and demand differences simulating a ban on wholesale price discrimination has positive welfare effects in this market and less if downstream cost differences shrink or with less competition introduction wholesale price discrimination means that an upstream firm sets different prices for the same product for various downstream retailers wholesale price discrimination is commonly practiced in many markets examples include markets such as petroleum distribution steel heavy trucking tobacco and pharmaceuticals in several countries milk and other dairy products are sold using government administered or sanctioned discriminatory pricing schemes wholesale price discrimination practices are also used for services such as loans insurance and advertising 1 competition authorities have been concerned with wholesale price discrimination the european union treaty s article 82 c prohibits practices where a dominant firm would place trading partners at a competitive disadvantage the u s robinson patman act forbids discriminat ing in price between different purchasers where the effect may be to lessen competition unless the university of california berkeley sberto are berkeley edu i thank the editor igal hendel and two anonymous referees for many helpful comments and max auffhammer cyndi berck peter berck gal hochman silke januszewski forbes george judge kai uwe k uhn diana lazo mark muendler aviv nevo ariel pakes jeff perloff andrew sweeting miguel villas boas and participants at uc san diego university of michigan the inra idei conference in toulouse and the university of british columbia summer conference in industrial organization for their suggestions i thank daniel klapper for letting me have access to the data support from the giannini foundation and from an aes grant are gratefully appreciated see for gasoline markets texaco v hasbrouck 496 us 543 no 87 2048 1990 and the new york state motor fuel marketing practices act for steel chan hall and rust 2003 for heavy trucking volvo trucks north america inc v reeder simco gmc inc docket no 04 905 for tobacco brooke group ltd v brown and williamson tobacco corp 509 us 209 no 92 466 1993 for wholesale pharmaceuticals see http www datcp state wi us trade business unfair comp drug price jsp for dairy markets see for example gardner 1984 and for services see givens 1983 c 2009 rand copyright

brand choice and purchase frequency revisited an application to recreation behavior the role that total purchases play in determining the choice among brands has been considered in microeconomic theory for quite some time but for traditional goods only consumption of outdoor recreation is an unusual good most often measured using an individual s recreational trip adding the trips made on a number of choice occasions seems the obvious way to aggregate this good but doing so leads to several problems in defining a meaningful price index the hicks leontief conditions for aggregation suggest that trips to destinations may be thought of as brand choices on consumption occasions andthe continuous analogue to total purchases may in fact be the individual s total travel an empirical example of the model is used to estimate welfare impacts for a group of anglers

assessing the value of museums with a combined discrete choice count data model this article assesses the value of dutch museums using information about destination choice as well as about the number of trips undertaken by an actor destination choice is analysed by means of a mixed logit model and a count data model is used to explain trip generation we use a utility consistent framework in which the discrete choice model for destination choice is linked to an indirect utility function the results are used to compute the compensating variation of particular museums and of the total group of museums in the sample

hedonic price analysis and selectivity bias hedonic valuation of quality attributes can be misleading when theassumption that these attributes are exogenous to sample selection isviolated this paper considers the simultaneity between hedonic valuationand sample selection in the context of a model of producer behavior andinvestigates empirically the case where land is demanded for use as an inputeither in agricultural production or in touristic development the empiricalanalysis suggests that failing to correct for sample selection results in abiased valuation of the effect of water salinity on agricultural land