stochastic convergence in per capita fossil fuel consumption in u s states abstract this study examines the stochastic convergence of per capita fossil fuel consumption across u s states including the district of columbia utilizing lm and rals lm unit root tests with allowance for endogenously determined structural breaks our results indicate that with the exception of nevada the evidence from two break and one break lm and rals lm unit root tests rejects the null hypothesis of a unit root in the relative per capita fossil fuel consumption in the u s this finding indicates the presence of stochastic convergence in relative per capita fossil fuel consumption in the u s states

conditional convergence in australia s energy consumption at the sector level abstract we examine the convergence of energy consumption per capita at the sector level in australia over the period 1973 74 to 2013 14 to do so we employ recently developed lm and rals lm unit root tests that accommodate up to two endogenously determined structural breaks we find support for energy consumption per capita convergence for six of seven sectors in australia

the cowles commission s contributions to econometrics at chicago 1939 1955 alfred cowles was an investment counselor in colorado springs colorado he told me in 1952 that after the stock market crash of 1929 he realized that he did not understand the workings of the economy and so in 1931 he stopped publishing his market advisory letter and began research on stock market forecasting 2 harold t davis a mathematician who spent summers in colorado springs put him in touch with irving fisher at yale president of the fledgling econometric society fisher had known cowles father and uncle when all three were undergraduates at yale davis and fisher proposed an economics research organization and a journal the idea appealed to cowles and he agreed to provide financing the cowles commission was founded in colorado springs in 1932 and econometrica began publishing in 1933 the commission s articles of in1 two earlier retrospective works on the cowles commission are christ 1952 a nonmathematical history of its first twenty years and clifford hildreth 1986 a detailed and technical account of its work at the university of chicago from 1939 to 1955 theodore w anderson 1991 and james heckman 1992 discuss trygve haavelmo s contributions christ 1985 section vii deals with the identification problem roy epstein 1987 and mary morgan 1990 discuss the history of econometrics in general including the cowles commission s contributions 2 cowles and his associates generated random stock market advice and random portfolio choices and compared them with actual market newsletters and actual fire insurance company portfolios they found that on the average the actual advice and portfolios were slightly inferior to the random ones the best actual advice and portfolios were about as good as the best random ones but the worst actual ones were worse than the worst random ones cowles 1933

revenue management with forward looking buyers a seller wishes to sell multiple goods by a deadline for example the end of a season potential buyers enter over time and can strategically time their purchases each period the profit maximizing mechanism awards units to the buyers with the highest valuations exceeding a sequence of cutoffs we show that these cutoffs are deterministic depending only on the inventory and time remaining in the continuous time limit the optimal mechanism can be implemented by posting anonymous prices when incoming demand decreases over time the optimal cutoffs satisfy a one period look ahead property and prices are defined by an intuitive differential equation

haggling over substitutes abstract using a model of substitutable goods i determine generic conditions on tastes which guarantee that fixed prices are not optimal the fully optimal tariff includes lotteries that is a profit maximising seller would employ a haggling strategy we show that the fully optimal selling strategy in a class of cases requires a seller to not allow themselves to focus on one good but to remain haggling over more than one good this throws new light on the selling strategies used in diverse industries these insights are used to provide a counter example to the no lotteries result of mcafee and mcmillan j econ theory 46 1988 335

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

bargaining and strikes strikes are generally regarded as an important economic phenomenon and yet good theoretical explanations of them are hard to come by the difficulty is to understand why rational parties should resort to a wasteful mechanism as a way of distributing the gains from trade why could not both parties be made better off by moving to the final distribution of surplus immediately or if it is uncertain to its certainty equivalent and sharing the benefits from increased production

bundling as an optimal selling mechanism for a multiple good monopolist abstract multiple objects may be sold by posting a schedule consisting of one price for each possible bundle and permitting the buyer to select the price bundle pair of his choice we identify conditions that must be satisfied by any price schedule that maximizes revenue within the class of all such schedules we then provide conditions under which a price schedule maximizes expected revenue within the class of all incentive compatible and individually rational mechanisms in the n object case we use these results to characterize environments mainly distributions of valuations where bundling is the optimal mechanism in the two and three good cases

the coase conjecture need not hold for durable good monopolies with depreciation abstract we consider the optimal sales policy for a monopoly seller of a durable good in a non stationary rational expectations equilibruim with replacement sales we show that coase s conjecture that the monopolist will sell the competitive stock as period length approaches zero may not hold under these assumptions

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

intertemporal price discrimination with two products we study the two product monopoly profit maximization problem for a seller who can commit to a dynamic pricing strategy we show that if consumers valuations are not strongly ordered then optimality for the seller can require intertemporal price discrimination the seller offers a choice between supplying a complete bundle now or delaying the supply of a component of that bundle until a later date for general valuations we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling so we show that the established no discrimination across time result does not extend to two product sellers under standard taste distributions

optimal selling strategies when to haggle when to hold firm a seller encountering risk neutral buyers one at a time should if commitments are feasible quote a single take it or leave it price to each this strategy is superior to any other for finite or infinite buyer populations whether there is learning or the distribution of buyer prices is known at the outset with one object for sale or many although haggling may offer advantages in terms of price discrimination these gains are more than offset by the losses it generates by encouraging buyers to refuse purchases at high prices

poor but allocatively efficient evidence from the eastern amazon this research empirically investigates the well known poor but efficient hypothesis formulated by schultz 1964 assuming that small scale farmers in developing countries are reasonably efficient in allocating their scarce resources by responding positively to price incentives deviating from schultz it is assumed here that scale effects explain a considerable proportion of small scale farmers relative efficiency the theoretical underpinnings of the scale efficiency concept are briefly reviewed before a normalized generalized leontief gl profit function is modeled by using its output supply and input demand system to capture the joint production of cassava flour and maize by a sample of small scale farmers in the bragantina region of the eastern amazon brazil the discussion of theoretical consistency and functional flexibility is considered by imposing convexity on the gl profit framework the empirical results confirm our revised hypothesis that small farmers in traditional development settings are poor but allocatively efficient by clearly suggesting considerable inefficiency with respect to the scale of operations

a more general theory of commodity bundling this paper extends the standard model of bundling as a price discrimination device to allow products to be substitutes and for products to be supplied by separate sellers whether integrated or separate firms have an incentive to introduce a bundling discount when demand for the bundle is elastic relative to demand for stand alone products product substitutability typically gives an integrated firm a greater incentive to offer a bundle discount relative to the model with additive preferences while substitutability is often the sole reason why separate sellers wish to offer inter firm discounts when separate sellers coordinate on an inter firm discount they can use the discount to overturn product substitutability and relax competition

intertemporal price discrimination structure and computation of optimal policies we study a firm s optimal pricing policy under commitment the firm s objective is to maximize its long term average revenue given a steady arrival of strategic customers in particular customers arrive over time are strategic in timing their purchases and are heterogeneous along two dimensions their valuation for the firm s product and their willingness to wait before purchasing or leaving the customers patience and valuation may be correlated in an arbitrary fashion for this general formulation we prove that the firm may restrict attention to cyclic pricing policies which have length at most twice the maximum willingness to wait of the customer population to efficiently compute optimal policies we develop a dynamic programming approach that uses a novel state space that is general capable of handling arbitrary problem primitives and that generalizes to finite horizon problems with nonstationary parameters we analyze the class of monotone pricing policies and establish their suboptimality in general optimal policies are in a typical scenario characterized by nested sales where the firm offers partial discounts throughout each cycle offers a significant discount halfway through the cycle and holds its largest discount at the end of the cycle we further establish a form of equivalence between the problem of pricing for a stream of heterogeneous strategic customers and pricing for a pool of heterogeneous customers who may stockpile units of the product this paper was accepted by yossi aviv operations management

integration of regional electricity markets in australia a price convergence assessment abstract from an electricity market design perspective it is relevant and practical to know which market structures allow for price convergence and how long this takes to achieve this study employs the phillips and sul 2007 2009 methodology to test for the convergence of wholesale electricity prices across the australian states we identify a long run common price growth pattern that applies to a cluster formed by three eastern states that share common market characteristics and limited physical interconnection we also find another cluster with less competitive market structures that although not interconnected strongly converge towards their own trend these findings confirm theoretical expectations while quantifying the rate of convergence finally we also investigate the role that the carbon tax regime has played in the convergence process with new empirical showing that the previous results are not affected with the notable exception being the case of south australia

optimal bundling and pricing under a monopoly contrasting complements and substitutes from independently valued products we develop an analytical model of contingent valuations and address two questions of import to a monopolist i should a given pair of complements or substitutes be sold separately pure components together pure bundling or both mixed bundling and at what prices ii how do optimal bundling and pricing strategies for complements and substitutes differ from those for independently valued products we find that the combination of marginal cost levels and the degree of complementarity or substitutability determines which of the three bundling strategies is optimal complements and substitutes should typically be priced higher than independently valued products

gaussian demand and commodity bundling in an important and widely cited essay adams and yellen 1976 examine the use of package selling as a price discrimination device they consider a monopolist producing two goods with constant unit costs and facing buyers with diverse tastes the marginal utility of a second unit of either good is assumed to be zero for all buyers the two goods are independent in demand for all buyers so that any buyer s reservation price for the first unit of either good is independent of the market price of the other thus the maximum amount any buyer would pay for a bundle consisting of one unit of each good is the sum of the two reservation prices and buyers are completely described by the values of those two prices 2 resale markets are assumed away in order to obtain comparative results for alternative pricing strategies the distribution of reservation prices in the adams yellen framework is assumed to be bivariate normal implications of gaussian demand are explored pure bundling is shown to operate by reducing buyer diversity thus facilitating the capture of consumers surplus it generally makes buyers worse off than unbundled sales it is more profitable if average reservation prices are high enough mixed bundling combines advantages of both pure bundling and unbundled sales and it is generally strictly more profitable than either bundling which treats goods symmetrically seems most attractive under symmetric reservation price distributions i am indebted to severin borenstein for superb research assistance to the ford motor company for research support through a grant to m i t and to the harvard economics department for housing me as a visiting scholar while most of this research was performed of course only i can be held responsible for this essay s shortcomings 1 the first clear recognition of this possibility seems to have been by stigler 1968 but also see burstein 1960 2 paroush and peles 1981 relax the assumption that consumers purchase at most one unit of each good but they consider only two types of buyers both with linear demand functions they retain the assumption that demands are independent for all buyers telser 1979 and phillips 1981 use different frameworks to analyze bundling policies spence 1980 explores the relation between bundling across commodities as here and bundling multiple units of the same

the convergence of u s state level energy intensity abstract this study extends a neoclassical growth model to include the accumulation of physical capital and energy consumption within a panel of fifty states plus the district of columbia in the u s the theoretical model allows us to examine the implications for convergence in economic growth and energy intensity from the theoretical model we formulate an empirical approach using a dynamic panel model that is estimated using a general method of moments framework to test the conditional rates of convergence the empirical results indicate convergence in energy intensity and our estimates accurately predict both the growth in and convergence of energy intensity across our entire sample consistent with other findings in the literature our results imply that energy use over the past four decades plays a small and positive role in state level per capita economic growth and convergence based on these results we discuss policy implications for state level income growth and energy consumption

price volatility and residential electricity decisions experimental evidence on the convergence of energy generating source abstract the recent trend in most developed countries has been toward greater reliance on renewable or green energy sources this paper investigates how price volatility in residential electricity rates impacts consumers preferences for green power using a choice based experiment we present respondents with choice scenarios that feature two electric utility plans i a conventional plan where electricity is generated from either coal or natural gas and ii a green plan where electricity is generated renewably from either wind or solar we then systematically vary the monthly price volatility of each plan across choice scenarios our results suggest that price volatility in monthly rates significantly impacts respondents plan choices and specifically their decision to adopt the green power plan in particular increased volatility in the green power plan reduces the likelihood of respondents choosing the green plan while increased volatility in the conventional plan increases the likelihood of respondents choosing the green plan moreover the documented effects of price volatility are robust across different price premiums for the green power plan

when is price discrimination profitable we consider a general model of monopoly price discrimination and characterize the conditions under which price discrimination is and is not profitable we show that an important condition for profitable price discrimination is that the percentage change in surplus i e consumers total willingness to pay less the firm s costs associated with a product upgrade is increasing in consumers willingness to pay we refer to this as an increasing percentage differences condition and relate it to many known results in the marketing economics and operations management literatures

strong duality for a multiple good monopolist we characterize optimal mechanisms for the multiple good monopoly problem and provide a framework to find them we show that a mechanism is optimal if and only if a measure derived from the buyer s type distribution satisfies certain stochastic dominance conditions this measure expresses the marginal change in the seller s revenue under marginal changes in the rent paid to subsets of buyer types as a corollary we characterize the optimality of grand bundling mechanisms strengthening several results in the literature where only sufficient optimality conditions have been derived as an application we show that the optimal mechanism for n independent uniform items each supported on c c 1 is a grand bundling mechanism as long as c is sufficiently large extending pavlov s result for two items pavlov 2011 at the same time our characterization also implies that for all c and for all sufficiently large n the optimal mechanism for n independent uniform items supported on c c 1 is not a grand bundling mechanism

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

estimating the speed of adjustment to target levels the case of energy prices in this paper we propose a model that estimates the speed of energy price adjustment to its target level we also explain the source of price adjustment moreover we extract energy price bubbles and show that bubbles help explain price adjustment since ours is the first paper that develops an energy price adjustment model and links it to bubbles several avenues for future research have emerged from our analysis the first is to provide a theoretical framework for the bubbles and price adjustment mechanism the second direction of research will be to continue the search for other potential determinants of price adjustment

durable goods monopoly with entry of new consumers this paper analyzes a model of a dynamic monopolist who produces at constant unit cost each period a new cohort of consumers enters the market each entering cohort is identical consumers within a cohort have different tastes for the good my main results are if players are sufficiently patient any positive average profit less than the maximum feasible level can be attained in a subgame perfect equilibrium in the subset of subgame perfect equilibria in which players use stationary strategies the seller cannot make sales at prices significantly greater than the lowest willingness to pay when period length goes to zero and the seller attains the maximum profit when commitment is feasible by charging the same static monopoly price in every period this paper analyzes a model of a dynamic monopolist who operates in a market in which there is a regular flow of new consumers the seller produces a durable good at constant unit cost each period a new cohort of consumers enters the market consumers wish to buy exactly one unit of the item but are willing to wait resales are not allowed each entering cohort is identical

the value of purchase history data in target marketing an important aspect of marketing practice is the targeting of consumer segments for differential promotional activity the premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information the increased availability of individual consumer panel data open the possibility of direct targeting of individual households the goal of this paper is to assess the information content of various information sets available for direct marketing purposes information on the consumer is obtained from the current and past purchase history as well as demographic characteristics we consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment short of this complete purchase history we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes we develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics we couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets the couponing problem allows us to place a monetary value on the information sets our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories even rather short purchase histories can produce a net gain in revenue from target couponing which is 2 5 times the gain from blanket couponing the most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons surprisingly even the information contained in observing one purchase occasion boasts net couponing revenue by 50 more than that which would be gained by the blanket strategy this result coupled with increased competitive pressures will force targeted marketing strategies to become much more prevalent in the future than they are today

reputation and equilibrium selection in games with a patient player a single long run player plays a simultaneous move stage game against a sequence of opponents who play only once but observe all previous play let the stackelberg strategy be the pure strategy to which the long run player would most like to commit himself if there is positive prior probability that the long run player will always play the stackelberg strategy then his payoff in any nash equilibrium exceeds a bound that converges to the stackelberg payoff as his discount factor approaches one when the stage game is not simultaneous move this result must be modified to account for the possibility that distinct strategies of the long run player are observationally equivalent

multiproduct monopoly commodity bundling and correlation of values through what selling strategy can a multiproduct monopolist maximize his profits when his knowledge about individual consumers preferences is limited one possibility extensively studied in the context of a single good monopoly is to use quantity dependent pricing as a means of discriminating among customers with differing tastes see for example oi 1971 and maskin and riley 1984 an alternative technique for price discrimination first suggested by stigler 1968 and analyzed further by adams and yellen 1976 is for the monopolist to package two or more products in bundles rather than selling them separately through a series of examples adams and yellen illustrate that bundling can serve as a useful price discrimination device even when all consumers willingnesses to pay for each of the goods individually are unaffected by whether they are also consuming the other product a typical example is illustrated in figure i adapted from figure iv in adams and yellen where there are two goods three consumers ab c who consume at most one unit of each good with reservation values for each good that are independent of whether the other good is consumed and zero costs of production there a bundle offered at a price of 100 fully extracts all potential surplus which would be impossible pricing the goods independently unfortunately though these authors do not provide any general characterization of the circumstances in which bundling is actually a multiproduct monopolist s optimal strategy their examples however such as figure i create the impression that the profitable use of bundling

durable good monopolies with rational expectations and replacement sales a monopoly producer of a durable good is examined under the previously uninvoked assumption that the good depreciates and hence that replacement sales must occur if a fixed stock of the good is to be maintained we find two ways in which the no depreciation result that the monopoly will always at least eventually produce a stock equal to that produced by a competitive market may not hold if the length of the trading period is nonzero the limiting stock produced by the firm will be lower than the competitive stock to ensure the profitability of future replacement sales if the firm is able to constrain its production capacity it may choose a constraint that always binds in the sense that it will be impossible for the firm to achieve a stock equal to the competitive stock

sequentially optimal mechanisms this paper establishes that posting a price in each period is a revenue maximizing allocation mechanism in a finite period model without commitment a risk neutral seller has one object to sell and faces a risk neutral buyer whose valuation is private information and drawn from an arbitrary bounded subset of the real line the seller has all the bargaining power she designs a mechanism to sell the object at t but if trade does not occur at t she can propose another mechanism at t 1 we show that posting a price in each period is an optimal mechanism a methodological contribution of the paper is to develop a procedure to characterize optimal dynamic incentive schemes under non commitment that is valid irrespective of the structure of the agent s type 2006 the review of economic studies limited

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

on delay in bargaining with one sided uncertainty recently attention has been given to a model of two person bargaining in which the parties alternate making offers and there is uncertainty about the valuation of one party the purpose of the analysis has been to identify delay to agreement with a screening process where agents with relatively lower valuations distinguish themselves by waiting longer to settle we point out a fundamental difficulty with this program by demonstrating that the assumptions used in the literature allow for delay only in so far as the time between offers is significant

institutions capital flows and financial integration the focus of this paper is on capital flows from developed to less developed countries and in particular on the question of why such flows are not much larger i first outline the theoretical arguments with regard to such flows and then go on to review the historical evidence on international financial integration more generally i then turn to the related literature on economic development which over the past decade has shifted its emphasis from technology and capital accumulation to the underlying institutional factors that affect investment i present evidence that such factors also affect to rich to poor country capital flows good policies e pursuit of price stability fewer direct interventions and sound institutional structures e are accompanied by higher capital flows and bad policies by lower capital flows 2006 elsevier ltd all rights reserved

optimal price dynamics and speculation with a storable good this paper analyzes as a dynamic game the optimal price and storage strategies of respectively a the seller of a storable good who must keep pace with inflation but incurs a cost to changing his price b his customers who speculate on the timing of price adjustments to buy and store just before a unique markov perfect equilibrium is shown to exist and is fully characterized rt generally involves a phase of mixed strategies during which the seller tries to deter speculation by injecting uncertainty into its price dynamics while speculators store in increasing numbers with possibly a final run on the good the stochastic price policies of a large number of such firms are shown to aggregate back to a price index growing at the rate of general inflation in response to which they arose the model thus establishes that a a constant rate of aggregate inflation can at the same time generate and cover up significant uncertainty and social costs at the microeconomic level b speculation can be destabilizing and socially wasteful even in the absence of shocks and imperfect information most importantly they provide a theoretical foundation for the frequently encountered claim that inflation causes price uncertainty