effluent regulation and long run optimality a regulator faced with free entry of firms is concerned not only with the implications of public policy for the discharges from a representative firm but also with the total pollution observed at the long run market equilibrium the regulator must take into account not only the effects of regulations upon the net marginal returns of the firm but must also consider the total profit of the firm and incentives for entry and exit this paper shows that effluent charges and tradeable effluent permits lead to long run optimality with entry of small firms the difference between firm payments and environmental damages is interpreted as the rent accruing to the environmental resource this result applies only to the competitive case with small polluters the analysis presented here allows a comparison and clarification of the literature on small and large polluters in a multi input framework with social damages dependent upon total effluents effluent charges are shown here to result in socially optimal entry confirming an assertion of baumol and oates 2 p 179 fn 161 and the important result of schulze and d arge 15 by taking average as well as marginal damages into account the effluent charge results in optimal firm scale levels and the correct input mix at the free entry market equilibrium the firm subject to an effluent tax will operate above or below the private minimum efficient scale depending upon whether average external costs exceed or are less than marginal external costs since public policy to reduce effluents is often directed at reducing the effluentgenerating activity some policy recommendations include a tax on the final output of the polluting firm in some theoretical analyses a relation between the output of the firm and the effluent level is identified and a pigouvian output tax is applied this approach should not be followed by policymakers since an output tax does not provide firms with the correct incentives for either input substitution or market entry it is shown that while a lump sum transfer is needed to provide correct entry incentives when a pigouvian output tax is applied no such transfer is needed if the tax is correctly applied to effluents contrary to 5 even if optimal firm scale and i thank the referees for helpful suggestions the support of the national science foundation under grant ses 82 19121 is gratefully acknowledged any errors are my responsibility 103

optimal mix of emissions taxes and cap and trade abstract in practice different emitters of a particular pollutant are sometimes subjected to different control mechanisms this paper focuses on the situation where a part of the economy is regulated by a cap and trade program while the rest is subjected to an emissions tax using an extended version of weitzman s prices vs quantities model m l weitzman prices vs quantities revi econ stud 41 1974 477 491 we analyze the conditions under which this is superior from an efficiency point of view to subjecting the whole economy to either of these control mechanisms the paper addresses a crucial trade off between two sources of efficiency loss one due to cost effectiveness issues and another due to emissions volume this trade off determines the optimal size of each sector it is shown that the size of the taxed sector at an optimum increases with the relative steepness of the aggregate marginal abatement cost function

an economic rationale for the pricing structure of bank loan commitments abstract an economic rationale is provided for the competitive equilibrium deployment of commitment and usage fees in loan commitment pricing it is shown that under perfect information assessing both fees rather than just one permits optimal risk sharing when the borrower is privately informed about its probability of future commitment utilization commitment and usage fees can be used to induce borrowers to identify themselves by self selection through contract choice the equilibrium characterized here is dissipative and thus raises the usual existence questions which are addressed in the paper

paying too much and being happy about it existence causes and consequences of tariff choice biases abstract a common assumption underlying the analysis of consumers choices among optional tariffs is that consumers choose the tariff that maximizes their surplus and thus the tariff that leads to the lowest billing rate for a given amount of usage yet there is evidence that many users prefer a flat rate even though their billing rate would be lower with a pay per use tariff flat rate bias and some users prefer a pay per use tariff even though they would save money with a flat rate pay per use bias the authors conduct four empirical analyses based on three different data sets they show that the flat rate bias is more important and has a greater regularity and time persistence than the pay per use bias they classify potential causes of the flat rate bias as insurance effect taxi meter effect convenience effect and overestimation effect and show that the insurance the taxi meter and the overestimation effects lead to a flat rate bias they provide evidence that underestimation of usag

buyer uncertainty and two part pricing theory and applications we consider two part pricing of a service offered to risk averse buyers subject to demand uncertainty buyers subscribe to the contract before resolution of the uncertainty sellers set two part prices that trade off between insuring buyers against the uncertainty and the ex post deadweight loss from inefficient usage if marginal and total benefits from the service are positively correlated a sufficient condition is that the uncertainty not directly affect the buyer benefit the usage charge should be set above the marginal cost of the service if marginal and total benefits are negatively correlated the usage charge should be set below the marginal cost these results apply whether the seller has market power or is subject to competition the difference between the profit maximizing usage charge and marginal cost increases with buyer risk aversion our results can be extended to the case of the seller being more risk averse than the buyers we discuss applications to pricing of beach and ski resorts lines of credit utility computing and government services

should sliding controls be the next generation of pollution controls abstract the desirability of imposing a set of sliding effluent charges is investigated in a stochastic multifirm model that explicitly includes not only emissions but also a positively valued product and the amount of pollution removed from the effluent before it is emitted drawing upon the intuition developed in the literature of comparative economics it is urgued that if the cost variables are positively correlated across firms then the best sliding control for each firm closely approximates a quantity standard when many firms are to be regulated other possibilities are also considered and the slope of the best sliding control is suggested in each case

managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

dynamic environmental policy with strategic firms prices versus quantities abstract environmental regulators often have imperfect information about regulated firms abatement costs in this paper we compare taxes and emissions permits in a dynamic setting in which firms behave strategically the regulator updates policy over time based upon previous aggregate industry performance assuming that firms are not strategic we find that strategic firms facing an emissions tax have an incentive to overabate in order to obtain a lower tax in the future firms that trade emissions permits have a strategic incentive to reveal an artificially high permit price to obtain more permits in the future whether permits or taxes are preferred from a welfare standpoint depends upon how permit prices are determined taxes generate higher welfare when the low cost firm sets the permit price but permits generate higher welfare when the high cost firm sets the permit price

the future of u s natural gas production use and trade two computable general equilibrium models one global and the other providing u s regional detail are applied to analysis of the future of u s natural gas the focus is on uncertainties including the scale and cost of gas resources the costs of competing technologies the pattern of greenhouse gas mitigation and the evolution of global natural gas markets results show that the outlook for gas over the next several decades is very favorable in electric generation given the unproven and relatively high cost of other low carbon generation alternatives gas is likely the preferred alternative to coal a broad ghg pricing policy would increase gas use in generation but reduce use in other sectors on balance increasing its role from present levels the shale gas resource is a major contributor to this optimistic view of the future of gas gas can be an effective bridge to a lower emissions future but investment in the development of still lower co2 technologies remains an important priority international gas resources may well prove to be less costly than those in the u s except for the lowest cost domestic shale resources and the emergence of an integrated global gas market could result in significant u s gas imports

pricing access services many established industries such as the online service industry the telecommunication industry or the fitness club industry are access service industries when using services in these industries consumers pay for the privilege of accessing the firm s facilities but do not acquire any right to the facility itself a firm s pricing decisions in access industries frequently come down to a simple choice among flat fee pricing usage pricing or two part tariff pricing however it is not so simple for firms in those industries to make this choice access service firms typically face a mix of consumers who have intrinsically different usage rates a key characteristic of access service firms however is that the cost of providing an additional minute of usage is typically negligible as long as the firm has the necessary capacity to serve its customers service capacity which corresponds to the total available time on a firm s system is often limited in this paper we show that service capacity and consumer usage heterogeneity are two important factors that determine a firm s optimal choice we develop a model that incorporates these two salient characteristics shared by access industries and study what determines a firm s choice among the three alternative pricing structures flat fee pricing usage pricing or two part tariff pricing our analysis shows that in the presence of consumer usage heterogeneity service capacity mediates a firm s optimal choice in a complex yet predictable way a firm s choice also hinges on whether heavy or light users are more valuable in terms of their willingness to pay on a per unit capacity basis the presence of both consumer usage heterogeneity and capacity constraints prompts a firm to choose its pricing structure to attract a desired customer mix and to price discriminate as a result two part tariff pricing is not always optimal in access industries and a firm s pricing structure can vary in a complex way with the interaction of those two factors specifically we show that when light users are more valuable a firm may use a two part tariff or a flat fee depending on whether the firm is constrained by its service capacity but never charge a usage price alone or offer any signing bonus a negative flat fee or a flat payment to customers when heavy users are more valuable a firm may choose to set a usage price a signing bonus plus a usage price or flat fee interestingly regardless of whether heavy or light users are more valuable in an access service industry only flat rate pricing is a sustainable pricing structure once the industry has developed sufficient excess capacity we also show that the optimal pricing strategy in access industries can have some intriguing nonintuitive implications that have not been explored elsewhere for instance when the industry capacity is unevenly distributed between competing firms the large capacity firm may well be advised to increase rather than to decrease its price to accommodate the small firm it would be too costly and too tactless for the large firm to do otherwise in fact the strategy of accommodation calls on the larger firm to retreat in both light and heavy user markets and leave more of its capacity idle and more of the market demand unmet when the small firm s capacity hence the industry capacity increases this implies that incremental policy measures that encourage the growth of smaller companies in the presence of a large company can be welfare decreasing because the growth of smaller firm can force the retreat of a large company at the expense of market coverage today services account for two thirds to three quarters of the gnp not only in the united states but also in many industrial countries access industries are growing rapidly to exert profound impact on today s economy however service pricing in general and pricing access services in particular have not received adequate attention in the literature in this paper we take the first step in understanding how capacity constraints and consumer usage heterogeneity mediate the choice of pricing structures in both monopolistic and competitive contexts

how to price discriminate when tariff size matters firms that serve a large market with many diverse consumer types use discriminatory or nonlinear pricing to extract higher revenue inducing consumers to separate by self selecting from a large number of tariff options but the extent of price discrimination must often be tempered by the high costs of devising and managing discriminatory tariffs including costs of supporting consumers in understanding and making selection from a complex menu of choices these tariff design trade offs occur in many industries where firms face many consumer types and each consumer picks the number of units to consume over time examples include wireless communication services other telecom and information technology products legal plans fitness clubs automobile clubs parking healthcare plans and many services and utilities this paper evaluates alternative ways to price discriminate while accounting for both revenues and tariff management costs the revenue maximizing menu of quantity price bundles can be very or infinitely large and hence not practical instead two part tariffs 2pts which charge a fixed entry fee and a per unit fee can extract a large fraction of the optimal revenue with a small menu of choices and they become more attractive once the costs of tariff management are factored in we show that three part tariffs 3pts which use an additional instrument the free allowance are an even more efficient way to price discriminate a relatively small menu of 3pts can be more profitable than a menu of 2pts of any size this 3pt menu can be designed with less information about consumer preferences relative to the menu of two part tariffs which in order to segment customers optimally needs fine grained information about preferences our analysis reveals a counterintuitive insight that more complex tariffs need not always be more profitable it matters whether the complexity is from many choices or more pricing instruments

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

optimal pricing of new subscription services analysis of a market experiment there are now available a number of new subscription services that comprise a dual pricing system of a monthly access fee rental and a per minute usage charge examples include cellular phones the internet and pay tv the usage and retention of such services depend on the absolute and relative prices of this dual system for instance a moderate access fee but a low usage charge might initially appeal to customers but later a low usage customer might find the monthly fee unjustified and thereby relinquish the service providers of such services therefore usually offer several pricing packages to cater to differing customer needs the purpose of this study is to derive a revenue maximizing strategy for subscription services that is the combination of access and usage price that maximizes revenue over a specified time period an additional objective is to determine access and usage price elasticities because they have historically played an important role in theoretical pricing models the application area is the cellular phone market but for a new rather than an existing product to help gauge the likely usage rates and customer retention a field experiment is conducted in which several alternative price combinations are used specifically a sample of potential residential customers most of whom did not have an existing cell phone were divided into four treatment groups the first group were not charged an access fee but did have to pay a small per minute usage charge the second group also paid a small usage charge but in addition had three access price increases over the duration of the trial the third group paid no access fee but had usage charge increases while the fourth group had both access fee and usage charge increases usage levels for each respondent are recorded as is their month of dropout if they discontinue the service an initial examination of the data shows that higher access fees result in higher customer attrition and higher usage cost results in lower usage furthermore usage and retention are related in that declining usage levels over time often signal impending customer attrition hence two phenomena need to be modeled usage of the service and customer retention conditional on usage some seasonal effects are also observed and are allowed for in the model modeling customer attrition simultaneously with usage is important because ignoring customer attrition will likely result in an underestimate of price sensitivity this results from a censoring effect whereby respondents who remain in the trial tend to be wealthier and hence less price sensitive given the known problems of ignoring customer attrition we develop a theoretical model of usage which explicitly incorporates attrition by extending a time series model introduced by hausman and wise 1979 we make two extensions of the hausman and wise model the first is to generalize it from two to many time periods and the second is to allow for respondent heterogeneity by incorporating latent classes we fit the model by maximum likelihood and find that a two segment model is best in addition we examine the predictive validity of our model and find it to be reasonably good in general the results show that access and usage prices have different relative effects on demand and retention there are five key results first access price has some effect on usage but a much stronger effect on retention second usage price has a strong effect on usage and a moderate effect on retention in that if usage price increases so much that usage declines then lower usage levels results in higher attrition third access price elasticity is about half that of usage price with both elasticities generally being much smaller than 1 indicating relative inelasticity for this particular service fourth customer attrition rate churn is much more sensitive to access than usage price and last if just observed usage is examined and customer attrition is ignored then price sensitivity is very likely to be substantially underestimated on the order of 45 in our case finally when developing the revenue maximizing price combination we allow for the cost of customer acquisition by using some typical advertising to sales ratios for the telecommunications industry we find that the revenue maximizing price is 27 70 per month for the access fee and 0 81 per minute for the airtime charge these values are in line with current access fees and usage costs in the given market

pollution control by options trading abstract for pollution control with imperfect information about aggregate abatement costs we propose a combination consisting of free permits and a menu of call options for additional permits with different striking prices by appropriately choosing permits and corresponding striking prices the regulator can approximate the marginal damage function arbitrarily well

on the long run efficiency of auctioned vs free permits abstract when marketable permits affect the entry exit decisions of competitive firms the efficient proportion of auctioned vs free permits depends on the pollutant s nature all permits should be auctioned for global pollutants and some should be free for local pollutants

prices vs quantities with multiple pollutants abstract we examine the choice of policy instruments price quantity or a mix of the two when two pollutants are regulated and firms abatement costs are private information whether abatement efforts are complements or substitutes is key determining the choice of policies when pollutants are complements a mixed policy instrument with a tax on one pollutant and a quota on another is sometimes preferable even if the pollutants are identical in terms of benefits and costs of abatement yet if they are substitutes the mixed policy is dominated by taxes or quotas

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

stochastic dominance and expected utility survey and analysis while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics finance agriculture statistics marketing and operations research in this survey the first second and third order stochastic dominance rules are discussed with an emphasis on the development in the area since the 1980s

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

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

emission taxes and tradable permits a comparison of views on long run efficiency we compare three different views on the long runefficiencies of emission taxes which includethresholds inframarginalexemptions and of tradeable emission permitswhere some permits areinitially free the differences are caused bydifferent assumptions aboutwhether thresholds and free permits should besubsidies given only to firmsthat produce or full property rights treatingtax thresholds as well asfree permits as property rights would departfrom the conventional view but would allow greater flexibility in makingeconomic instruments bothefficient and acceptable such flexibilitycould be very important inachieving efficient control of greenhouse gasemissions

environmental policy a la carte letting firms choose their regulation under uncertainty the optimal choice between price and quantity instruments depends on the technology of the regulated firms which is often private information we consider an environmental policy that delegates the prices versus quantities decision to the firms by offering them the choice between an emissions tax and permit trading such an approach is currently used in swiss climate policy we provide a detailed characterization of the optimal policy and show that this approach reduces expected social costs compared to a pure tax or permit trading regime we demonstrate that an optimal allocation of firms to instruments can be achieved despite substantial informational constraints and that all firms gain from the introduction of the instrument choice compared to optimally designed single instrument policies furthermore we discuss the conditions under which this approach is likely to be preferable to a hybrid regulation

competition and two part tariffs monopoly power of some sort is thought to have viewed two part tariffs as price discrimibe a necessary condition for a firm to have the nation devices empower to price discriminate for example a firm ployed exclusively by prefers to use a two part tariff see oi 1971 firms with market rather than charge a single price for output power this paper ofhowever a competing firm could always charge fers an explanation for the use of such price a single price that consumers would prefer and schedules by firms in earn nonnegative profits thus it seems that the highly competitive marexistence of competition in a market would result kets such as health in the elimination of any two part tariff howclubs it is argued that ever the existence of two part tariffs in many in a world with buyer markets that are or appear to be competitive uncertainty about future demands they can belies this standard assumption this paper exprovide insurance for plains why monopoly power is not required for risk averse buyers the the existence of a two part tariff i show circumfixed entry fee finances stances in which price discrimination using a a marginal price below marginal cost it is two part tariff is preferred by consumers to a sinshown that the benefits gle price and therefore why this pricing method from this lower price will be found in competitive markets such pricwill under certain ing occurs in environments with uncertainty bespecified conditions cause two part tariffs act as a form of insurance outweigh the costs of ex ante consumers plan consumption however the entry fee there is a random component to their consump

lock in effect of emission standard and its impact on the choice of market based instruments abstract a country s existing emission standard policy will lead to a lock in effect when the country plans to adopt new market based instruments to control greenhouse gas emissions it must consider this effect as it chooses among instruments to avoid larger efficiency loss in this paper we find that the lock in effect will cause a kink point to occur on the marginal abatement cost mac curve this change of shape for the mac curve reminds us to be cautious in choosing market based instruments when applying weitzman s rule we also introduce this concept into a dynamic multi regional computable general equilibrium cge model for china and simulate mac curves for all regions after applying weitzman s rule we propose a timeline for introducing price instruments under different marginal benefit mb curve scenarios

comment managing channel profits comment in a recent paper in this journal jeuland and shugan jeuland a s shugan 1983 managing channel profits marketing sci 2 summer 239 272 proposed a quantity discount schedule as a way of coordinating a channel as they put it on p 253 of their paper a quantity discount schedule which would fix the retailer s and hence the manufacturer s profits to some fixed linear function of total channel profits would lead the channel to maximize profits the purpose of this note is to show that a quantity discount schedule is not necessary for channel coordination

efficiency in pollution control in the short and long runs a system of rental emission permits efficiency in pollution control in the short and long runs a system of rental emission permits author s robert a collinge and wallace e oates source the canadian journal of economics revue canadienne d economique vol 15 no 2 may 1982 pp 346 354 published by blackwell publishing on behalf of the canadian economics association stable url http www jstor org stable 134787 accessed 05 05 2008 21 07

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

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

scenarios for russia s natural gas exports to 2050 abstract russia is an important energy supplier as it holds the world s largest natural gas reserves and it is the world s largest exporter of natural gas despite a recent reduction in russia s exports to europe it plans to build new pipelines we explore the long term up to 2050 scenarios of russian natural gas exports to europe and asia using the mit emissions prediction and policy analysis eppa model a computable general equilibrium model of the world economy we found that over the next 20 40 years natural gas can still play a substantial role in russian exports and there are substantial reserves to support a development of the gas oriented energy system both in russia and in its current and potential gas importers based on the considered scenarios russia does not need any new pipeline capacity to the eu unless it wants to diversify its export routes to supply the eu without any gas transit via ukraine and belarus asian markets are attractive to russian gas and substantial volumes may be exported there relatively cheap shale gas in china may sufficiently alter the prospects of russian gas especially in asian markets in the reference scenario exports of natural gas grow from russia s current 7 tcf to 11 12 tcf in 2030 and 13 14 tcf in 2050 alternative scenarios provide a wider range of projections with a share of russian gas exports shipped to asian markets rising to more than 30 by 2030 and almost 50 in 2050 europe s reliance on lng imports increases while it still maintains sizable imports from russia

supermodularity and complementarity in economics an elementary survey the literature on supermodular optimization and games is surveyed from the perspective of potential users in economics this methodology provides a new approach for comparative statics based only on critical assumptions and allows a general analysis of games with strategic complementarities the results are presented in a simplified yet rigourous manner without reference to lattice theory for the special case of one dimensional parameter and actions sets with the emphasis being on wide accessibility detailed applications are presented for well known models of consumer behavior monopoly pass through bertrand and cournot competition strategic r d search and matching wherever appropriate useful tricks for applications and comparative comments are inserted

optimal design of a phase in emissions trading program abstract this paper studies a phase in emissions trading program with voluntary opt in possibilities for non affected firms and derives optimal permits allocations to affected and opt in firms when the environmental regulator has incomplete information on individual unrestricted emissions and control costs the regulator faces a trade off between production efficiency minimization of control costs and information rent extraction reduction of excess permits allocated to opt in firms the first best equilibrium can be attained if the regulator can freely allocate permits to affected and opt in firms otherwise a second best equilibrium is implemented the latter is sensitive to uncertainty in control costs and benefits

economic impacts of natural gas flow disruptions between russia and the eu abstract in this paper we use a non linear programming approach to predict the wider interregional and interindustry impacts of natural gas flow disruptions in the short run economic actors attempt to continue their business as usual and follow established trade patters as closely as possible in the model this is modelled by minimizing the information gain between the original pattern of economic transactions and the situation in which natural gas flows are disrupted we analyze four scenarios that simulate russian export stops of natural gas by means of a model calibrated on an international input output table with six sectors and six regions the simulations show that at the lower levels of aggregation considerable effects are found at the aggregate level of the whole economy however the impacts of the four scenarios are negligible for europe and only a little less so for russia itself interestingly the effects on the size of the economy as measured by its gdp are predominantly positive for the various european regions but negative for russia the effects on the welfare of the populations involved however as measured by the size of domestic final demand have an opposite sign with predominantly negligible but negative effects for european regions and very small positive effects for the russian population

the demand boost theory of exclusive dealing this paper unifies various approaches to the analysis of exclusive dealing that so far have been regarded as distinct the common element of these approaches is that firms depart from efficient pricing raising marginal prices above marginal costs we show that with distorted prices exclusive dealing can be directly profitable and anticom petitive provided that the dominant firm enjoys a strong competitive advantage over rivals the dominant firm gains directly rather than in the future or in adjacent markets thanks to the boost in demand it enjoys when buyers sign exclusive contracts we discuss the implication of the theory for antitrust policy

does uncertainty matter consumer behavior under three part tariffs in communication information and other industries three part tariffs are increasingly popular a three part tariff is defined by an access price an allowance and a marginal price for any usage in excess of the allowance empirical nonlinear pricing studies have focused on consumer choice under two part tariffs we show that consumer behavior differs under three part tariffs and assess how consumer demand uncertainty impacts tariff choice we develop a discrete continuous model of choice among three part tariffs and estimate it using consumer level data on internet usage our model extends prior work in accommodating consumer switching to competitors thereby capturing behavior in competitive industries more accurately our empirical work shows that demand uncertainty is a key driver of choice among three part tariffs consumers expected bill increases with the variation in their usage steering them toward tariffs with high allowances consequently demand uncertainty decreases consumer surplus and increases provider revenue a further analysis of consumers responsiveness to the different elements of a three part tariff under the provider s current pricing structure reveals that prices affect a consumer s tariff choice more than her usage quantity and that the allowance plays a strong role in consumer tariff choice based on our results we derive implications for pricing with three part tariffs

advance selling effects of interdependent consumer valuations and seller s capacity we examine the impact of consumer valuation interdependence and capacity on a firm s optimal selling strategies we consider a seller who can offer a single product to consumers twice in advance and in spot consumers choose whether and when to buy but if they buy in advance they are uncertain about their own valuations whether they buy in advance or in spot consumers valuations are realized in the spot period and they may range from fully independent to perfectly correlated creating markets with different characteristics of aggregate demand for the seller facing these consumers the seller chooses a portion of the total capacity to offer in advance and prices in both periods we describe how the optimal strategy and benefits of advance selling depend on the interdependence of consumer valuation as well as capacity level and other market parameters we find that a change in valuation interdependence can lead to dramatically different policies for the seller for example when individual valuations are highly diverse and the consumer population is large the seller must offer a discount during advance selling but may limit the advance sales on the other hand when valuations are highly correlated the seller can charge a premium price during advance selling for the same valuation interdependence the qualitative nature of the optimal strategy changes with available capacity this paper was accepted by martin lariviere operations management