the economics of a blend mandate for biofuels a biofuel blend mandate may increase or decrease consumer fuel prices with endogenous oil prices depending on relative supply elasticities biofuel tax credits always reduce fuel prices tax credits result in lower fuel prices than under a mandate for the same level of biofuel production if tax credits are implemented alongside mandates then tax credits subsidize fuel consumption instead of biofuels this contradicts energy policy goals by increasing oil dependency co 2 emissions and traffic congestion while providing little benefit to either corn or ethanol producers these social costs will be substantial with tax credits costing taxpayers 28 7 billion annually by 2022 copyright 2008 oxford university press

does the public sector over provide club goods a general result abstract with nondistortionary user charges the first best and second best of a single club exogenous income economy with identical individuals coincide they differ if incomes differ overprovision of a superior club good then occurs in the second best

demystifying rins a partial equilibrium model of u s biofuels markets abstract we explore four fundamental channels of mandate compliance available under current u s biofuel policy increased ethanol blending through e10 or e85 increased biodiesel blending and a reduction in the overall compliance base simulation results highlight the interplay and varying importance of these channels at increasing blend mandate levels in addition we establish how rin prices are formed the value of a rin in equilibrium is shown to reflect the marginal cost of compensating the blender for employing one additional ethanol equivalent unit of biofuel this contrasts with existing research equating the price of rins to the gap between ethanol supply and demand evaluated at the mandate level we demonstrate the importance of this distinction in case of binding demand side infrastructure constraints such as the ethanol blend wall as percentage blend mandates increase the market for low ethanol blends may contract in order to reduce the overall compliance base this has important implications for implied ethanol demand in the economy

corrigendum to when is efficiency separable from distribution in the provision of club goods journal of economic theory 90 2000 204 221 abstract this note corrects a slip in fraser s j econ theory 90 2000 204 221 treatment of the necessary condition for partial separation of efficiency from distribution in providing a club good his corrected theorem 1 shows that many families of utility function can generate partial and total separation thereby considerably extending the scope of his analysis

ski lift pricing with applications to labor and other markets reply after we wrote our paper on pricing at ski areas barro and romer 1987 we received several comments like that of tyler cowen and amihai glazer 1991 noting that our results could be interpreted as special cases of results that have been established in club theory we also received comments claiming that our results were clearly wrong because they contradicted standard results in club theory we now sympathize with the economist who was reportedly told by a critic that your result is trivial wrong and i already proved it when we wrote our paper we were aware that ski areas were sometimes mentioned as examples of club goods see for example the paper by suzanne scotchmer 1985 we did not pursue the literature on clubs because our problem contained no club goods the goods we dealt with rides up a chair lift are conventional private goods our result also contradicted the one result from club theory that we knew the standard club analysis of a ski area treats it as a shared facility each member in the club decides how intensively to use this facility in this setting eitan berglas 1976 first showed that both a membership fee and a usage fee are necessary to support an efficient allocation our finding was that queues with no usage fee support an efficient allocation nevertheless cowen and glazer are correct that our results have much in common with results from club theory specifically our results can be interpreted as special cases of results for clubs that are not subject to variable intensity of usage there are therefore two interesting questions why does the analysis of a problem with private goods resemble the analysis of a problem with club goods and why does our problem resemble a club problem in which people cannot vary how often they use the shared facilities the answer to both of these questions depends on the observation that it is possible to treat a bundle of private goods as a

gorman and musgrave are dual an antipodean theorem on public goods abstract this paper examines the conditions under which the allocation branch of the government can determine the optimum provision of public goods independently of the distribution of private goods we draw attention to the duality with the literature on aggregation over consumers private goods economies

nash equilibrium existence and uniqueness in a club model abstract we model a single club heterogeneous consumer exogeneous income economy as an aggregative public good game under common assumptions if club quality functions are homogeneous of positive degree in the club facility investment and use an unique nash equilibrium exists

public goods self selection and optimal income taxation using the self selection approach to tax analysis this paper derives a modified samuelson rule for the provision of public goods when the government deploys an optimal nonlinear income tax this approach gives a straightforward interpretation of the central result in this area generalises it and provides a simple characterisation of optimal policy in a wide range of circumstances the analysis also emphasises and clarifies the significance of the choice of numeraire for the optimality of decentralising public spending decisions it is well known that the famous samuelson rule for the provision of public goods may not be applicable when the tax revenues used to finance the public goods come from distorting taxes the principle was recognized as long ago as pigou 1947 long before the samuelson rule was devised pigou saw that in addition to the resource cost involved in transferring funds from the private to the public sector there was a deadweight loss involved from this insight he suggested that the criterion for providing public goods should be more stringent than the samuelson rule would later suggest in particular one might expect that the inclusion of the deadweight loss of taxes as part of the cost of providing a public good would lead to a reduction in its optimal provision relative to a situation in which lump sum taxes were available the problem was investigated more systematically by atkinson and stern 1974 who considered the case in which a public good is financed by a set of optimal commodity taxes all individuals were assumed to be identical so efficiency alone dictated the objective they found that no prima facie case could be made for the pigou position that the use of distortionary taxes called for a reduction in the supply of the public good their analysis clearly showed that there were two influences at work when the financing of a public good was by distorting taxes on the one hand

ski lift pricing with applications to labor and other markets the market for ski runs or amusement rides often features admission tickets with no explicit price per ride therefore the equilibrium i nvolves queues which are systematically longer during peak periods s uch as weekends moreover the prices of admission tickets are much l ess responsive than the length of queues to variations in demand eve n when these variations are predictable despite the queues and stick y prices the authors show that the outcomes are nearly efficient und er plausible conditions they then show that similar results obtain f or some familiar congestion problems and for profit sharing schemes i n the labor market copyright 1987 by american economic association

competitive equilibrium and the core in club economies with anonymous crowding in club economies with anonymous crowding competitive equilibrium states of the economy are efficient and coincide with the core when there is only one private good anonymous admission prices permit consumers with different tastes to share facilities consumers might do so when their demands for facility size and crowding coincide in which case sharing is efficient thus similarity of demands is the relevant consideration for efficiently grouping consumers with different tastes

removing distortions in the u s ethanol market what does it imply for the united states and brazil we analyze the impact of trade liberalization and removal of the federal tax credit in the united states on ethanol markets using a multimarket international ethanol model we find that u s trade barriers have been effective in protecting the ethanol industry under current policy there is separability of the u s ethanol market from world markets with trade liberalization the ethanol market deepens making it less susceptible to price volatility the effect of trade liberalization extends beyond ethanol markets affecting agricultural markets the results show that the impact of removal of the tax credit overrides the impact of the tariff removal copyright 2008 oxford university press

price discontinuities in the market for rins abstract in the last few years a market has emerged for renewable identification numbers rins a unique 28 character alphanumeric code assigned to each domestically produced and imported gallon of renewable fuel as with many commodity markets the arrival of new information can lead to unexpectedly rapid changes or jumps in prices this suggests that rins prices may follow a more complex process than geometric brownian motion gbm we investigate the potential presence of jumps as well as time varying volatility in the spot price for rins our results demonstrate that allowing for jumps and time varying volatility provides statistically important improvements in the modeling of prices relative to gbm both jumps and time varying volatility can contribute to the fatness of the tails in the distribution of price returns which has implications for investments in capital projects linked to renewables

does britain or the united states have the right gasoline tax this paper develops an analytical framework to assess the second best optimal level of gasoline taxation taking into account unpriced pollution congestion and accident externalities as well as interactions with the broader fiscal system we provide calculations of the optimal taxes for the us and the uk under a variety of parameter scenarios under our central parameter values the second best optimal gasoline tax is 1 01 gal for the us and 1 34 gal for the uk current tax rates are much lower than this in the us and higher in the uk the calculations are moderately sensitive to alternative parameter assumptions the congestion externality is the largest component in both nations revenue raising needs also play a significant role as do accident externalities and local air pollution potential welfare gains from reducing the current uk tax rate are estimated at nearly one fourth the production cost of all gasoline used in the uk even larger gains could be achieved by switching to a tax on vehicle miles with equal revenue yield for the us the welfare gains from optimizing the gasoline tax are smaller but those from switching to an optimal tax on vehicle miles are very large

optimal public good provision with limited lump sum taxation it is often argued that the use of distortionary taxation lowers the optimal provision of public goods below its optimal level in a first best economy which contains no restrictions on lump sum taxation however this issue is usually investigated using commodity tax models that contain no lump sum taxes this paper examines a many consumer economy in which the only tax instruments are commodity taxes and a poll tax subsidies are negative taxes the optimal level of public good provision in this economy typically exceeds the first best level at least for distributionally neutral public goods copyright 1991 by american economic association

when do market games have transferable utility a pure exchange economy generates a market game in which the allocations achievable by any coalition are determined by the initial endowments of its members subject to certain regularity conditions it is shown that for a market game it is possible to find utility representations for each consumer so that the game can be treated as a game with transferable utility if and only if indirect utility of all consumers can be represented in the gorman polar form this is the class for which aggregate demand behaves as if it were the demand of a single consumer journal of economic literature classification numbers 021 022 cc 1985 academic press inc

news management and the value of firms the literature on asymmetric information has been concerned mainly with the problem of the informed party lying to the uninformed parties however in many cases the informed party will stop short of lying but will seek to gain from private information by managing the disclosure of news this article examines the pricing of a firm when there is such manipulation of news i model this situation as a variant of the persuasion game of milgrom and roberts 1986 in which i can parameterize the notion of the degree of credence placed by the market on the disclosures of the informed party an empirical hypothesis thrown up by the theory is that for otherwise identical firms a low price earnings ratio will be associated with a greater degree of positive skewness of the disclosure strategy

when is efficiency separable from distribution in the provision of club goods abstract using the homogeneous of degree zero inverse congestion quality function employed most frequently in the literature we characterise completely the families of utility functions which are then necessary and sufficient for break even utilitarian welfare maximising provision of club goods with self selection to be separable from distribution two types of separation involving alternatively a the price and quality b the price quality facility size and total utilisation are considered when separation is possible utility functions and optimal decisions take simple intuitive forms our results extend the scope of separation results previously obtained only for pure public goods journal of economic literature classification numbers d62 h23 h40

clubs local public goods and transportation models a synthesis abstract clubs local public goods and transportation models are analyzed within a unified model the emphasis is on the derivation of optimal allocation pricing and the size of the sharing group we derive the conditions under which optimal prices will yield surplus or deficit as well as those under which competitive provision will be efficient given heterogeneous tastes we prove that segregation according to tastes is generally efficient although several cases where this result does not hold are also discussed we show that the existing literature is unnecessarily restrictive and that the unified approach suggested here considerably extends the existing analysis of clubs local public goods and the transportation problems

persuasion and receiver s news in a persuasion game with possibly missing evidence a receiver with access to news may make better decisions when she does not observe its content the value of ignorance deteriorates when communication is two sided

the indirect land use impacts of united states biofuel policies the importance of acreage yield and bilateral trade responses recent work has highlighted agricultural land conversion as a significant debit in the greenhouse gas accounting of ethanol as an alternative fuel this work has at the same time sparked considerable debate on the role of crop yield growth as a means of avoiding rapid land conversion we examine the agricultural land use impacts of mandate driven ethanol demand increases in the united states in a formal economic equilibrium framework which allows us to examine the importance of yield price relationships we find that the standard assumption of trend yield growth is likely restrictive for analysis of equilibrium response to significant demand increases for fuel feedstocks furthermore we identify both the acreage response and bilateral trade specification of a multi country model as important sources of variability in terms of parametric uncertainty in predicting global land use change from the biofuels boom

decompositions of corn price effects implications for feed grain demand and livestock supply this article examines how corn prices affect the demand for feed grains and the supply of livestock outputs the differential approach to the theory of the multiproduct firm is employed to examine ex ante decisions about feed grain demand and livestock supply the estimation results suggest that livestock producers have little flexibility in adjusting the demand for corn in response to an increase in corn prices the substitutable relationship between corn and distillers grains contributes to alleviating pressures on feed costs in response to high corn prices in addition the estimation results highlight that the composition of livestock supply can be altered by changes in livestock prices on the basis of the estimated elasticities the decompositions of profit maximizing input demand are conducted to examine the effects of changes in corn prices on feed grain demand and livestock supply the decomposition results reveal that an increase in corn prices reduces corn demand but raises the demand for distillers grains mainly due to the substitution effects of corn price changes the decomposition results also show that an increase in the price of corn reduces cattle supply but raises the supply of chicken and pork due to the output relationships in supply

overcoming the club dilemma of village scale bioenergy projects the case of india small scale decentralised electricity generation at village level based on locally available biomass is a promising solution for providing electricity access in remote rural areas as it can supply villages with an independent reliable high quality and environmentally friendly energy source however despite such systems technological feasibility they are often discontinued research so far has not studied the reasons for discontinuation this article analyses a case of biomass based gasification in india by studying the type of goods the village system provides and the distribution of benefits within the system in this case the infrastructural and social system provide electricity as a club good given fluctuating numbers of service users the club faced the decision to either expand the system to new members or to reduce the services provided the focus on the village community hampered the extension of the club a reduction in the quality and quantity of services however decreased the comfort provided by the system the system faced what here is called a club dilemma to avoid the club dilemma and for a sustained energy provision policy needs to find means to secure feedstock i e by the means of subsidies or collaboration with agricultural departments

two tier pricing of shared facilities in a free entry equilibrium we explore how well the market will provide shared facilities which are subject to congestion it is usually efficient to have multiple facilities because it is more efficient to spend resources on facilities than to endure crowding costs we assume firms can charge a membership price and a visit price we present a symmetric nash equilibrium in these two prices we show that ifthe number offirms is large the membership price will be small thus the membership price is a measure of market power when entry occurs in response to positive profit but such that entry is deterred by the prospect of negative profit in a symmetric nash equilibrium the endogenous number offirms is bounded below by one fewer than the efficient number thefees paid by a client converge to an appropriately defined competitive price as the economy is replicated

how policies affect international biofuel price linkages abstract we estimate the role of biofuel policies in determining which country is the price leader in world biofuel markets using a cointegration analysis and a vector error correction vec model weekly prices are analyzed for the eu us and brazilian ethanol and biodiesel markets in the 2002 2010 and 2005 2010 time periods respectively the us blender s tax credit and brazil s consumer tax exemption are found to play a role in determining the ethanol prices in other countries for biodiesel our results demonstrate that eu policies the consumer tax exemption and blending target tend to determine the world biodiesel price

the welfare economics of a biofuel tax credit and the interaction effects with price contingent farm subsidies a framework is developed to analyze the effects of a biofuel consumer tax exemption and the interaction effects with a price contingent farm subsidy ethanol prices rise above the gasoline price by the amount of the tax credit corn farmers gain directly while gasoline consumers only gain from any reduction in world oil prices due to the extra ethanol production domestic oil producers lose historically the intercept of the ethanol supply curve is above the gasoline price hence part of the tax credit is redundant and represents rectangular deadweight costs that dwarf triangular deadweight cost measures of traditional farm subsidies copyright 2007 oxford university press

independence of allocative efficiency from distribution in the theory of public goods when is the pareto optimal amount of public goods independent of income distribution subject to some regularity conditions the answer is when preferences of every individual i can be represented by a utility function of the form u x i y a y x i b i y where x i is i s consumption of private goods and y is the amount of public goods

market provision of price excludable public goods a general analysis the demand distribution is employed as a novel and powerful basis for analyzing monopoly provision of price excludable public goods and could be used to analyze other market structures or in some circumstances private goods provision for uniform per unit all or none two part and multipart pricing we identify characteristics of revenue functions relative profitability and operational procedures for selecting price output levels under all these strategies rationing of some consumers by output is required and a positive price output relationship may arise in general the revenue ranking of pricing strategies is sensitive to the distribution of demand and though multipart pricing can be expected to be revenue dominant uniform per unit pricing emerges as a surprisingly robust strategy even before operational complexity is fully taken into account

when are nash equilibria independent of the distribution of agents characteristics author s bergstrom ted varian hal r abstract we present examples of nash equilibria that do not vary with the distribution of a parameter across agents and then offer a general theorem that characterizes this independence

arm s length relationships we show that lowering the cost of acquisition of information that a principal obtains about the performance of an agent may make it more difficult for the principal to commit to threats hence it will weaken incentives and can therefore be counterproductive this phenomenon is explored in a framework where improving the quality of information makes a commitment not to renegotiate less credible applications to the theory of the firm are briefly explored

using the competitive storage model to estimate the impact of ethanol and fueling investment on corn prices abstract the impact of biofuel mandates on the prices of commodities used to produce food continues to be a major consideration by policy makers more recently concern about high compliance costs of oil companies due to mandates led to reductions in us biofuel mandates to gain insights into the policy impacts of mandates on agricultural commodity prices and compliance costs requires development of dynamic models that can capture the fact that many agricultural commodities used to produce biofuels can be stored and that flexible compliance mechanisms allow for banking and borrowing of tradable permits us biofuel mandates are enforced using a system of tradable permits called rins rin market dynamics are important because rins can be banked for the future or borrowed from the future corn is the primary u s biofuel feedstock and is storable rational expectations competitive storage models are well suited to capture the dynamic behavior of commodity markets such a model is developed here for corn and rin markets to estimate the impacts of alternative future ethanol mandate levels the model considers corn use for ethanol storage and all other uses in each period accounting for two random variables oil prices and corn yields borrowing and banking provisions of the renewable fuels standard mandate are explicitly integrated into the model we use the model to provide estimates of the impact on corn prices corn plantings and ethanol production under two ethanol mandate scenarios for six marketing years from 2016 17 our scenarios are a combination of volume requirements and infrastructure investment the first scenario is one in which corn ethanol mandates stay the same as required in the current and proposed rfs and additional e85 stations are introduced that allow for compliance with higher mandates the second scenario is one in which no investment occurs and the environmental protection agency reduces the mandate to 13 87 billion gal a level that can just be met with 10 percent ethanol blends comparing the results for two scenarios we find that average corn prices are about 5 to 6 lower with the reduced mandates or about 22 to 30 cents per bushel while average rin prices drop from around 60 to 40 cents per rin