assessing the effects of co2 price caps on electricity investments a real options analysis abstract this paper uses real options modeling to assess the impact of different climate change policy instruments on investment profits and cumulative emissions in the electricity sector even though co 2 price caps or safety valves have been suggested as methods to limit uncertainty emanating from fluctuating prices of co 2 permits that would hurt the industry s profit and thereby also energy security our analysis shows that price caps set at a too low level are detrimental to the adoption of e g modern biomass fired capacity as a replacement for existing coal fired power plants we therefore conduct a series of experiments with different policy scenarios to analyze under which regime emissions are most effectively reduced with respect to co 2 price uncertainty it turns out that even for moderately rising co 2 prices fluctuations frequently lead to investment into carbon capture and storage ccs while investment is often not triggered in the face of deterministic co 2 prices

all pay war we study a model of conflicts and wars in which the outcome is uncertain not because of luck on the battlefield as in standard models but because countries lack information about their opponent in this model expected resource levels and production and military technologies are common knowledge but realized resource levels are private information each country decides how to allocate its resources to production and warfare the country with the stronger military wins and receives aggregate production in equilibrium both comparative and absolute advantages matter a larger resource share is allocated to warfare by the country with a comparative advantage in warfare at relatively low realized resource levels and by the country with an absolute disadvantage in warfare at relatively high realized resource levels from an ex ante perspective the country with a comparative advantage in warfare is more likely to win the war unless its military potential is much lower

distributional coalitions and the politics of economic reform in latin america for much of the discipline of economics a closed economy is seen as the result of efforts of distributional coalitions and rent seekers to maintain sector specific protections accordingly economic liberalization is explained by the policy consistency of uncompromising reform elites students of the politics of economic adjustment in the developing world in turn have argued that reform programs concentrate costs in the present and disperse benefits in the future hence losers are prepared to engage in collective action whereas prospective winners facing uncertainty about payoffs remain disorganized they thus posit the cohesiveness and insularity of policymakers as the main variable for explaining successful reform both economists and political scientists therefore adopt a collective action approach that overlooks how groups organize in support of liberalization in the recent latin american experience however these reforms have preserved market reserves for firms that provided vital political support to and often colluded with policymaking elites this setting has thus reproduced incentives for rent seeking behavior even in the presence of comprehensive liberalization this evidence supports two interrelated theoretical claims first distributional coalitions may proliferate when the state withdraws from the economy not only when it intervenes second interest based variables retain explanatory power in political economy which state autonomy arguments disregard irrespective of whether the economy is closed or open which neoclassical perspectives overlook to highlight the centrality of interest groups favoring marketization therefore the article suggests modifications to the dominant theories of collective action and the literature on the politics of economic adjustment

resource abundance and internal armed conflict types of natural resources and the incidence of new wars abstract recent armed domestic conflicts have been described as being related to natural resource abundance and as being characterized by new features not present in earlier internal conflicts multiplicity of actors devastation of production structures the paper develops and tests a framework that captures both the role of natural resource abundance and the stylized facts from the descriptive literature in a simple two sector model in which violent appropriation of natural resources imposes a negative externality on the production sector the model predicts that the probability of armed conflict varies directly with the size and value of lootable resource endowments and inversely with variables that increase labor productivity in contrast to mineral resources abundance of agricultural resources reduces conflict probability by raising labor productivity these predictions are supported by cross country ordered probit estimations in quantitative terms the negative effect of agricultural resources on conflict probability is almost twice as large as the positive effect of mineral resources

germany s dash for coal exploring drivers and factors abstract the german electricity sector has recently seen extensive planning and construction of new coal fired power plants within a period of only a few years new investments amounting to around 15 of the total sector capacity were brought on the way and plans for a multitude of additional projects are pending this dash for coal in germany has raised considerable public concern especially as it risks to undermine recent political attempts to combat global warming yet the question of why the dash for coal has emerged has not yet been addressed in a thorough analysis this article attempts to close this research gap while at the same time contributing as a case study to the general understanding of investment patterns in liberalized electricity markets it finds that the main reasons for the dash have been 1 replacement requirements due to the nuclear phase out 2 the onset of a new investment cycle in the power market 3 favorable economic and technological prospects for coal compared with natural gas in the long run 4 a status quo bias of investors in regard to future renewable deployment 5 explicit political support for coal and 6 the ineffectiveness of public protest in hampering new projects

does lootable wealth breed disorder a political economy of extraction framework this article proposes a political economy of extraction framework that explains political order and state collapse as alternative outcomes in the face of lootable wealth different types of institutions of extraction can be built on lootable resources with divergent effects on political stability if rulers are able to forge institutions of extraction that give them control of revenues generated by lootable resources then these resources can contribute to political order by providing the income with which to govern conversely the breakdown or absence of such institutions increases the risk of civil war by making it easier for rebels to organize the framework is used to explain two puzzling cases that experienced sharply contrasting political trajectories in the face of lootable resources sierra leone and burma a focus on institutions of extraction provides a stronger understanding of the wide range of political outcomes from chaos to dictatorship to democracy in resource rich countries

value creation management competencies and global corporate citizenship an ordonomic approach to business ethics in the age of globalization this article develops an ordonomic approach to business ethics in the age of globalization through the use of a three tiered conceptual framework that distinguishes between the basic game of antagonistic social cooperation the meta game of rule setting and the meta meta game of rule finding discourse we address three questions the answers to which we believe are crucial to fostering effective business leadership and corporate social responsibility first the purpose of business in society is value creation companies have a social mandate to organize mutually advantageous cooperation second business ethics should teach the management competencies necessary to fulfill business s societal mandate these competencies are optimization competence in the basic game of value creation governance competence in the meta game of political rule setting and the three discourse related skills of orientation competence reception competence and communication competence necessary for engaging in the meta meta game third companies can help solve global problems through global corporate citizenship if they participate as political and moral actors in rule setting processes and rule finding discourse aimed at laying the foundation for value creation on a global scale

the specification of the probability functions in tullock s rent seeking contest abstract in his model of a rent seeking contest tullock g 1980 efficient rent seeking in buchanan j m tollison r d tullock g eds toward a theory of the rent seeking society texas a and m university press college station pp 97 112 uses a simple concrete specification for the probability functions which determine the probability that a player wins the contest given the bids made by the players we discuss in general terms a set of conditions that can be imposed on probability functions in this game next we show that the specification chosen by tullock is the unique one that satisfies these conditions

toward a public choice theory of monopoly regulation its many dimensions from the perspective of market economics this new thrust was consolidated in 1976 by s peltzman who developed a formal market model in which regulations were viewed as commodities brokered via political markets in response to bids and counter bids by those who stood to gain or to lose from specific regulation outcomes the subsequent contribution by becker 1983 added insights and institutional flesh to the stigler peltzman embryo confirming regulation as an integral component of mainstream market economics an important implication of such contributions especially those from the chicago perspective is that regulation for the most part confirms resource efficiency within market process that political markets in the absence of entry barriers are just as effective as are competitive commodity markets in achieving economic efficiency defined within a comparative institutions framework nowhere is this complacency more apparent than in the conclusion drawn by becker 1983 from a detailed formal analysis of competition among pressure groups for political influence

a multi winner nested rent seeking contest this paper considers a symmetric imperfectly discriminating rent seeking contest in which there may be several winners we first demonstrate a serious flaw in previous work and then go on to suggest an alternative method for analyzing the contest in contrast to the previous work we show that the value of the rent is fully dissipated in equilibrium as the number of players becomes large

economic activity in the shadow of conflict i introduction production prices and welfare are altered when exchange emerges in an autarkic economy these same variables are likewise affected when appropriation arises in a production and exchange economy consider robinson crusoe who allocates resources to clothing and food the implicit relative price of clothing and the production consumption point are determined by crusoe s preferences and production possibilities when friday appears and exchange enters crusoe s world there is a change in all of the fundamental economic variables relative price production consumption and utility but suppose friday has the capacity to profitably seize some or all of crusoe s goods or resources crusoe might guard against such a contingency by building defenses sufficient defenses could induce friday to carry out an exchange that might otherwise not occur by allocating some of his resources to defense crusoe alters economic fundamentals including the existence of exchange itself throughout its history economics has generally ignored the effects of appropriation possibilities on production and exchange often however the three economic activities are enmeshed according to barraclough 1994 specialized production and trade became quite extensive in the ancient eurasian world because empires could provide protection for trading links more recently european colonial powers created trading empires based upon strong navies skaperdas and syropoulos 1996 mansfield 1994 today within russia and china there are numerous examples of intertwined production exchange and appropriation even in commonplace crime these activities can be interdependent a potential shoplifter could steal if the store s defenses are low or trade if defenses are high 1 when appropriation possibilities are overlooked the results of standard trade models can be misleading when the role of exchange is ignored the predictions of conflict models can be erroneous economists need a new class of models designed to investigate economic activity in the shadow of conflict where production exchange and appropriation are intertwined pure trade and pure conflict models will be special cases of these new integrated models 2 the fundamental goal of this paper is to contribute to the theoretical development of the new class of integrated models of production exchange and appropriation specifically we model a one time interaction between two agents as a sequential predator prey game with the potential for ricardian trade think of crusoe as a potential prey and friday as a potential predator crusoe moves first by allocating some resources to defensive fortifications to protect his remaining resources friday moves second and faces two options either allocate some resources to weapons in hope of seizing resources from crusoe or produce no weapons and pursue specialized production and trade the economic interactions among appropriation production and exchange depend on key parameters in the model relative resource endowments effectiveness of offensive weapons against defensive fortifications and weapons and consumer goods productivities within the model we show how conflict can be subdued by the potential of mutually beneficial exchange but at a resource cost that modifies fundamental economic variables like relative price production trade volume gains from trade and security of property the model also identifies the conditions under which conflict is so powerful that specialized production and trade cannot emerge further we discover that the integrated model opens up a new way to think about and measure the gains from trade a predator may gain from trade relative to predation or autarky but prefer that the exchange institution be precluded alternatively a predator may be indifferent about trade relative to predation or autarky but gain from the trade institution in section ii we present a general theoretical framework for integrating production exchange and appropriation in a one shot sequential game

bad loans to good friends money politics and the developmental state in south korea why has the literature on asian development not addressed the issue of money politics in south korea how can we reconcile the view of an efficient developmental state in south korea before 1997 with reports of massive corruption and inefficiency in that same country in 1998 and 1999 politics is central to the answer in this study i make two arguments first money politics was extensive in south korea both during and after the high growth era second political not economic considerations dominated policymaking this study explains both past and present and compares the patterns of money politics in the early post independence era with those that arose after the democratic transition in 1987 while during the park era a balance of power between businessmen and politicians kept corruption from spinning out of control the transition to democracy altered the basic business state relationship allowing business to exert greater influence over policy decisions the political hypothesis advanced in this study suggests a new direction for our research about the developmental state

ecological and economic sustainability in fishery management a multi agent model for understanding competition and cooperation recent studies have shown that many marine ecosystems are experiencing an accelerating loss of population and biodiversity it is apparent that there is a growing disparity between the available supply of fish and the desire of the growing world population to catch them although studies have begun to question the ecological sustainability of managed fishery systems they often omit the corresponding effects on the economic sustainability of fishery industries this is particularly important in rural coastal areas where the fishing industry is often a dominant employer in this article we analyze the interactions between economic and ecological dynamic systems using a multi agent dynamic model of fishery management multiple agents fishers harvest multiple fish species and adapt the amount and allocation of their effort to their value functions which are given as net profits of the fish harvest sold for a market price this is largely unique in fishery models since many econometric studies view fishers as represented by homogenous average agents we introduce and compare two different decision rules governing the behavior of fishers engaged in a competitive market we demonstrate a situation where both behaviors lead to a decline of all fish stocks as well as profits for most fishers as an alternative we introduce a cooperative approach in which fisheries jointly set sustainable limits for total harvest and effort that are then distributed to the fishers according to distribution rules the simulation reveals that fish stocks and profits can stabilize at significantly higher levels in the cooperative case leading to a continuous accumulation of capital for all fishers this model demonstrates key aspects of overfishing conflicts that can be overcome through planned fishing quotas and cooperative market mechanisms it also demonstrates a novel approach for simulating the dynamic behavior of heterogeneous fishers

property rights to multi attribute fishery resources abstract the united nations code of conduct for responsible fisheries urges governments to manage multiple yield bycatch and habitat attributes of fishery resources the information and enforcement costs of multi attribute management are high however as a result relatively few attributes generally stock biomass age structure and growth are specified in yield targets exposing others e g localized abundance sex to excessive use in the public domain spillovers caused by fishing gear e g gear conflicts bycatch habitat damage generally are regulated with catch limits and area closures that artificially divide or exclude activities which interact due to attribute jointness total fishery income is compromised because tradeoffs are not evaluated at the margin alternative arrangements that bundle fishery resource attributes are suggested bundled property rights could evolve from a comprehensive assignment of usufruct rights which reduce the transaction costs of gathering information on unspecified attributes and of contracting for spillovers markets for harvest rights could resolve the simpler gear conflict and bycatch problems other interactions e g predation habitat requirements would require corporate or collective property rights and governance arrangements that make harvesters and other interested parties the residual claimants of their harvest decisions subject to government restrictions that protect public goods

allocating and funding universal service obligations in a competitive market abstract we examine in a network market open to competition various mechanisms for allocating and funding universal service obligations among agents rival firms and consumers the obligations we consider are geographic ubiquity and nondiscrimination we analyze from both the efficiency and equity point of views the respective advantages of a restricted entry system where the entrant is not allowed to serve high cost consumers and a pay or play system we show that pay or play regulation always dominates restricted entry regulation under ubiquity constraint alone this result no longer holds when the regulator imposes also the nondiscrimination constraint

gordon tullock and experimental economics gordon tullock s research has substantially influenced the development of economic science in general and experimental economics in particular we present the first comprehensive survey of this significant achievement we show how tullock s research in bioeconomics influenced later developments in neuroeconomics and how his pioneering work on rent seeking generated a literature of laboratory tests of his hypothesis we also describe tullock s own experiments and draw attention to his early insights on trust games

a dynamic model of conflict and appropriation abstract this paper presents an extension of a static model of economic conflict analyzed by hirshleifer 1991 1995 and skaperdas 1992 to an infinite horizon differential game our aim is to highlight the strategic role of appropriation among a smaller group of agents in an intertemporal context the model yields the conclusion that there exists a unique linear nonlinear markov perfect equilibrium strategy even when strategies are defined over the entire state space we demonstrate that partial cooperation can be seen as a long run response to conflict moreover a decrease in the effectiveness of appropriation the depreciation rate of a common pool stock the rate of time preferences or an increase in the degree of noise improves the degree of partial cooperation and thus welfare in an anarchic society

mechanisms of funding for universal service obligations the electricity case abstract the transition towards a more competitive regime in network industries and specially in electricity sector raises the relevant question of funding for the universal service obligations usos our paper focuses on two ways of funding for universal service and equal treatment obligations ubiquity and nondiscrimination constraints und the funding through access charge cs regime or taxation t regime using a network model including competition between a historical monopoly in charge for the usos and an entrant we obtain some results concerning gains and losses of social welfare due to those mechanisms we show that most of the time it is socially better to let the historical monopoly be active whatever the type of funding for usos applying and whatever profitability of the firms is however when the entrant is active we can highlight that the introduction of the t regime compared to the cs one implies either welfare deterioration or an entry prevention strategy by the historical firm therefore the t regime could not be an argument for the regulator to promote vertical separation of the historical firm according to the european community line

investment risks under uncertain climate change policy abstract this paper describes results from a model of decision making under uncertainty using a real options methodology developed by the international energy agency iea the model represents investment decisions in power generation from the perspective of a private company the investments are subject to uncertain future climate policy which is treated as an external risk factor over which the company has no control the aims of this paper are to i quantify these regulatory risks in order to improve understanding of how policy uncertainty may affect investment behaviour by private companies and ii illustrate the effectiveness of the real options approach as a policy analysis tool the study analysed firms investment options of coal and gas fired power plants and carbon capture and storage ccs technologies policy uncertainty is represented as an exogenous event that creates uncertainty in the carbon price our findings indicate that climate policy uncertainty creates a risk premium for power generation investments in the case of gas and coal fired power generation the risk premium would lead to an increase in electricity prices of 5 10 in order to stimulate investment in the case of ccs the risk premium would increase the carbon price required to stimulate investment by 16 37 compared to a situation of perfect certainty the option to retrofit ccs acts as a hedge against high future carbon prices and could accelerate investment in coal plant this paper concludes that to minimise investment risks in low carbon technologies policy makers should aim to provide some long term regulatory certainty

windfall profits in the power sector during phase iii of the eu ets interplay and effects of renewables and carbon prices abstract since power utilities were originally grandfathered into the eu ets by way of a free allocation of carbon emission allowances eua the issue of windfall profits accruing to producers with carbon intensive generation portfolios has been the subject of critical analysis one of the chief aims of the switch to a predominantly auction based allocation system at the onset of phase iii of the eu ets was to negate the incidence of windfall profits the following analysis examines the merits of this policy aim drawing on economic theory of power markets a linear optimisation model covering the electricity market of the eu member states is deployed to investigate this question scenarios reflecting developments over a medium term horizon 10 years are developed with which carbon prices are endogenously determined their effects on the contribution margins of producers in the member states are subsequently evaluated the overall findings indicate that the incidence of windfall profits in the power sector remains prevalent in the overwhelming majority of eu countries the analysis suggests that the carbon intensiveness of the respective generation fleet is not the deciding factor as to whether producers earn windfall profits but rather the fundamental generation structure of the power plant fleet the results raise questions about the capacity of the current eu ets regime to provide the desired decarbonising effect on power producers generation portfolios in european power markets

aggregate comparative statics abstract in aggregative games each player s payoff depends on her own actions and an aggregate of the actions of all the players many common games in industrial organization political economy public economics and macroeconomics can be cast as aggregative games this paper provides a general and tractable framework for comparative static results in aggregative games we focus on two classes of games 1 aggregative games with strategic substitutes and 2 nice aggregative games where payoff functions are continuous and concave in own strategies we provide simple sufficient conditions under which positive shocks to individual players increase their own actions and have monotone effects on the aggregate the results are illustrated with applications to public good provision contests cournot competition and technology choices in oligopoly

rent seeking at 52 an introduction to a special issue of public choice a half century after he developed it gordon tullock s idea of rent seeking is more relevant than ever though the concept has gained widespread acceptance among academics it has yet to make an impression on public discourse but with favoritism corruption and the power of special interests in the headlines the idea deserves broader attention in this special issue of public choice we commemorate tullock s insight contributors examine the making of this classic piece and its effect on economic theory empirical analysis and economic teaching original papers also develop new insights into questions of development the control of violence corruption culture equity regulation rent extraction the political coase theorem and more

rent seeking and market structure comment if the firms in an industry are to be successful in raising money to influence government two conditions must be met 1 there must be sufficient rents available from government decisions regarding that industry to make such expenditures worthwhile and 2 the industry must be sufficiently concentrated to avoid a free rider problem in fund raising this argument though seemingly intuitively appealing has been under recent empirical attack this paper seeks to restore the parapets

the impact of intraday markets on the market value of flexibility decomposing effects on profile and the imbalance costs abstract an increasing share of variable renewable energy sources vres basically affects the electricity price formation in two ways 1 the so called merit order effect tends to lower the base price level and challenges conventional plants to remain profitable 2 due to the variable nature of renewable energy infeed the short term demand for flexibility increases and changes the volatility of electricity prices the more variable prices offer opportunities for controllable electricity producers ceps who provide up and down ramping flexibility to increase their revenues in contrast the vres with high degrees of simultaneity tend to pay for this flexibility in the electricity spot market to reduce their imbalance exposure the intraday market idm for electricity has gained importance for the market value of different technologies lately and continues to expand due to the increasing efforts to balance within day deviation from day ahead schedules this article presents a combination and extension of two existing models to capture the peculiarities of the intraday price formation and to analyze the impact of the idm on the market value of vres and ceps doing so the paper suggests an adjustment of the classical market value factor metric and to go beyond classical day ahead market dam information the article shows that market value factors mvfs can be stabilized if the idm delivers market based price signals for the costs of flexibility that are sufficient to activate flexibilities prior to the usually more expensive imbalance mechanism ibm yet the mvfs from single vre technologies will worsen if their market share is high enough to outweigh forecast errors from other technologies and if they become a permanent price maker in the idm and the ibm

rent seeking in a market with morality solving a puzzle about corporate social responsibility rent seeking by lobbying for government favors is generally thought to be wasteful in view of this wastefulness it is puzzling that rent seeking by corporations has not been criticized as a failure to be socially responsible or even as an unethical business practice this article examines the compatibility of rent seeking with corporate social responsibility by utilizing thomas dunfee s idea of a marketplace with morality this idea is useful for solving this puzzle because in considering whether rent seeking is compatible with corporate social responsibility it is necessary first to define rent seeking which this article argues is a normative concept and second to find some principled way of identifying rent seeking behavior it also solves the puzzle about rent seeking by revealing that the concept of rent seeking itself is of little use in determining whether certain conduct is or is not socially responsible since rent seeking activity cannot be identified without first evaluating which activity is rent seeking

economists and public policy chicago political economy versus conventional views both conventional welfare economics and public choice analysis suggest that economists have an important educational role to play in the public policy process in improving the decision making process in sharp contrast information and incentive problems related to voting rules the bureaucracy and the legislature do not arise in cpe because these processes are all perfect agents of interest groups consequently the political process is efficient and there is no scope for beneficial economic analysis as it relates to the sugar program or other public policies that is the polity is efficient or it would be reordered by competing interest groups to make it so but as mitchell 1989 290 stresses the important unanswered question in cpe remains if there is no scope for improvement how and why does change occur

the industrial structure of the california assembly committee assignments economic interests and campaign contributions this paper examines the provision of campaign contributions made by economic interests to incumbents seeking reelection in the 1984 1986 and 1988 california assembly elections the study tests whether the distribution of campaign contributions by specific industrial sectors corresponds to legislator possession of the policy property rights associated with membership on relevant assembly standing committees a non parametric statistical model compares the distribution of campaign contributions from groups within a given industrial sector to members of relevant policy committees with the distribution of contributions from all other contributor classes the empirical analysis confirms that committee assignments significantly affect the allocation of special interest resources in assembly elections substantiating the importance of institutional considerations in influencing special interest activity

ideological conviction and persuasion in the rent seeking society abstract the paper develops a model of rent seeking in a democratic political context where voting as well as rent seeking matters in this context the paper demonstrates that voter ideology is a constraint on the rent seeking game as well as a possible avenue of rent seeking in a setting where there are both rent seeking and ideological interest groups rent seekers can free ride on the efforts of ideologues which tends to reduce rent seeking effort in a setting where complementary economic and ideological interest groups coordinate their efforts both rent seeking and ideological conflict tend to increase

on the social costs of rent seeking versus the social costs of production flexibility in this paper an analysis is provided of two alternative methods of defensive behaviour by a firm first rent seeking and second potential adjustment by way of investing in product flexibility from the analysis it emerges that at times rent seeking may be socially superior less socially wasteful to other more traditional means of responding to threats this paper therefore suggests that in circumstances where some type of defensive or aggressive activity by firms is available rent seeking while constituting gross social waste may be a net social gain given the alternative options available to the firm

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

participation in deterministic contests abstract this paper considers participation in deterministic contests for m 1 identical prizes which employ an auction like rule to determine the winners in most papers that investigate such models participation by precisely m 1 players is associated with players having complete information about their opponents characteristics and participation by more than m 1 players is associated with players having incomplete information about their opponents characteristics i show that incomplete information is in fact neither sufficient nor necessary for participation by more than m 1 players

anarchy and its breakdown anarchy defined as a system in which participants can seize and defend resources without regulation from above is not chaos but rather a spontaneous order however anarchy is fragile and may dissolve either into formless amorphy or into a more organized system such as hierarchy under anarchy each contestant balances between productive exploitation of the current resource base and fighting to acquire or defend resources anarchy is sustainable only when there are strongly diminishing returns to fighting effort the decisiveness parameter is sufficiently low and incomes exceed the viability minimum these considerations explain many features of animal and human conflict

rent seeking with regretful agents theory and experiment abstract we investigate both theoretically and experimentally the role that information disclosure has on behavior in all pay environments in which all agents must exert costly effort but only the winner is rewarded through the lens of all pay auctions we show that bidders who have regret concerns when they lose an auction may alter their bids whether or not information about the winning bid is disclosed all losing bidders regret not bidding 0 however when feedback on the winning bid is provided those bidders who lost at an affordable price may regret not bidding more we show that the former effect causes bidders to lower their bids while the latter effect causes bidders to raise their bids our experimental results indicate overbidding whether or not the winning bid is disclosed to losing bidders however disclosing the winning bid leads to even more aggressive bidding increases revenues decreases the frequency of dropouts and also leads to more efficient allocations thus our results show that information disclosure is a powerful tool that mechanism designers may wish to exploit to extract more rents in all pay environments

a generalized model of rent seeking behavior in this paper i present a formal analysis of rent seeking games in which the players valuations for the prize are represented as vectors the players in this game are risk neutral and may not be indifferent to who wins the contestable rent if it is someone else both tullock s original rent seeking model and the public goods rent seeking model by katz et al turn out to be special cases of this more general model

illegal markets and the social costs of rent seeking this paper argues that making goods or services illegal results in an increase in the social costs associated with rent seeking the increased social cost is in the form of negative externalities that result from market participants use of coercion and violence in attempts to control trade in the illegal good consequently the social costs of rent seeking will exceed the value of resources dissipated in rent seeking competition and where the external costs exceed the undissipated portion of the tullock cost the social cost of rent seeking is greater than the sum of tullock and harberger costs

reexamining efficient rent seeking in laboratory markets given millner and pratt s 1989 finding of behavior inconsistent with theory we reexamine efficient rent seeking in experimental markets we show that a when r 3 no nash equilibrium exists and therefore behavior has no theoretical benchmark to judge consistency and b when r 1 with a new experimental design utilizing an explicit expected payoff matrix rent seeking behavior is consistent with both nash equilibrium and dissipation hypotheses

natural resources rent seeking and welfare abstract a new and very simple mechanism to explain why natural resource abundance may lower income and welfare is developed in a model with rent seeking a greater amount of natural resources increases the number of entrepreneurs engaged in rent seeking and reduces the number of entrepreneurs running productive firms with a demand externality it is shown that the drop in income as a result of this is higher than the increase in income from the natural resource more natural resources thus lead to lower welfare

decision by sortition a means to reduce rent seeking this essay gives an overview of how arandomized decision mechanism sortition can be expected to reduce the intensity ofself interested activity by rent seekingfactions within democracies the socialcosts of rent seeking are briefly reviewed i then make the case that randomization ofcollective decision making proceduresattenuates rent seeking expenditures iillustrate the argument by reference to thehighly contested presidential election of2000 finally i buttress that argument bycomparing plurality voting and sortitionwithin the context of tullock s efficient rent seeking model 1980

on conflict over natural resources abstract this paper considers a game theoretic framework of repeated conflict over natural resource extraction in which the victory in each engagement is probabilistic and the winner takes all the extracted resource every period each contesting group allocates its capabilities or power between resource extraction and fighting over the extracted amount the probability of victory rises with fighting effort but a weaker group can still win an encounter the victorious group wins all of the extracted resources and converts them to power and the game repeats in one model groups openly access the resource in a variant of the model the stronger group can access a larger part of the resource than its rival while in a second variant of the model the advantage of the dominant group is made more decisive than in the first two models our models generate outcomes that mimic several aspects of real world conflict including full military mobilization defeats in one or repeated battles victories following defeats changes in relative dominance and surrender we examine comparative dynamics with respect to changes in the resource attributes resource extraction initial power allocation fighting capabilities and power accumulation the policy implications are evaluated and future research avenues are discussed

natural resources and economic growth the role of investment is it possible that excessive reliance on natural resources affects saving and investment in a way that retards economic growth and thus in the long run the level of output per capita this paper reviews the literature explores the data and compares and contrasts the explanatory power and interplay of natural resources and civil liberties our proxy for institutional variables currently under scrutiny in the literature we propose that natural resource dependence may be viewed as an exogenous factor that impedes economic growth and investment as well as institutions even if we stress that natural resource abundance may be good for growth

risk aversion and co2 regulatory uncertainty in power generation investment policy and modeling implications abstract we consider a simulation of risk averse producers when making investment decisions in a competitive energy market who face uncertainty about future regulation of carbon dioxide emissions investments are made under regulatory uncertainty then the regulatory state is revealed and producers realize returns we consider anticipated taxes grandfathered permits and auctioned permits and show that some anticipated policies increase investment in the relatively dirty technology beliefs about the policy instrument that will be used to price carbon may be as important as certainty that carbon will be priced more generally a failure to consider risk aversion may bias policy analysis for the power sector

electoral rule disproportionality and platform polarization despite common perception existing theoretical literature lacks a complete for mal argument regarding the relationship between the electoral rule disproportionality and platform polarization in this paper we build a model that incorporates the disproportionality of the electoral system in a standard downsian electoral competition setup with mainly but not necessarily purely policy motivated parties we first show that in equilibrium platform polarization is decreasing in the level of the electoral rule disproportionality we then argue that the number of parties has a positive effect on platform polarization when polarization is measured by the distance between the two most distant platforms this effect does not hold when polarization is measured by the widely used dalton index constructing a dataset covering more than 300 elections our main theoretical findings are empirically supported pointing towards the electoral rule disproportionality as a major determinant of polarization

the design of rent seeking competitions committees preliminary and final contests the paper examines the common practice in multi contest rent seeking competitions where finalists are selected based on rent seekers efforts in a preliminary contest we find that for any single contest design rent seeking expenditures could be reduced by introducing a preliminary contest if the marginal returns to rent seeking effort in the preliminary contest is sufficiently low in addition to other reasons the paper argues that this may explain why such multi contest designs are common we argue that rent seeking expenditure in the preliminary stage represents the cost of reducing the number of contestants we also find that the practice of setting a higher quality standard in the final contest than the quality standard in the preliminary contest reduces rent seeking waste we derive an expression for the optimal number of finalists under certain conditions we find that the optimal number of finalists is directly proportional or equal to the square root of the number of potential contestants finally we show that whether rent seeking expenditures rise or fall when the rent is awarded by a committee instead of a single administrator depends on the sensitivity of the committee relative to that of the single administrator

conflicts over property rights and natural resource exploitation at the frontier abstract competition for land at the frontier is analyzed by considering a game between a first settler and a contestant although the first settler is the legitimate owner of a plot of land his remoteness from the government s administrative center makes it difficult to prove it this creates incentives for a contestant to dispute his claims both contenders will expend resources in order to secure ownership due to transport costs the more remote a plot of land is the lower its output value this tends to discourage appropriative activities land degradation is sometimes used as a substitute to appropriative activities a lower discount rate may encourage land degradation

competitive procurement with corruption we study competitive procurement administered by a corrupt agent who is willing to manipulate his evaluation of contract proposals in exchange for bribes with complete information and no corruption the efficient firm will win the contract for sure if the agent is corrupt and has large manipulation power however bribery makes it costly for the efficient firm to secure a sure win so in equilibrium the efficient firm loses the contract with positive probability the optimal scoring rule for the buyer deemphasizes quality relative to price and does not fully handicap and may even favor the efficient firm

a ten year rule to guide the allocation of eu emission allowances abstract member states in the european union eu are responsible for national allocation plans governing the initial distribution of emission allowances in the co2 emission trading system including rules governing allocations to installations that close and to new entrants the european commission has provided guidelines to discourage the use of allocation methodologies that provide incentives affecting firms compliance behavior for example by rewarding one type of compliance investment over another we find that the treatment of closures and new entrants by member states is inconsistent with the general guidelines provided by the eu we propose stronger eu guidance regarding closures and new entrants a more precise compensation criterion on which to justify free allocations and a ten year rule as a component of future eu policy that can guide a transition from current practice to an approach that places greater weight on efficiency

when are stable rights to rents bad stable enforceable property rights over resources normally furthers economic efficiency i argue that stable rights to government created rents and wealth transfers by contrast generate inefficiency secure rights to receive transfers increases rent seekers incentive to make political investments creating new transfers i demonstrate the point using a two period rent seeking game contestable transfers reduce the probability of establishing a transfer program and aggregate rent seeking expenditures strengthening transfer recipients rights increases the difficulty of eliminating a transfer program

rents in the european power sector due to carbon trading abstract the european union emissions trading scheme eu ets has imposed a price on the allowances for co2 emissions of electricity companies integrating this allowance price into the price of electricity earns a rent for companies who have received these allowances for free during phase i 2005 2007 rents corresponding to the aggregate value of allocated allowances amounted to roughly 13 billion per year however due to the specific price setting mechanism in electricity markets true rents were considerably higher this is due to the fact that companies also that have not received any allowances gain additional infra marginal rents to the extent that their variable costs are below the new market price after inclusion of the allowance price producers with low carbon emissions and low marginal costs thus also benefit substantially from carbon pricing this paper develops a methodology to determine the specific interaction of the imposition of such a co2 constraint and the price setting mechanism in the electricity sector under the assumption of marginal cost pricing in a liberalized european electricity market the article thus provides an empirical estimate of the true total rents of power producers during phase i of the eu ets 2005 2007 the eu ets generated in phase i additional rents in excess of 19 billion per year for electricity producers these transfers are distributed very unevenly between different electricity producers in a second step the paper assesses the impact of switching from free allocation to an auctioning of allowances in 2013 we show that such a switch to auctioning will continue to create additional infra marginal rents for certain producers and will leave the electricity sector as a whole better off than before the introduction of the eu ets

first evidence of asymmetric cost pass through of eu emissions allowances examining wholesale electricity prices in germany abstract we test the hypothesis that rising prices of emission allowances have a stronger impact on wholesale electricity prices than falling prices asymmetric cost pass through using an autoregressive distributed lag model we confirm this hypothesis for the german market

incentive contracts and elections for politicians with multi task problems abstract we consider a model with a politician facing a multi task problem while in office the reelection mechanism distorts the allocation of effort in favor of tasks whose outcomes can be measured more precisely than others we show that a combination of elections and incentive contracts can alleviate this inefficiency the incentive contract does not require direct information about the performance of the politician and is self financing across terms

the implementation process of comparable worth winners and losers this paper provides a unique opportunity to observe how a public policy affected the earnings of various interest groups at different stages of implementation specifically we examine how the earnings of women union members and supervisory and professional staff were affected by various proposed and implemented comparable worth pay plans in iowa we find that large relative gains to women in the original proposed plans were reduced as the process evolved as a result some of the original gains to women were redistributed to union members supervisors and professionals

structure of public support for national agricultural research systems a political economy perspective abstract this paper initiates development of a set of stylized facts concerning the structure of public support for national agricultural research systems nars within a neoclassical political economy framework the aim is to place public funding of nars in the broader context of the overall level of direct government assistance to agriculture using a newly constructed data set on nars expenditures over the 1970 1985 period we observe a growing disparity in agricultural research intensity ratios which measure the level of public support for nars in relation to agricultural gross domestic production aggdp between low and high income countries this growing disparity appears to be driven by much larger increases in support for agricultural research by high income countries coupled with a significantly slower growth in the size of their agricultural sector despite the propensity of low and middle income countries to increase real support to agricultural research as per capita incomes rise the public agricultural expenditure ratio which measures public expenditures on agriculture relative to the size of the agricultural sector aggdp increases substantially public expenditures on agriculture were indexed on agricultural and non agricultural populations to give a rough indication of the increasing incentives for rural distributional coalitions to seek a redistribution of public expenditures in their favor a relative research expenditure rre ratio is developed which measures the proportion of total public expenditure on agriculture spent on agricultural research it provides an indication of the relative importance given to research on agriculture within the constraints imposed by overall public spending on agriculture in contrast to the agricultural research intensity ratios the rre ratios suggest that agricultural research appears to command as large a share of the public purse devoted to agriculture in low and middle income countries as it does in high income countries expectations derived from the neoclassical political economy literature that research may have fared relatively better in high compared with low income countries were not supported by the data

risk aversion heterogeneity and contests we introduce a novel method of modellingcontests that avoids the complexitiesencountered by the best response function approach we analyse contests in which i there are many risk averse players ii attitudes to risk may differ acrossindividuals and iii the technology thattransforms rent seeking effort intoprobability of winning may also differacross individuals we establish that ifevery player has a constant degree ofabsolute risk aversion a uniqueequilibrium exists we also establishcomparative static results and examine howthe level of rent dissipation is affectedby the heterogeneity of attitudes towardsrisk and the precise nature of the technology

group contests with internal conflict and power asymmetry we investigate simultaneous inter and intra group conflict in the shadow of within group power asymmetry and complementarity in members group conflict efforts a more symmetric group faces a higher degree of internal conflict and might expend more effort in external conflict when the group conflict effort technology is highly complementary depending on the degree of complementarity the stronger player s relative contribution to external conflict might be higher in a more asymmetric group and as a result it is possible for the weaker player to earn a higher payoff in the absence of any complementarity the rent dissipation is non monotonic with the within group power asymmetry

contest efforts in light of behavioural considerations this study shows that distortion of probabilities is a possible reason for rent under dissipation incontests with relatively small number of participants such distortion may also result however inover dissipation of the contested rent focusing on contests with homogeneous contestants and thecommonly studied contest success function our main results clarify under what circumstances i rents are more under dissipated relative to the standard situation where probabilities are notdistorted ii rents are under dissipated yet less intensely relative to the standard situation whereprobabilities are not distorted iii rents are over dissipated and iv the contest does not possess asymmetric interior equilibrium in pure strategies

access pricing bypass and universal service this paper discusses the interaction between competition and price regulation in telecommunications markets first we discuss how to achieve efficient entry when an incumbent s regulated retail prices are out of line with its costs second the analysis is extended to the case where entrants need to purchase network services from the incumbent except in the extreme case where entrants have no alternative but to use the incumbent s network to provide their own services i argue that i retail instruments should be used to combat retail level distortions such as universal service obligations and ii network access charges should be equal to the incumbent s cost of access excluding opportunity costs in order to achieve productive efficiency

free euas and fuel switching abstract this paper focuses on the impact of euas on the optimal policy of a competitive electricity producer the effect of grandfathering is consistently shown to introduce significant distortions to the system it is theoretically shown that there is a threshold value of carbon price so that for prices above this the eua becomes an incentive for reduced production rather than a penalty for inefficient producers these theoretical results are supported by the data of one producer from italy and one from germany furthermore the empirical evidence concludes that the high level of free allowances may generate a shift in production from less to more polluting technologies

the movement from real to abstract value theory 1817 1959 general value theory has become a nonagenda item for orthodox economics determination of exchange value is the only value questio n asked value theory is synonymous with price theory bounded by representative classical works of david ricardo and gerard debreu this involved a process wherein the inclusive real value base of classical political economy is replaced by reductionis t abstract value the thesis is grounded on three classical value questions the determinants the measure and the source s of value it is developed in discussion of classical real value the half way house of neoclassicism and post neoclassical closure of the abstract equilibrium based value system copyright 1988 by oxford university press

the resource curse what have we learned from two decades of intensive research introduction to the special issue there has been increasing interest in the so called resource curse that is the tendency of resource rich countries to underperform in several development outcomes this has generated a mountain of often contradictory evidence leaving many floundering in the flood of information this special issue compiles eight papers from some of the most prominent contributors to this literature combining original research with critical reflection on the current stock of knowledge the studies collectively emphasise the complexities and conditionalities of the curse its presence intensity is largely context specific depending on the type of resources socio political institutions and linkages with the rest of the economy

conflict between groups of players in coupled socio economic and ecological dynamics conflict among multiple groups is a major source of difficulty in environmental conservation people are often divided into various groups that have different social factors sometimes leading to differences in the degree to which they cooperate in environmental conservation this obstructs the social consensus needed to solve the environmental problems here we study the coupled dynamics of human socio economic choice and lake water pollution and examine the magnitude of the difference in cooperation levels between two groups in the model many players choose between a costly but cooperative option and a selfish option the former results in a reduced phosphorus discharge into the lake each player s choice is affected by an economic cost and social pressure social pressure is a psychological factor that promotes cooperation it becomes stronger when more players in the society are cooperative conformist tendency and when the problem at hand is a greater concern to society in the model two groups sometimes show large differences in their cooperation levels even when both have exactly the same social factors however cooperation levels are more likely to differ between groups that have different social factors enhancement of the cross group conformist tendency is the most effective way to minimize differences in cooperation levels and to mitigate conflict between groups

lottery versus all pay auction models of lobbying i first provide a complete characterization of the unique equilibrium of the lottery game by n lobbyists with asymmetric valuations and then compare the lottery and the all pay auction models of lobbying i show that the exclusion principle discovered by baye kovenock and de vries 1993 for all pay auction does not apply to lottery i also show that the perverse effect that an exogenous cap may increase the total lobbying expenditure in a two bidder all pay auction discovered by che and gale 1998 does not apply to lottery

swords or plowshares a theory of the security of claims to property this paper develops a general equilibrium model of the allocation of resources among appropriative and productive activities the model emphasizes the distinction between offensive weapons which are the instruments of predation and fortifications which provide defense against predation the analysis of this model shows how the equilibrium security of claims to property is determined the analysis focuses on the possibility of a nonaggressive equilibrium in which no resources are allocated to offensive weapons and claims to property are fully secure we also analyze the complex relation between economic welfare and the security of claims to property we find for example that a relatively poor agent could be better off in an equilibrium with less secure claims to property

a comparison of rent seeking models and economic models of conflict this paper provides a comparative analysis of the basic rent seeking model and a simple economic model of conflict each model is concerned with a game in which players invest resources in pursuit of a prize the purpose of the analysis is to elucidate structural differences between the two models and to analyse the consequent behavioral differences and equilibrium outcomes in the two cases a key finding is that where such comparisons are possible the conflict model tends to involve greater relative expenditure on wealth redistribution activities than does the rent seeking model

the access pricing problem a synthesis the baumol willig efficient component pricing rule states that it is efficient to set the price of access to an essential facility equal to the direct cost of access plus the opportunity cost to the integrated access provider the authors analyze the relevant notion of opportunity cost under various assumptions about demand and supply conditions including product differentiation bypass and substitution possibilities which all reduce opportunity cost compared to the benchmark case they show that the ramsey approach to access pricing developed by j j laffont and j tirole 1994 is closely related to the efficient component pricing rule provided opportunity cost is correctly interpreted

emissions trading and investment decisions in the power sector a case study in finland abstract organizations which consider investment in or divestment of power production licences capacity within the european community are exposed to the impacts of the european union emission allowance trading scheme eu ets in this paper the consequences of the eu ets on investment decisions are explored in a country specific setting in finland first we review the general mechanisms through which the eu ets influences size timing and cashflows of an investment next we discuss the projected changes in finnish power producers investment environment and examine the financial impacts due to the eu ets on a case investment decision a hypothetical condensing power plant 250 mwe the standard discounted cash flow dcf analysis is extended to take into account the value of two real options the option to wait and the option to alter operating scale in a quantitative investment appraisal the impact of emissions trading not only depends on the expected level of allowance prices but also on their volatility and correlation with electricity and fuel prices the case study shows that the uncertainty regarding the allocation of emission allowances is critical in a quantitative investment appraisal of fossil fuel fired power plants

natural resources and conflict a meta analysis of the empirical literature abstract the link between natural resources and conflict has been extensively analysed by the empirical literature yet there is disagreement on both the existence and the type of relationship connecting resources to conflict existing research has focused on demonstrating the impact of resource scarcity or abundance on the risk of conflict but no effort has explored the reasons behind the persisting disagreement among scholars this paper seeks to remedy this imbalance by conducting a meta analysis of the empirical literature that investigates the link between natural resources and conflict we adopt an econometric approach to analyse 900 estimates from 41 articles our results show that both resource scarcity and abundance are associated with a higher probability of conflict the direction and magnitude of the relationship depends on the type of resources and whether climate variables are controlled for specifically the impact of the scarcity of agriculturally related resources such as land and vegetation seems to be mediated by climate variables we also find that the way conflicts and resources are operationalized together with methodological choices and model specifications greatly influence the probability of finding a significant relationship between conflicts and resources

how emission certificate allocations distort fossil investments the german example despite political activities to foster a low carbon energy transition germany currently sees a considerable number of new coal power plants being added to its power mix there are several possible drivers for this dash for coal but it is widely accepted that windfall profits gained through free allocation of ets certificates play an important role yet the quantification of allocation related investment distortions has been limited to back of the envelope calculations and stylized models so far we close this gap with a numerical model integrating both germany s particular allocation rules and its specific power generation structure we find that technology specific new entrant provisions have substantially increased incentives to invest in hard coal plants red to natural gas at the time of the ets onset more precisely disproportionate windfall profits compared more than half the total capital costs of a hard coal plant moreover shorter periods of free allocations would not have turned investors favours towards the cleaner natural gas technology because of pre existing economic advantages for coal in contrast full auctioning of permits or a single best available technology benchmark would have made natural gas the predominant technology of choice

did investment become green in china evidence from a sectoral panel analysis from 2003 to 2012 under conditions of policy incentives and energy transition an investment is considered to become green if greater investment would support a reduction in the proportion of total energy consumption involving coal use however few empirical studies have attempted to investigate green investment in china at the sector level using panel data for 5 sectors in china between 2003 and 2012 we tested the relationships between investment and different factors including carbon dioxide co2 emission reduction policies and energy structure by building panel models for the national sample the results demonstrated that investment did not become green and mainly relied on gross domestic product gdp during the 2003 2012 period in china although investments in the industry sector and the commerce and services sector were weakened by the co2 emission regulations chinese climate policies had no effect on investment in the agriculture sector or the construction sector and had a positive effect on investment in the transportation sector moreover the proportion of total energy consumption involving coal use had no effect on investment in the construction sector or the commerce and services sector but had a negative effect on investments in the agriculture sector and the transportation sector investment in the industry sector showed strong viscosity to low price coal consumption finally we propose a series of policy implications based on the test results which may guide green investment

cultural institutions and value formation on the art market a rent seeking approach the formation of value in the artistic market can be specifically affected by the behavior of cultural institutions acting on it as monopolistic quality certifiers the rent maximizing strategy limits quantities to sub optimum levels and keeps prices and costs higher this can be worsened by institutional rent seeking the establishment s strategies cannot always be matched through public policies because this can result in an increase of monopoly social losses and of the establishment s lobbying efforts

rent seeking and its implications for pollution taxation one of the fundamental insights gained from the study of economics comes from an understanding of how market prices arising from private property and exchange can motivate efficient responses to the problem of scarcity not surprisingly when private property rights and market exchange are deemed not to be feasible for either technological or political reasons economists have overwhelmingly recommended that politically imposed prices be employed as surrogates for market prices the most extensively discussed example of this in the literature is the use of pollution taxation as a means of motivating polluters to take the full cost of their polluting activities into account 1

ambiguous political power and contest efforts when there is incomplete information on the source of power in a contest the contestants may divide their lobbying efforts between the potential centers of power only one of which determines the contests winning probabilities our analysis focuses on the effect of ambiguity regarding the source of power on the contestants aggregate effort in a symmetric simple lottery contest with two potential centers of power specifically we examine the effects of varying the informativeness of the contestants private signals i e the probability that a signal is correct and the degree of correlation between them our benchmark case is the standard tullock s model in which the source of power is known i e the contestants signals are perfectly informative we show that the level of aggregate effort in this case is reached also when the signals are perfectly uninformative however in any intermediate case the contestants aggregate effort is lower provided that the signals are not perfectly correlated in other words there is a u shape relationship between the informativeness of the signals and the aggregate effort in the contest the lowest level of effort is spent when the signals are independent and the probability that a signal is true is about 0 85 in this case efforts are reduced by about one fifth in comparison with the benchmark case from a rent dissipation of 50 to slightly over 40