evaluating greening farm policies a structural model for assessing agri environmental subsidies this study uses a structural econometric model to evaluate the impacts of support from a european union agri environmental program designed to reduce nutrient pollution from agricultural land drawing on a representative sample of individual grain farms we first quantify the effects of agri environmental payments on farms decisions on land allocation and on fertilizer use we then combine the predicted land allocation and fertilizer use with environmental production functions to quantify the impact on nutrient loading finally we assess the monetary value of reduced nutrient pollution drawing on a recent valuation study

government programs and adoption of conservation tillage practices on nonirrigated wheat farms a whole farm simulation analysis is used to investigate producer preferences for adoption of separate tillage practices minimum till combination till or no till under provisions of both the 1981 and 1985 farm bills an analysis of preference for participation or nonparticipation in government programs under both farm bills is also considered for risk averse producers a combination tillage practice with program participation is found to dominate as measured by stochastic dominance the other strategies considered under both the 1981 and 1985 provisions

risk analysis of tillage alternatives with government programs stochastic dominance analysis of two tillage systems conventional tillage and no tillage for five crop rotations wheat fallow grain sorghum fallow continuous wheat continuous grain sorghum and wheat grain sorghum fallow shows that riskaverse managers prefer a conventional tillage wheat sorghum fallow system small changes in production costs or yields lead to indifference between this system and the no tillage wheat sorghum fallow and no till and conventional wheat fallow systems participation in the basic government commodity program generally increases average net returns and lowers variation of returns government commodity program payments calculated under a variety of scenarios do not generally encourage the use of no till practices for grain sorghum and wheat in the central great plains

on monoculture and the structure of crop rotations an issue when seeking to identify rotation choice is persistence in yield enhancement and input saving carry over effects focusing on carry over length and the monoculture decision we use quasi convexity of choice functions to develop price independent and price dependent principles concerning rotation structure iowa corn soybean rotation data suggest corn has one year memory for corn soybeans in the prior year is yield increasing 16 5 bu ac and nitrogen saving 51 lb ac the hypothesis that soybean has two year memory cannot be rejected corn in the prior year two years increases yield by 7 bu ac 11 6 bu ac we simulate to find price and practice subsidy levels that support different rotations

the strategic implications of scale in choice based conjoint analysis choice based conjoint cbc studies have begun to rely on simulators to forecast equilibrium prices for pricing strategic product positioning and patent copyright valuations whereas cbc research

the effects of development constraints on forest management at the urban forest interface this article develops a model of a forest owner operating in a small open city environment where the rent for developed land is increasing concave in nearby preserved open space and is rising over time reflecting an upward trend in households income within this framework we examine how changes in nearby preserved open space and alternative development constraints affect an individual private landowner s decisions regarding both regeneration harvests and conversion dates we also examine how such policies affect development density once conversion from forestry to residential use occurs we show that when residential rents change over time the nature of the timber problem at the urban forest interface changes because it forces us to allow for the possibility of changes in land use from timber to residential use as a result the traditional faustmann setup is not suitable to study forest management decisions at this interface we also find that in the presence of rising income increases in permanently preserved open space hasten regeneration and conversion cuts of a neighboring parcel currently under forest use and leads to lower density development once conversion takes place compared to the case where income is constant we also find that both a binding development moratorium and a binding minimum lot size policy can postpone regeneration and conversion cut dates and thus help to protect open space even if only temporarily however the policies do not have the same effects on development density of converted forestland while the former leads to high density development the latter encourages low density development

empathy conditioned conservation walking in the shoes of others as a conservation farmer conservation tillage on farms can improve downstream water quality using a dual interests theoretical framework guided by the metaeconomics approach this paper examines the role of self interest and shared other interest in the conservation tillage adoption decision the data is from a 2007 survey of farmers in the blue river tuttle creek watershed of nebraska and kansas logit models show that farmers who temper their pursuit of self interest with shared other interest reflecting empathy sympathy are more likely to adopt conservation tillage habit and control also play a role farmers pursue a joint and interdependent own interest and not only self interest as presumed in microeconomics

equilibrium in hotelling s model of spatial competition we study hotelling s two stage model of spatial competition in which two firms first simultaneously choose locations in the unit interval then simultaneously choose prices under hotelling s assumptions uniform distribution of consumers travel cost proportional to distance inelastic demand of one unit by each consumer the price setting subgames possess equilibria in pure strategies for only a limited set of location pairs because of this problem pointed out independently by vickrey 1964 and d aspremont et al 1979 hotelling s claim that there is an equilibrium of the two stage game in which the firms locate close to each other is incorrect a result of dasgupta and maskin 1986 guarantees that each price setting subgame has an equilibrium in mixed strategies we first study these mixed strategy equilibria we are unable to provide a complete characterization of them although we show that for a subset of location pairs all equilibria are of a certain type we reduce the problem of finding an equilibrium of this type to that of solving three or fewer highly nonlinear equations at each of a large number of location pairs we have computed approximate solutions to the system of equations next we use our analytical results and computations to study the equilibrium location choices of the firms there is a unique up to symmetry subgame perfect equilibrium in which the location choices of the firms are pure in it the firms locate 0 27 from the ends of the market at this equilibrium the support of the subgame equilibrium price strategy is the union of two short intervals most of the probability weight is in the upper interval so that this strategy is reminiscent of occasional sales by the firms we also find a subgame perfect equilibrium in which each firm uses a mixed strategy in locations in fact in the class of strategy pairs in which the firms use the same mixed strategy over locations and this strategy is symmetric about 0 5 there is a single equilibrium in this equilibrium most of the probability weight of the common strategy is between 0 2 and 0 4 and between 0 6 and 0 8 there is a wide range of pure nash as opposed to subgame perfect equilibrium location pairs the subgame strategies in which each firm threatens to charge a price of zero in response to a deviation support all but those location pairs in which the firms are very close

on the price of anarchy in a single server queue with heterogeneous service valuations induced by travel costs abstract this work presents a strategic observable model where customer heterogeneity is induced by the customers locations and travel costs the arrival of customers with distances less than x is assumed to be poisson with rate equal to the integral from 0 to x of a nonnegative intensity function h in a loss system m g 1 1 we define the threshold nash equilibrium strategy xe and the socially optimal threshold strategy x we investigate the dependence of the price of anarchy poa on the parameter xe and the intensity function for example if the potential arrival rate is bounded then poa is bounded and converges to 1 when xe goes to infinity on the other hand if the potential arrival rate is unbounded we prove that x xe always goes to 0 when xe goes to infinity and yet in some cases poa is bounded and even converges to 1 if h converges to a positive constant then poa converges to 2 if h increases then the limit of poa is at least 2 whereas if h decreases then poa is bounded and the limit of poa is at most 2 in a system with a queue we prove that poa may be unbounded already in the simplest case of uniform arrival

commodity price forecasting with large scale econometric models and the futures market this paper compares the accuracy of major commercial price forecasts for corn wheat soybeans soybean oil soybean meal cotton live cattle and hogs the price forecasting information in futures prices is evaluated by comparison the results among commercial forecasters are mixed but futures prices perform relatively better on average although not universally so these results have important implications for operational risk management

credible spatial preemption it is often argued that incumbent firms may deter entry by preemptive investment in new goods we show that these conclusions are reversed when multiproduct incumbentfirms may exit in response to entry once entrants are in an industry an incumbent will often want to withdraw some goods to prevent competition with the entrant from reducing profits on other goods such a reaction makes entry more attractive to a potential entrant the equilibrium industry structure is less likely to be monopolistic as the goods are better substitutes as exit costs are low and as the competition between producers of the same good is more intense

pricing prototypical products when we think of colas coca cola first comes to mind products such as cola cola tide laundry detergent and chapstick lip balm are the prototypical products in their respective categories for more than three decades research in consumer psychology has accumulated evidence on how prototypicality influences memory shapes the composition of consideration set and affects purchase decision yet there is no research on how it changes the competitive behavior of firms in a horizontally differentiated market for example some prototypical products are priced lower than other products in their category whereas in certain other categories the prototypical product is priced higher we propose a novel model of spatial competition where the prototypicality of a product influences the probability of the product being included in consumers consideration sets without affecting its valuation using the model we examine theoretically the impact of prototypicality on the pricing decisions of competing firms our analysis shows that when consumer valuations are low the prototypical product is priced lower than a nonprototypical product and earns more profits however when consumer valuations are high the rank order of the prices of the prototypical product and a nonprototypical product is reversed but not the order of profits we subject these predictions to an empirical test the experimental results lend support for the qualitative predictions of the model

net buyers net sellers and agricultural landowner support for agricultural zoning agricultural zoning and land use restrictions are long standing approaches for controlling non agricultural development we provide a theoretical explanation for variation in agricultural landowner support for zoning based on landowners positions whether a landowner is a buyer or a seller in the land market hypotheses derived from the model are tested using data from a survey of agricultural landowners in kent county michigan the empirical findings are consistent with our hypothesis that net buyers and net sellers of agricultural land will differ in their support for agricultural zoning

acreage decisions under risk the case of corn and soybeans an acreage supply response model is developed under expected utility maximization the resulting framework is used to specify and estimate a system of risk responsive acreage equations for corn and soybeans in the united states particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices also a wealth variable is included in the acreage equations the empirical results indicate that risk and wealth variables play an important role in cornsoybean acreage decisions the analysis also shows that cross commodity risk reduction is important in acreage allocation decisions

price matching policy and the principle of minimum differentiation this paper shows that if duopolists are allowed to choose their product locations a price matching policy and their prices sequentially and independently both tacit collusion and minimum differentiation occur copyright 1995 by blackwell publishing ltd

risk and revelation changing the value of information a different approach is introduced to determine the value of an information sharing agreement the measure of risk aversion loving this approach reveals the relationship between information sharing models and the risk literature it also allows uncertainty regarding the slope of a firm s own demand function to be examined which previous work eschews the results suggest that the incentive to reveal information is more prevalent than previously thought firms prefer to commit to reveal private valued information in both quantity and price competition this differs from previous work where the incentive to commit depended on the type of competition

the effects of market organization on conspiracies in restraint of trade abstract mindful of the market structure conduct performance paradigm fundamental to industrial organization research this paper uses laboratory experimental techniques to study the impact of conspiratorial opportunities on market performance we compare posted offer markets where sellers but not buyers are all conspiratorial opportunities with observations from three control groups 1 posted offer markets without conspiratorial opportunities 2 double auction markets with conspiratorial opportunities and 3 posted offer markets with true single seller monopolists the basic conclusions generated by our experimental design are 1 seller conspiracies in posted offer markets tend to raise prices but not profits relative to similarly organized markets without conspiracies 2 posted offer conspiracies tend to generate higher prices but not profits than double auction conspiracies and 3 posted offer monopolies tend to generate higher profits but not prices then posted offer conspiracies

can price competition dominate market segmentation this note analyses duopoly competition in a two stage location price game while allowing each firm to establish a couple of outlets both the circle and the line model of spatial competition are considered our main result is clear cut in equilibrium neither firm will take up the opportunity of opening two stores this is a warning that market segmentation i e competition from multiple outlets might not be attractive at all because it entails more intense price competition

exchange of cost information in oligopoly when do oligopolists gain by sharing their private information about their costs with one another what are the social welfare effects of such information exchange i study these questions by comparing the oligopolists expected profits under a cost sharing agreement with their expected profits in the bayesian equilibrium that would arise without cost sharing i also analyse the firms decisions to form a trade association to share their cost data under conditions of linear demand and cournot behaviour industrywide information exchange is the unique point in the core of the trade association membership game the exchange of cost data increases expected profits and welfare but reduces expected consumer surplus cost sharing increases efficiency by raising the market shares of lower cost firms and reducing the variability of aggregate output consumer surplus is diminished however because the variance of output is reduced and consumer surplus is a convex function of output

estimating the environmental impact of land and production decisions with multivariate selection rules and panel data we propose an estimation procedure dealing with multivariate selection and dynamics in land choice and unobserved heterogeneity in structural and crop selection equations the method is applied to a multi output profit function with multiple corner solutions and farm level panel data estimation results reveal that the single selection rule associated with the tobit procedure is rejected in favor of our multivariate selection treatment inconsistent estimates are expected with the tobit procedure or if farmer fixed effects are omitted which can have important consequences for policy recommendations as illustrated in an evaluation of nitrogen runoff elasticities with respect to economic variables copyright 2011 oxford university press

structural agricultural land use modeling for spatial agro environmental policy analysis this paper develops a spatially disaggregated structural econometric model of agricultural land use and production based on the joint multi output technology representation introduced by chambers and just 1989 starting from a flexible specification of the farm profit function we derive land use allocation input application crop yield and livestock intensity equations in a joint and theoretically consistent framework to account for the presence of censored observations in micro level data the model is estimated as a system of two limit tobit equations via quasi maximum likelihood we present an empirical application using fine scale spatial data covering the entirety of england and wales and including the main economic policy and environmental drivers of land use change in the past forty years a simulation of the effects of diffuse pollution reduction measures illustrates how our approach can be applied for agro environmental policy appraisal

tax versus emissions trading scheme in the long run in this paper we compare the performance of emission taxes and tradable permits under free market entry when firms face idiosyncratic ex ante cost uncertainty we show that under auctioned permits insufficient entry occurs while under a linear emission tax scheme depending on parameters market entry can be either excessive or insufficient our long run analysis thus contrasts with spulber s 1985 equivalence result and also modifies weitzman s result in favor of an ets in that the superiority of a tax over an ets is not guaranteed even when the weitzman condition favors a tax we also show that an ets is superior to a tax scheme when the entry cost is low and the magnitude of uncertainty asymmetric information and the size of the output market are large

note on risk aversion and sharing of firm specific information in duopolies this note extends earlier work on the effects of risk aversion on the preferences of duopolists to share information it is shown that the common finding that cournot duopolists prefer to share firm specific information no longer obtains for some parameterizations in particular the greater the aversion to risk the larger the parameter regions in which not sharing information is preferred copyright 1993 by blackwell publishing ltd

the principle of minimum differentiation revisited abstract hotelling s model of differentiated products is examined and modified so that consumers have relatively low reservation prices for the differentiated products the problem of existence of a nash equilibrium in prices in a duopoly with given products is analysed when the reservation price is relatively low a nash equilibrium in prices exists for a larger range of products than when the reservation price is infinite next i examine product competition with instantaneous adjustment to the nash equilibrium prices of the previous game firms competing in a nash fashion have tendencies to move away from each other and try to achieve local monopolistic positions this is in sharp contrast with the acclaimed principle of minimum differentiation of the original model of hotelling of high reservation price where firms clustered in the product space

consequences of the clean water act and the demand for water quality since the 1972 u s clean water act government and industry have invested over 1 trillion to abate water pollution or 100 per person year over half of u s stream and river miles however still violate pollution standards we use the most comprehensive set of files ever compiled on water pollution and its determinants including 50 million pollution readings from 240 000 monitoring sites and a network model of all u s rivers to study water pollution s trends causes and welfare consequences we have three main findings first water pollution concentrations have fallen substantially between 1972 and 2001 for example the share of waters safe for fishing grew by 12 percentage points second the clean water act s grants to municipal wastewater treatment plants which account for 650 billion in expenditure caused some of these declines through these grants it cost around 1 5 million 2014 dollars to make one river mile fishable for a year we find little displacement of municipal expenditure due to a federal grant third the grants estimated effects on housing values are smaller than the grants costs we carefully discuss welfare implications

an experiment on spatial competition with endogenous pricing hotelling s 1929 principle of minimum differentiation and the alternative prediction that firms will maximally differentiate from their rivals in order to relax price competition have not been explicitly tested so far we report results from experimental spatial duopolies designed to address this issue the levels of product differentiation observed are systematically lower than predicted in equilibrium under risk neutrality and compatible with risk aversion the observed prices are consistent with collusion attempts our main findings are robust to variations in three experimental conditions automated vs human market sharing rule for ties individual vs collective decision making and even vs odd number of locations

the east end the west end and king s cross on clustering in the four player hotelling game nicolaas j vriend i introduction despite the popularity of simple location models in industrial economics and voting theory in the tradition following hotelling 1929 and despite the recent rise of the experimental method in economics there have been only few experimental tests of such models brown kruse et al 1993 and brown kruse and schenk 1999 study models with elastic demand while collins and sherstyuk 2000 focus on the simpler case which we address too where demand is inelastic collins and sherstyuk implement a model with three agents who choose locations on a line segment with a uniform density of consumers who due to the assumption of inelastic demand can also be seen as voters with one vote each it is well known that this game has no pure strategy equilibrium see eaton and lipsey 1975 normalizing the line segment to the unit interval the unique mixed strategy equilibrium prescribes uniform randomization over the middle two quarters for all firms see shaked 1982 as it is a well established fact that experimental subjects have difficulties in randomizing see for example rapoport and budescu 1997 it is not very surprising that collins and sherstyuk do not find strong support for the equilibrium hypothesis their empirical distribution of choices is m shaped and has a considerably larger support than the equilibrium distribution in this study we analyze the case of four agents with uniform consumer density and inelastic demand as the equilibrium of this case implies that two firms locate at the edge of the first and second quarters and the other two at the edge of the third and fourth quarters this setup seems ideal for the investigation of various matters first there is no other number of agents where the equilibrium prediction has a better chance to be valid 1 with three competitors the unique symmetric equilibrium is mixed with five the unique equilibrium configuration is asymmetric and implies unequal payoffs and with six and more agents the equilibrium configurations cease to be unique thus only the two and the four agent cases yield unique pure and symmetric equilibrium configurations that give identical payoffs to all agents second the equilibrium in the four agent case has a property that makes it interesting from a behavioral and empirical point of view not only the focal midpoint is empty but the whole middle segment of the linear city is empty as well that is notwithstanding the nice theoretical properties the equilibrium is not entirely intuitive and is also conflicting with casual empirical evidence there are no cities without shops in the center nor are there democracies without parties located in the political middle ground the picture we will discern in our experimental data can be summarized in the following experimental result in the four seller case the equilibrium prediction is of substantial but limited help about one third of all choices are clustered around the equilibrium locations but in no session do we observe convergence to equilibrium at the same time the focal midpoint exerts a considerable attraction with almost 10 of all choices clustered around it consumers profit from this considerably in the form of lower transportation costs the remainder of the article is organized as follows in section ii we give a theoretical account of the model we implement in section iii we present the experimental design in section iv we analyze the results and explain the data and section v concludes ii theory consider a linear city in which four firms produce a good at constant marginal cost the price of the good is fixed due to some unmodeled features of the market consequently costs can be normalized to zero and the price to one to sell the goods the firms simultaneously choose a location on the unit interval 0 1

noncooperative bargaining and spatial competition the article develops a bargaining model of spatial competition sellers compete by choosing locations in a market region consumers face a cost to moving from one place to another the price of the good is determined as the perfect equilibrium of a bargaining game between seller and buyer in this game the buyer has the outside option to move to another seller and so the prices at all stores are interdependent existence of a location price equilibrium is established the outcome approaches the perfectly competitive one if the consumer s cost of traveling becomes negligible or if the number of sellers tends to infinity copyright 1989 by the econometric society

impacts of federal crop insurance on land use and environmental quality this article integrates economic and biophysical models to assess how federal crop revenue insurance programs affect land use cropping systems and environmental quality in the u s corn belt region the empirical framework includes econometric models that predict land conversion and crop choices at the parcel level based on expectation and variance of crop revenues land quality climate conditions and physical characteristics at each site the predictions are then combined with site specific environmental production functions to determine the effect of revenue insurance on nitrate runoff and leaching soil water and wind erosion and carbon sequestration results suggest that federal crop insurance has on average a small effect on conversions of non cropland to cropland and somewhat more significant impacts on crop choice and crop rotation these changes in cropping systems have on average small impacts on agricultural pollution

industry equilibrium uncertainty and futures markets abstract this paper studies competitive long run industry equilibrium with uncertainty and futures trading we also provide a long run analysis of futures trading instead of the conventional short run analysis it is shown without using a general equilibrium model that given uncertain demand and risk aversion a bias backwardation or contango arises in long run industry equilibrium given risk neutrality such a bias however disappears we find that the occurrence of the bias depends not only on the existence of a risk premium but also on the length of the period considered each risk averse firm operates at a less efficient scale and moreover an expected spot price never accords with marginal cost when the expected spot price is less than marginal cost the risk averse firm can secure profit by selling futures contracts more than the amount of its output in the presence of production supply uncertainty a risk neutral firm operates with excess capacity under additive risk while the firm operates with proper capacity under multiplicative risk the key lies in whether its average cost curve is shifted by production risk

asymmetnc taxation and the theory of the competitive firm under uncertainty this paper examines the implications of the asymmetries in the tax treatment of corporate profits and losses for the theory of the competitive firm under uncertainty it is shown that the tax asymmetry introduces a curvature into the firm s target function which affects its behaviour in the short run in long run industry equilibrium however most of the effects disappear at the firm level but still remain at the industry level

supply demand and technology in a multiproduct industry texas field crops the purpose of this paper is to examine the structure of agricultural production for six texas field crops cotton grain sorghum wheat corn rice and hay which account for nearly 95 of recent field crop value specific objectives are to a test the structure of technology to determine i if output and input utilization choices for individual products are independent of production decisions about other outputs and ii if products and or inputs can be consistently aggregated b estimate a coherent set of interrelated supply functions for the six commodities and input demand functions for fertilizer and hired labor because the empirical focus of this paper is specific to one state the results will be of limited value for interpreting specific production relationships elsewhere however the problem is of common interest in production agriculture and the techniques used demonstrate an important application of dual modeling

do antitrust laws facilitate collusion experimental evidence on costly communication in duopolies bertrand supergames with non binding communication are used to study price formation and stability of collusive agreements on experimental duopoly markets the experimental design consists of three treatments with different costs of communication zero cost low cost and high cost prices are found to be significantly higher when communication is costly moreover costly communication decreases the number of messages but more importantly it enhances the stability of collusive agreements mccutcheon 1997 presents an interesting application to antitrust policy by letting the cost of communication symbolize the presence of an antitrust law that prohibits firms from discussing prices although our experimental results do not support the mechanism of mccutcheon s 1997 argument the findings point in the direction of her prediction that antitrust laws might work in the interest of firms

the differential impact of uncertainty on investment in small and large businesses we study the impact of profit uncertainty on investment and whether or not this response is different in industries that are dominated by small firms versus those that are dominated by relatively larger firms our key findings are that the sign of the investment uncertainty relationship is negative and that the quantitative negative impact is substantially greater in industries dominated by small firms these results are robust to accounting for potential endogeneity of the uncertainty measure alternate procedures for measuring uncertainty and alternate ways of segmenting industries into small and large firm groups

transparency in markets for experience goods experimental evidence we propose an experimental design to investigate the role of information disclosure in the market for an experience good the market is served by a duopoly of firms that choose both the quality and the price of their product consumers differ in their taste for quality and choose from which firm to buy we compare four different treatments in which we vary the degree to which consumers are informed about quality contrary to theoretical predictions firms do not differentiate quality under full information rather both tend to offer products of similar high quality entailing more intense price competition than predicted by theory under no information we observe a lemons outcome where quality is low at the same time firms manage to maintain prices substantially above marginal cost in two intermediate treatments quality is significantly higher than the no information level and there is evidence that prices become better predictors of quality taken together these findings suggest that information disclosure is a more effective tool to raise welfare and consumer surplus than theory would lead one to expect jel l15 c91 d82

interactions between agricultural and environmental policies a conceptual framework agricultural policy has a well documented impact on farmers production decisions and those decisions land water and agricultural chemical use may in turn affect the environment there is a public perception that existing agricultural policies are linked to agricultural pollution as exemplified by the conclusions of the recent national research council report alternative agriculture 1989 there is only limited theoretical or empirical research addressing these linkages however this paper develops a conceptual framework that can be used to analyze the interactions between agricultural and environmental policies and pollution this framework integrates physical and economic models at a disaggregate level necessary to capture the heterogeneity of the physical environment and the economic behavior of farmers following e hochman and d zilberman 1978 the disaggregate units can be statistically aggregated to a level useful for policy analysis agricultural and environmental policies can be categorized according to their effects on the intensive and extensive margins combining the different policy instruments with the microeconomic heterogeneity we find that existing agricultural and environmental policies can have either positive or negative effects of nonpoint source pollution to infer an aggregate effect requires data that do not currently exist our framework provides a basis for empirical investigations of these effects given adequate data moreover we find that agricultural policy instruments can be used to mitigate pollution if used appropriately

noise a firm made trade barrier abstract a dominant domestic firm confronted by a fringe of risk averse importers achieves higher profits by adopting a volatile price policy than by setting quantity according to the standard marginal condition the fluctuating domestic price is equivalent to a tariff on imports for all intents and purposes the local firm raises its rivals costs

information and conspiracy in sealed bid auctions abstract this paper examines the allocative properties of the sealed bid institution when different aspects of the available information to bidders are considered specifically we examine a the effect on price determination in repeated sealed bid auctions of post auction revelation of losing bids and b the effect on price determination when conspiratorial discussions are allowed

the comparative statics of a competitive industry facing demand uncertainty abstract the comparative statics of a competitive industry under uncertainty with free entry is clarified and extended using the general structure of random demand due to leland 1972 while strong results are obtained for the industry few unambiguous results can be derived for the firm

incentive payments to encourage farmer adoption of water quality protection practices farmers can be encouraged to voluntarily adopt environmentally sound management practices through the use of incentive payments this paper uses both a bivariate probit with sample selection model and a double hurdle model on data from a survey of farmers to predict farmer adoption of the practices as a function of the payment offer the five management practices addressed here are integrated pest management legume crediting manure testing split applications of nitrogen and soil moisture testing also estimated are models that predict the acreage on which these practices would be applied given the decision to accept the incentive payments estimated

revenue neutral tax policies under price uncertainty reply in their comment on my 1990 article yeh suwanakul and mai extend my analysis which focused attention exclusively on firm output to allow for simultaneous endogeneity of price aggregate output and numbers of firms they show that with downward sloping demand industry output adjusts positively to revenue neutral changes in the marginal rate of taxation this result is significant for two reasons first we are more often interested in predictions about aggregate phenomena than we are in predictions about individual firms indeed firm level predictions are frequently irrefutable since firm data are often unavailable second the authors derive their result under a set of conditions that appear to be more general than those invoked in my 1990 article in particular they circumvent the need to invoke specific assumptions about the nature of firms aversions toward risk i consider this a useful extension and i appreciate the careful scrutiny of my paper

the aggregate effects of risk in the agricultural sector the theory of the firm facing a random output price is extended to include industry equilibrium conditions in a way particularly important for agriculture land prices adjust to maintain industry equilibrium the comparative statics and the effects of policy for the firm are significantly altered the main finding is that risk and other parameter changes are capitalized into the price of land and yield wealth or income effects rather than substitution effects this often simplifies the analysis

market games as social dilemmas abstract in an experimental exchange market based on shapley and shubik 1977 two types of players with different preferences and endowments independently submit quantities of the goods they wish to exchange in this context although the nash equilibria of the game involve zero or minimum trade we obtain intense trade close to levels that maximize social welfare going a step forward we implement communication within pairs of traders from the same horizontal and opposite vertical sides of the market overall we find that horizontal communication tends to reduce bids whereas vertical communication has no effect

risk aversion and technology mix in an electricity market this article analyzes the eff ect of risk and risk aversion on the long term equilibrium technology mix in an electricity market it develops a model where fi rms can invest in baseload plants with a fi xed variable cost and peak plants with a random variable cost and demand for electricity varies over time but is perfectly predictable at equilibrium the electricity price is partly determined by the random variable cost and the returns from the two kinds of plants are negatively correlated when the variable cost of the peak technology is high the return of peak plants is low but the return to baseload plants is high risk averse fi rms reduce the capacity of the riskiest technology and develop the capacity of the other compared to risk neutral fi rms in the particular case where a risk neutral fi rm invests heavily in baseload technology and only sparely in peak capacity a risk averse fi rm would invest less in baseload increase peak capacity and increase total installed capacity

joint estimation of technology adoption and land allocation with implications for the design of conservation policy one challenge to estimating the parameters of a technology adoption model is that technology is selected jointly with land allocation the article estimates a nested logit model of technology and crop choices that accounts for unobserved correlation among decisions estimation is conducted with a data set of adoptions in contrast to the more common approach of using cross section observations of existing technologies estimation results support the choice of a nesting structure as opposed to a more standard multinomial logit model adoption of precision irrigation technology is shown to be more sensitive to financial incentives affecting input price and technology cost than suggested by previous studies

from microlevel decisions to landscape changes an assessment of agricultural conservation policies the growth in conservation programs has created a need for modeling frameworks capable of measuring microlevel behavioral responses and macrolevel landscape changes this paper presents an empirical model that predicts farmers production practices and the resulting levels of agricultural runoffs at more than 42 000 agricultural sites in the upper mississippi river basin under alternative conservation policies results suggest that payments for conservation tillage and crop rotations increase the use of these conservation practices however the acreage response is inelastic and the programs are not likely to be cost effective on their own for addressing hypoxia problem in the gulf of mexico

theory and experiments on spatial competition we present theoretical and experimental results on spatial competition between two firms firms choose locations simultaneously along a line representing a linear market identical consumers with non increasing demand functions are uniformly distributed along this line we solve for symmetric equilibrium payoffs in an infinitely repeated game for the case of linear demand and an arbitrary discount factor the set of equilibriums found includes both competitive and collusive payoffs in laboratory experiments in which the final period was unknown to the players in advance we observed both competitive and collusive outcomes non binding communication led to collusion

revenue neutral tax policies under price uncertainty comment in an interesting paper in this journal holloway investigated the firm s response to revenue neutral taxation under price uncertainty in his analysis revenue neutral policies adjust simultaneously the marginal tax rate and the level of exemptions while keeping expected tax receipts constant using an assumption of nonincreasing absolute risk aversion he concluded that a reduction in the marginal rate would cause the firm to contract output holloway used the 1986 tax reform act as an example of a revenue neutral policy as a matter of fact the act was intended to be revenue neutral while low

a note on free entry under uncertainty the role of asymmetric information in a model of competing managerial firms i show that the equilibrium number of firms decreases with uncertainty if entry is relatively more costly than monitoring the result adds to the earlier contributions and is consistent with the available evidence

research needs and challenges in the few system coupling economic models with agronomic hydrologic and bioenergy models for sustainable food energy and water systems on october 12 13 a workshop funded by the national science foundation was held at iowa state university in ames iowa with a goal of identifying research needs related to coupled economic and biophysical models within the few system approximately 80 people attended the workshop with about half representing the social sciences primarily economics and the rest from the physical and natural sciences the focus and attendees were chosen so that findings would be particularly relevant to sbe research needs while taking into account the critical connectivity needed between social sciences and other disciplines we have identified several major gaps in existing scientific knowledge that present substantial impediments to understanding the few system we especially recommend research in these areas as a priority for future funding 1 economic models of decision making in coupled systems deliberate human activity has been the dominant factor driving environmental and land use changes for hundreds of years while economists have made great strides in modeling and understanding these choices the coupled systems modeling literature with some important exceptions has not reflected these contributions several paths forward seem fruitful first baseline economic models that assume rationality can be used much more widely than they are currently moreover the current generation of iams that include rational agents have emphasized partial equilibrium studies appropriate for smaller systems to allow this approach to be used to study larger systems the potential for and consequences of general equilibrium effects should be studied as well second it is important to address shortcomings in these models of economic decision making valuable improvements could be gained from developing coupled models that draw insights from behavioral economics many decision makers deviate systematically from actions that would be predicted by strict rationality but very few iams incorporate this behavior potentially leading to inaccurate predictions about the effects of policies and regulations improved models of human adaptation and induced technological change can also be incorporated into coupled models particularly for medium to long run models decisions about adaptation and technological change will have substantial effects on the conclusions and policy implications but more compelling methods for incorporating these changes into modeling are sorely needed in addition some economic decisions are intrinsically dynamic yet few coupled models explicitly incorporate dynamic models economic models that address uncertainty in decision making are also underutilized in coupled models of the few system 2 coupling models across disciplines despite much recent progress established models for one component of the few system often cannot currently produce outcomes that can be used as inputs for models of other components this misalignment makes integrated modeling difficult and is especially apparent in linking models of natural phenomena with models of economic decision making economic agents typically act to maximize a form of utility or welfare that is not directly linked to physical processes and they typically require probabilistic forecasts as an input to their decision making that many models in the natural sciences cannot directly produce we believe that an especially promising approach is the development of bridge models that convert outputs from one model into inputs for another such models can be viewed as application specific reduced form distillations of a richer and more realistic underlying model ideally these bridge models would be developed in collaborative research projects involving economists statisticians and disciplinary specialists and would contribute to improved understanding in the scientific discipline as well 3 model validation and comparison there is little clarity on how models should be evaluated and compared to each other both within individual disciplines and as components of larger iams this challenge makes larger integrated modeling exercises extremely difficult some potential ways to advance are by developing statistical criteria that measure model performance along the dimensions suitable for inclusion in an iam as well as infrastructure and procedures to facilitate model comparisons focusing on the models out of sample distributional forecasting performance as well as that of the iam overall is especially promising and of particular importance moreover applications of iams tend to estimate the effect of hypothetical future policy actions but there have been very few studies that have used these models to estimate the effect of past policy actions these exercises should be encouraged they offer a well understood test bed for the iams and also contribute to fundamental scientific knowledge through better understanding of the episode in question the retrospective nature of this form of analysis also presents the opportunity to combine reduced form estimation strategies with the iams as an additional method of validation

biological conservation in dynamic agricultural landscapes effectiveness of public policies and trade offs with agricultural production article i nfo land use change and land management intensification are major drivers of biodiversity loss especially in agricultural landscapes that cover a large and increasing share of the world s surface incentive based agri environmental policies are designed to influence farmers land use decisions in order to mitigate environmental degradation this paper evaluates the effectiveness of agri environmental schemes for biological conservation in a dynamic agricultural landscape under economic uncertainty we develop a dynamic ecological economic model of agricultural land use and spatially explicit population dynamics we then relate policies subsidies to grassland taxation of agricultural intensity to the ecological outcome probability of persistence of a species of interest we also analyze the associated trade offs between agricultural production in value and biological conservation in probability of persistence at the landscape scale

broken symmetry symmetry and price uncertainty or short and long run comparative statics of the competitive firm abstract the notion of broken or hidden symmetry is applied to a long run characterization of a competitive firm operating under price uncertainty the main result of the paper is the restoration of a slutsky type symmetry of the input demand functions within an expected utility framework which does not involve any assumption about risk aversion a second conclusion is that economic relations expressed in terms of relative quantities are essential in the long run comparative statics under price uncertainty

potential environmental impacts of increased reliance on corn based bioenergy this paper integrates economic and physical models to assess a how increases in agricultural commodity prices driven by ethanol production and other factors affect land use and cropping systems in the us midwest and b how the changes in land use and cropping systems in turn affect environmental quality in the region the empirical framework includes a set of econometric models that predict land conversion crop choices and crop rotations at the parcel level based on commodity prices land quality climate conditions and other physical characteristics at the sites the predictions are then combined with site specific environmental production functions to determine the effect of rising commodity prices on nitrate runoff and leaching soil water and wind erosion and carbon sequestration results suggest that increasing commodity prices will result in widespread conversions of non cropland to cropland fifty percent of the region s pasture and range land will be converted to cropland with 6 corn rising commodity prices will also result in dramatic changes in crop mix and rotation systems in the midwest with 6 corn the total acreage of corn will increase by 23 and 40 in the corn belt and lake states respectively the acreage of continuous corn will increase considerably in both regions as well these changes in land use and crop mix will have a large impact on agricultural pollution approaches to mitigating the environmental impacts are discussed

hedonic valuation of farmland using sale prices versus appraised values farmland provides agricultural products and natural amenities as well as residential sites the emergence of exurbanization appears to be changing the demand for natural amenities and their role in determining land values to better understand how appraised value and sale price capture the determinants of farmland value in a region facing exurbanization this study applies the hedonic method to land transaction data in southwestern michigan during 2003 2007 results suggest that appraised values are a poor substitute for sale prices if the research goal is to understand dynamically evolving determinants of land value in exurbanizing regions especially the value of natural amenities

econometric process models for integrated assessment of agricultural production systems this article develops the conceptual and empirical basis for a class of empirical economic production models that can be linked to site specific biophysical models for use in integrated assessment research site specific data are used to estimate econometric production models and these data and models are then incorporated into a simulation model that represents the decision making process of the farmer as a sequence of discrete and continuous land use and input use decisions an econometric process model of the dryland grain production system of the northern plains demonstrates the capabilities of this type of model to simulate decision making both within and outside the range of observed data copyright 2001 oxford university press

futures prices in supply analysis are instrumental variables necessary citation nathan p hendricks joseph p janzen aaron smith futures prices in supply analysis are instrumental variables necessary american journal of agricultural economics volume 97 issue 1 1 january 2015 pages 22 39 https doi org 10 1093 ajae aau062

predation asymmetric information and strategic behavior in the classroom an experimental approach to the teaching of industrial organization abstract classroom market experiments can complement the theoretical orientation of standard industrial organization courses this paper describes various experiments designed for such courses and presents details of a multi market game with entry and exit in this experiment incumbents have a cost advantage in their home markets and mobile firms decide which market to enter after entry decisions are made firms choose prices and quantities to offer for sale predatory pricing is possible with this setup and the experiment can be used to motivate discussions of monopoly competition entry and efficiency other classroom experiments with an industrial organization focus are surveyed

do zoning regulations rob rural landowners equity zoning regulations are land use control tools used to conserve resource land limit negative externalities from high density development and achieve agglomeration benefits from conserving large blocks of land however the passage of low density zoning is often challenged by landowners who claim that through it they lose their land s equity due to lower land values we investigate whether low density zoning impacts rural land value using arm s length sales in maryland s nine eastern shore counties using both a propensity score matching method and an instrumental variable approach we find that low density zoning has differentiated impacts resource parcels land values are unaffected and non resource parcels values decrease by 20 50

an examination on the cost efficiency of the banking industry under multiple output prices uncertainty this article formulates a behavioural model of profit maximization which explicitly incorporates both multiple output prices risk and safety first practice this theoretical model is specifically suitable for investigating financial institutions whose output prices frequently encounter a variety of risks such as loan defaults arrears the sample banks are empirically found to be highly risk averse furthermore risk preferences exert little effect on the technical efficiency estimates whereas the same estimates obtained by the standard fixed effect model under certainty tend to be overestimated evidence is found that a specialized bank offering a single product with a larger scale of production will be preferable in an uncertain atmosphere

cheap talk coordination and entry we show how costless nonbinding nonverifiable communication cheap talk can achieve partial coordination among potential entrants into a natural monopoly industry where the payoffs are qualitatively like the battle of the sexes the analysis would apply equally in other economic situations with such payoffs for example bargaining under complete information or choosing compatibility standards while cheap talk helps achieve asymmetric coordination in a symmetric mixed strategy equilibrium it cannot achieve complete coordination if the game involves even a small amount of conflict

duopolists don t wish to share information abstract this paper shows that in a full bayes cournot equilibrium duopolists would prefer to keep their market information private rather than share it with their opponent this is in contrast to a fulfilled expectations bayes cournot equilibrium where firms are indifferent to sharing

why do all the flights leave at 8 am competition and departure time differentiation in airline markets abstract theoretical models of spatial product differentiation indicate that firms face two opposing incentives 1 minimize differentiation in order to steal customers from competitors and 2 maximize differentiation in order to reduce price competition using data on u s airline departure times from 1975 when fares were regulated and 1986 when fares were not regulated we empirically estimate the effect of competition on differentiation we find a negative relationship in both periods in 1986 however reductions in exogenous scheduling constraints increase differentiation implying that firms may be differentiating their products where possible to reduce price competition this effect is not apparent in the 1975 data

on output price uncertainty and the comparative statics of industry equilibrium the analysis of firm response to output price variability has until recently been incomplete due to a failure to consider explicitly the effect of firm response on the attainment of competitive equilibrium at the industry level a recent paper by appelbaum and katz 1 has addressed the issue of industry equilibrium under output price uncertainty they show how the optimal number of firms might change through the process of exit and entry and they characterize the collective influence of firms decisions on expected market price however their analysis focuses on firms with a single stage production process which allows no production flexibility in the form of adjustment of output levels after output price is revealed an earlier paper by hartman 3 has shown that at the firm level the optimal response to output price uncertainty will depend on whether production flexibility exists specifically if firms employ a two stage production process which is characterized by the presence of a quasi fixed factor then firm level output may increase or decrease in response to changes in output price variability even if firms are risk neutral the assumption that production flexibility exists changes those results initially developed by sandmo 7 and applied more recently by appelbaum and katz 1 which are based on a single stage production process this paper provides an extension of the appelbaum and katz analysis to admit production flexibility equivalently it extends the analysis of hartman to consider explicitly the effect of firm response on the attainment of competitive equilibrium at the industry level appelbaum and katz show that for an industry of identical risk averse firms with a singlestage production technology the effect of a mean preserving increase in price uncertainty is to decrease industry output and to raise market price a more recent comment by ishii 5 shows that output per firm will also fall yet none of these authors shows unambiguously whether the number of firms increases or decreases although not explicitly stated the analysis in appelbaum and katz suggests there would be no firm or industry response to a mean preserving change in price spread if firms were risk neutral expected profit maximizers the model employed in this paper is analogous to that of appelbaum and katz with two principal exceptions i here an industry is composed of firms all of which are either risk neutral

minimal and maximal product differentiation in hotelling s duopoly abstract hotelling s 1929 model of duopolistic competition is re examined a family of utility functions is used which has as a special case hotelling s original utility function in a two stage location price game it is shown that an equilibrium exists when the curvature of the utility functions in the space of characteristics is sufficiently high the subgame perfect equilibrium never exhibits minimum product differentiation on the other hand not all equilibria are at maximal product differentiation

supply response under proportional profits taxation a striking result in the theory of the competitive firm under certainty is the proposition that a proportional profits tax with full offsets for losses will have no impact on optimal output this result does not apply under uncertainty it is shown that under constant or increasing returns to scale a proportional profits tax will yield an unambiguous expansion in output the same result is shown to hold for the more general rank dependent expected utility rdeu model

the opportunity for conspiracy in restraint of trade an experimental study a study is a limited exploration into the relationship between the opportunity for conspiracy in restraint of trade and the resulting market performance laboratory experimental methods are applied to separate competing theories the competitive model predicts well relative to cartel models nevertheless when measurements are taken relative to the performance of markets where conspiracies are not possible the effects of attempted conspiracies can be determined

risk averse duopolists and voluntary information transmission this paper considers the incentives for risk averse firms to share their private information they show that the introduction of risk aversion in some cases reverses the result in the literature that no such incentives exist further they show that the output level of risk averse cournot duopolists is increasing in the quality of their private information and decreasing in their perception of risk copyright 1989 by blackwell publishing ltd

competing for low end markets recent business research points to the fortune awaiting to be tapped in low end markets in this paper we investigate how the size of the low end market influences a firm s profits and the pioneering firm s quality choice as low valuation consumers increase in a market on average consumers willingness to pay decreases this may lead us to expect firms profits to decrease as the size of the low end market increases our analysis shows that if the size of the low end market is below a threshold an increase in the size of the low end market may actually dampen price competition and improve profits as firms can then strategically choose their quality levels such that their products are more differentiated conventional wisdom also suggests that the pioneering firm will offer a higher quality product and earn more profits compared with the later entrant in contrast to this notion of quality advantage our analysis identifies circumstances in which a pioneer can offer a lower quality product and yet earn more profits an experimental test lends support for some of our model s predictions we further extend the model to consider markets with multiple firms firms with multiple products and consumers with limited purchasing power

price uncertainty and the price discriminating firm in international trade the firm operating in an uncertain environment was initially analyzed in detail by sandmo 1971 and by leland 1972 since these early papers many extensions to the analysis have been explored by such writers as batra and ullah 1974 mayer 1975 hartman 1976 holthausen 1976 stewart 1978 paroush and kahana 1979 anid katz and paroush 1979 this paper investigates the optimal policy of a pr ice discriminating firm which operates under pr ice uncertainty in one of two markets the main motivation for the analysis comes from the problems of a firm which sells its output both domestically and abroad such a firm often has nearly full information about the domestic market b ut faces uncertainty in foreign markets in particular the firm which has its utility defined over profits denominated in terms of domestic currency will regard the profits on its foreign sales as uncertain given excha nge rate variability even if it has full information about all other conditions in the foreign market hence the paper may be regarded both as an extension to the above mentioned analyses of the firm under uncertainty and as an attempt to throw light on the activities of firms involved in international trade the treatment being essentially of a mricroeconomic nature is clearly different from that of such writers as batra 1 975 and helpman and razin 1979 which are essentially macroeconomic treatments

spatial competition with three firms an experimental study the paper reports the results of an experimental study of the three firm location problem we compare the subjects behavior in the experiments with the symmetric mixed strategy nash equilibrium calculated by shaked 1982 overall the findings are consistent with the equilibrium prediction however the subjects locations were significantly more dispersed than predicted by the theory three alternative explanations of this phenomenon inexperience approximate equilibrium behavior and risk aversion are suggested and evaluated for their predictive power special attention is paid to risk aversion

product differentiation with consumer arbitrage abstract we determine the equilibrium to a game where two firms set delivered price schedules and consumers simultaneously declare where they want to take delivery of the product equilibrium pricing policies provide incentives for consumers not to demand their preferred varieties but rather to purchase more standard varieties this behavior may decrease market diversity the demanded varieties tend to agglomerate around the market center we also show that it is efficient for the cost of adapting the product to consumers to be shared through arbitrage but oligopoly gives rise to an inefficient level of personal arbitrage

the effects of product differentiation on collusive pricing abstract using the spatial competition framework of hotelling 1929 this paper explores the relationship between the degree of product differentiation and the ability of firms to collude with respect to price we show that the minimum discount factor required to support the joint profit maximum as an equilibrium outcome monotonically increases as products become better substitutes when the joint profit maximum cannot be supported the optimal collusive price is shown to decline as products become more substitutable these findings suggest that firms producing stronger substitutes tend to find it tougher to collude in terms of their product price

the principle of minimum differentiation revisited return of the median voter we study a linear location model hotelling 1929 in which n with n 2 boundedly rational players follow noisy myopic best reply behavior we show through numerical and mathematical analysis that such players spend almost all the time clustered together near the center re establishing the principle of minimum differentiation that had been discredited by equilibrium analyses thus our analysis of the best response dynamics shows that when considering market dynamics as well as their policy and welfare implications it may be important to look beyond equilibrium analyses

efficient spatial competition abstract game theoretic models of spatial competition usually assume that firms set prices after their choices of locations rather than make this assumption this paper uses the core to model the competition between the firms two conditions are shown to be sufficient for efficient spatial competition the first is that the firms location choices satisfy a no externalities condition the second is that the second stage game satisfy a separable value condition namely that the value gains from trade can be created on a buyer by buyer basis this approach yields two further benefits first efficient location can be stable in situations with arbitrary distributions of buyers arbitrary willingness to pay functions and completely general location spaces second efficiency in location games can be shown to be related to the second welfare theorem

collusion under risk aversion and fixed costs we analyze collusion under demand uncertainty by risk averse cartels that care about the utility derived from profits with sufficient risk aversion and non trivial fixed operating costs it becomes difficult for cartels to collusively restrict output both when demand is low and marginal dollars are highly valued and when demand is high and potential defection profits are high output relative to monopoly levels becomes a u shaped function of demand greater risk aversion or higher fixed operating costs make collusion more difficult to support in recessions but easier to support in booms

communication in multilateral bargaining one of the most robust phenomena in the experimental literature on multilateral bargaining is the failure of proposers to extract equilibrium rents however all previous experiments have overlooked the fact that outside the lab committee members are allowed to and do engage in sometimes intense communication processes prior to voting on a proposal we conduct an experimental test of the baron ferejohn model in which we allow committee members to engage in unrestricted cheap talk communication before a proposal is submitted we find that proposers extract a significantly higher share of resources when communication is allowed communication increases proposer power through two channels first it mitigates the uncertainty surrounding the amount a coalition member is willing to accept second it allows potential coalition members to compete for a place in the coalition by lowering this stated price