interfering with secondary markets we present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets in the model consumers have heterogeneous valuations for quality so that used good markets play an allocative role our results are the following 1 in contrast to swan s famous independence result a monopolist does not provide socially optimal durability 2 allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist s market power in the used market however forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability 3 the manufacturer benefits from a well functioning used good market despite the fact that used goods provide competition for new goods 4 the monopolist prefers to restrict consumers abilities to maintain the good

durable goods and product obsolescence the issue of product obsolescence is addressed by examining the optimal sales strategy of a monopolist firm that may introduce an improved version of its current product consumers expectations of a forthcoming product lowers the price that they are willing to pay for the current product because of its loss in value due to obsolescence the new product is characterized by consumers increased willingness to pay and by its competitive interaction with the old product these characteristics affect the tradeoff that the firm makes between the cost of waiting for new product sales versus the cost of cannibalizing these sales we analyze the effect of these characteristics of the new product on the firm s optimal sales strategy we consider the various policy measures available to the firm including limiting initial sales in order to lower cannibalization of the new product buying back the earlier version of the product in order to generate greater demand for the new product and announcements of future product introductions we find that for modest levels of product improvement the firm s optimal policy is to phase out sales of the old product while for large improvements a buy back policy is more profitable lastly we find that the firm is better off if it informs consumers whether a new product is forthcoming

remanufacturing as a marketing strategy the profitability of remanufacturing systems for different cost technology and logistics structures has been extensively investigated in the literature we provide an alternative and somewhat complementary approach that considers demand related issues such as the existence of green segments original equipment manufacturer competition and product life cycle effects the profitability of a remanufacturing system strongly depends on these issues as well as on their interactions for a monopolist we show that there exist thresholds on the remanufacturing cost savings the green segment size market growth rate and consumer valuations for the remanufactured products above which remanufacturing is profitable more important we show that under competition remanufacturing can become an effective marketing strategy which allows the manufacturer to defend its market share via price discrimination

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

the political economy of agricultural credit the case of bolivi a theoretical framework is established to show that agricultural credit programs in less developed countries can be used for political purposes because of a government controlled supply b implicit income transfers associated with concessionary interest rates delinquency and inflation that can be used as patronage for politically influential borrowers and c ease of implementation under guise of economic objectives the framework is applied to bolivia within that country s political context large income transfers to a few influential farmers strongly suggest the importance of political factors in credit allocation with consequent effects on income distribution development and debilitation of financial institutions

price discrimination via second hand markets consumers have heterogeneous tastes for new and used goods and second hand markets involve transactions costs a monopoly seller may gain or lose from the existence of a second hand market locally it may prefer lower transactions costs but globally it may prefer high transactions costs so it can strangle the used market the monopolist uses the second hand market as an indirect device to achieve a form of second degree price discrimination if the monopolist can control the quality of its product when used it may wish to deteriorate this quality to worthless or else to have it as good as new

help wanted economists crime and public policy beginning with gary w becker s 1968 article on crime and punishment economists have contributed important theoretical insights and empirical findings to the study of criminal behavior but the influence of economists on crime relevant research and over policy debates remains negligible this essay summarizes some basic data on the causes of crime the social costs and benefits of incarceration and replenishing social capital work on crime by economists should become influential in setting research agendas and shaping policy debates but economists will have to roll up their sleeves complexify their models and confront a real world prisoner s dilemma or two

mixed markets and crime abstract this paper specifies and solves a two stage game theoretic model of a mixed market for crime control in the first stage of the model private targets and the government choose levels of policing in the second stage criminals choose targets and the severity of the crimes that they commit the paper s key results are as follows first private policing can both divert crime to targets that lack private protection and also increase the severity of the crime that these less protected targets suffer second an increase in private policing reduces the aggregate expenditure on traditional policing this is an instance of a political incentive externality where private policing affects the objective function of the government specifically it reduces the level of traditional policing that is consistent with the samuelson condition for efficient provision of a public good third the substitution of private for public policing carries with it a change in the technology of policing in effect private policing leads to a shift from enforcement and punishment towards monitoring and target hardening this in turn may lead to an increase in the severity of crime fourth the mixed policing equilibrium is inefficient and in some situations mixing may reduce the utility of all targets

crime and social interactions the high variance of crime rates across time and space is one of the oldest puzzles in the social sciences this variance appears too high to be explained by changes in the exogenous costs and benefits of crime we present a model where social interactions create enough covariance across individuals to explain the high cross city variance of crime rates this model provides an index of social interactions which suggests that the amount of social interactions is highest in petty crimes moderate in more serious crimes and almost negligible in murder and rape

individual protection against property crime decomposing the effects of protection observability we re examine the efficiency of observable and unobservable crime protection decisions with new results and insights observable protection is unambiguously associated with a negative externality at the individual level it reduces the crime effort but its unit payoff remains unchanged conversely unobservable protection reduces the unit payoff and has no effect on the crime effort exerted though it deters crime globally a decrease in the global crime payoff is detrimental to a victim if protection is observable while it is beneficial when unobservable while observable protection has a positive diversion effect it has the opposite effect when unobservable on reexamine l efficacite des decisions observables et non observables de protection par rapport au crime et on en tire de nouveaux resultats et de nouvelles perspectives la protection observable est associee a une externalite negative sans aucune ambiguite au niveau individuel elle reduit l effort de crime mais laisse les resultats financiers inchanges d autre part la protection non observable reduit les resultats financiers de l unite mais n a aucun effet sur l effort de crime dans ce cas particulier meme si cela se traduit par un effet dissuasif sur le crime globalement un declin dans le rendement global de l activite criminelle nuit a une victime si la protection est observable alors qu il est benefique quand la protection n est pas observable alors que la protection observable a un effet positif de diversion elle a l effet oppose quand elle n est pas observable

gated communities and the economic geography of crime abstract this paper analyzes gated communities in a geographic model of crime there are four major results first gating always diverts crime to other communities but has an overall deterrent effect on crime as long as it does not impact legitimate employment opportunities second gating expenditures may be strategic substitutes or strategic complements the latter possibility may help explain why gated communities appear to spread like a contagion third the nash equilibrium level of gating expenditures is inefficiently large fourth gating may actually increase the overall level of crime if it either affects employment opportunities or it influences the selection among multiple equilibrium crime rates

volunteering to be taxed business improvement districts and the extra governmental provision of public safety abstract when the median voter s preference sets the level of local public goods some voters are left unsatisfied is there an institution by which subsets of voters can resolve the collective action problem and increase the local provision of public goods if so what are the consequences in response to problems such as crime and vandalism neighborhood property owners have established business improvement districts bids to provide local public goods when a bid is approved by a majority of property owners in a neighborhood state law makes contributions to the bid budget mandatory this resolution of the neighborhood s collective action problem reduces crime bids in the city of los angeles are robustly associated with crime declines of 6 to 10 indeed crime falls regardless of estimation technique fixed effects comparing bids to neighborhoods that considered but did not adopt bids using propensity score matching and comparing bids to their neighbors strikingly these declines are purchased cheaply attributing all bid expenditure to violent crime reduction and thus ignoring the impact of bid expenditure on many quality of life crimes bids spend 21 000 to avert one violent crime this higher bound estimate is substantially lower than the 57 000 social cost of a violent crime

an industry equilibrium analysis of downstream vertical integration this paper investigates the effect of product substitutability on nash equilibrium distribution structures in a duopoly where each manufacturer distributes its goods through a single exclusive retailer which may be either a franchised outlet or a factory store static linear demand and cost functions are assumed and a number of rules about players expectations of competitors behavior are examined it is found that for most specifications product substitutability does influence the equilibrium distribution structure for low degrees of substitutability each manufacturer will distribute its product through a company store for more highly competitive goods manufacturers will be more likely to use a decentralized distribution system this article was originally published in marketing science volume 2 issue 2 pages 161 191 in 1983

the social efficiency of private decisions to enforce property rights costs must be incurred if an owner is to enforce private property rights effectively we show that in a perfectly competitive economy private decisions to enforce rights may result in either more or less enforcement than is socially efficient cases of multiple stable equilibria occur and an equilibrium may be locally but not globally efficient resources may not be employed in their socially most valuable uses and enforcement may be accompanied by inefficient investment in resource productivity

optimal strategies for trade old for remanufactured programs receptivity durability and subsidy due to its environmental financial and marketing benefits businesses and governments have increasingly embraced remanufacturing however the weak demand for remanufactured reman product severely hinders the implementation of remanufacturing lately trade old for remanufactured tor programs are growing in popularity as they can boost reman product demand in this paper we investigate the conditions when a firm should offer a tor program and how to best implement it our main findings are 1 firms should offer tor programs only when reman product receptivity and new product durability satisfy a certain condition 2 in addition to the reman product receptivity the new product durability also plays a significant role in motivating consumers to participate in tor programs and finally 3 high product remanufacturability and government subsidies are strong incentives for firms to offer their tor programs our analysis provides insights for firms and governments on how to use tor programs to benefit businesses consumers and the environment

competitive advantage through take back of used products abstract motivated by a recent antitrust ruling against hill rom one of the two dominant american suppliers of hospital beds we develop a stylized model to investigate the consequences of used product take back on firms industry and customers our findings suggest that by taking back and reselling refurbished products a manufacturer can increase both profit margins and sales to the detriment of a non interfering competitor in our model customers are always better off under product take back but it depends on the degree of competition whether firms use the benefits of take back primarily to increase their margins or to pass them on to the customers by lowering their prices the first firm to offer take back in some cases can deter its competitors from following this profitable strategy especially if it has an existing advantage in terms of lower production cost or higher market share contrary to the claim of hill rom s competitor we find a legitimate business justification for hill rom s reduction of new product prices

durability market structure and new used goods models focuses on the relationship between market structure and monopoly power durability models new used goods model durability and monopoly in the new used model interdependence between market structure and durability ebsco

exploring the relationship between the markets for new and used durable goods the case of automobiles given that durable products are long lived there exists the possibility of secondary markets for used products as well as the potential for product obsolescence this is an important issue in markets where technology changes rapidly because the introduction of new versions of a product can make earlier versions obsolete more generally prices of older versions in the secondary market adjust in response to changes incorporated in new versions of the product thus another method of evaluating consumers response to a new product is by looking at the variation in market prices of the old product this paper develops a general model to explore the relationship between primary markets for new cars and secondary markets for used cars the results suggest that the depreciation of used cars is influenced strongly by the types of changes in new model cars

private law enforcement fine sharing and tax collection theory and historical evidence abstract this paper contributes to the literature on private law enforcement by proposing a novel solution to the problem of underenforcement by monopolistic enforcers monopolistic enforcers underinvest in enforcement because they ignore the social benefits of deterrence we show that this problem can be partially resolved by combining law enforcement with tax collection because a joint enforcer collector will have an interest in reducing the crime rate in order to maximize his tax income in support of the theory we discuss two historical examples of this practice decentralized law enforcement under european feudalism and centralized law enforcement in the ottoman empire

the effect of a gated community on property and beach amenity valuation we examine how location in a gated community affects the value of a single family home and the valuation of a beach using data on 2 358 sales on barrier islands near charleston south carolina the empirical results indicate that homeowners pay a premium of 18 6 for a property in a gated community the value of location near a beach is greater in gated than nongated communities