price discrimination and investment incentives abstract we examine a model of a monopolist selling to two segments of consumers with different preferences for quality we show that if the firm is unable to price discriminate between the segments then there is less investment in quality we find that both consumer segments and society overall may suffer if the firm is unable to price discriminate we extend the model to duopoly competition and find that our results still hold

inflation forecast errors and time variation in term premia the expectations theory of the term strueture is well known to give wrong signals as to the future course of long term interest rates one explanation involves rational time varying term premia however the anomaly may also be due to inflation forecast errors we study survey forecasts of inflation it seems that the respondents forecasts are insufficiently adaptive interest rates reflect expectations similar to the inflation forecasts as a result past survey forecast errors reliably predict premia on u s government bonds

third degree price discrimination with interdependent demands this paper analyzes the price output and welfare effects of third degree price discrimination for a monopolist who sells in two interdependent markets the case where the two goods sold by the monopolist are complements is analyzed as well as the more typical case where the two goods are substitutes the economic effects of price discrimination are shown to depend on the type and strength of demand interdependence the curvature of the demands and the slope of marginal cost the circumstances under which price discrimination causes both market prices to either rise or fall are also analyzed

the effects of new public projects to expand urban rail transit abstract many us cities invest in large public transit projects in order to reduce private vehicle dependence and to reverse the downward trend in public transit use using a unique panel data set for five major cities that upgraded their rail transit systems in the 1980s we estimate new rail transit s impact on usage and housing values using distance as a proxy for transit access new rail transit has a small impact on usage and housing values this impact is enough to represent tangible benefits of new transit to nearby residents new transit s benefits are not uniformly distributed we document which demographic groups are over represented in transit growth areas and the changes in transit usage by different demographic groups

what price accountability the lucas island model and the politics of monetary policy this paper develops a model of an electoral cycle in inflation and output based on rational inflation expectations and rational retrospective voting voters are heterogeneous and partially informed about aggregate macroeconomic variables they observe precisely how monetary policy stimulates their local economies but their observations of economic activity in other sectors are imprecise voters extract information about the incumbent policymaker s economic competence from cross sectoral spillover effects the incumbent has incentives to generate preelection monetary surprises that stimulate the local economies and generate cross sectoral spillover effects he thereby creates an impression of economic competence and furthers his reelection prospects his policy manipulations are the price of political accountability on a positive note the incumbent is more likely to survive voter scrutiny if he is more competent than the average political candidate

parking transit and employment in a central business district abstract in this paper we present a general equilibrium model to examine the role of parking and transit subsidy policy on the size of a central business district cbd cbd land values and the market shares of cars and transit the three main features of the model are 1 agglomeration economies increase continuously with labor market size 2 congestion arises from auto use only transit is noncongestible and 3 locational equilibrium is maintained in the sense that firms and individuals cannot reduce costs or increase utility by moving given equilibrium prices and city size we derive the conditions under which parking taxes can be levied and used to subsidize transit and increase equilibrium cbd size and land values we compute an optimal parking tax that maximizes cbd size and land values and derive relationships among parking taxes transit use and congestion we find nonmonotonic relationships among parking taxes land values and transit use

price discrimination and patent policy patent and antitrust policy are often presumed to be in conflict as an important example there is ongoing controversy about whether price discrimination by a patent holder is an illegal or socially undesirable exploitation of monopoly power in this article we show that no conflict exists in many price discrimination cases even ignoring the dynamic effects on incentives for innovation third degree price discrimination by patent holders can raise static social welfare in fact pareto improvements may well occur welfare gains occur because price discrimination allows patent holders to open new markets and to achieve economies of scale or learning further even in cases where discrimination incurs static welfare losses it may be efficient relative to other mechanisms such as length of patent life for rewarding innovators with profits

monopoly price discrimination and demand curvature this paper presents a general analysis of the eects of monopolistic third degree price discrimination on welfare and output when all markets are served su cient conditions involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the dierent mar kets are presented for discrimination to have negative or positive eects on

a temporal and spatial equilibrium analysis of commuter parking abstract this paper examines the effects of parking availability on morning rush hour congestion and assesses the relative efficiency of road tolls and parking fees without pricing drivers occupy parking in order of increasing distance from the cbd a time varying toll can prevent queueing but does not affect the order in which parking spots are taken optimal location dependent parking fees may be superior they do not eliminate queueing but induce drivers to park in order of decreasing distance from the cbd thereby concentrating arrival times closer to work start times competitively set parking fees do nothing to reduce queueing and are relatively inefficient

price discrimination and social welfare studies the effect of price discrimination on social welfare using methods from duality theory features of the reservation model presented quasi linear utility and consumers surplus upper and lower bounds on welfare change bounds on welfare change with optimal price discrimination from ebsco

poverty among women and children what accounts for the change over the past few decades there has been a phenomenal increase in the number of households that are headed by women this fundamental change in family structure has been accompanied by increases in the number of women in poverty relative to the number of men in poverty for instance in 1959 women were 23 percent more likely to be poor than were men but by 1985 they were 51 percent more likely to be poor 1 at the same time the ratio of children s poverty relative to that of men s has skyrocketed while children were 53 percent more likely to be poor than were men in 1959 by 1985 they were 121 percent more likely to be poor the feminization of poverty has become shorthand for describing the disproportionate percentage of poverty that is borne by women living alone or with their children this paper analyzes the forces behind these changes a framework is developed that allows changes in poverty rates to be decomposed into component parts using a timeseries of independent cross sections covering the period from 1967 to 1985 this framework is then used to examine the empirical significance of a variety of factors that contribute to poverty the first set of factors examined includes women s wage rates and hours of work men s earnings and afdc guarantee levels the effects that these variables have had on poverty rates are twofold they have affected poverty directly holding marital status constant and have affected poverty indirectly through their effects on marital status both of these effects are considered in addition the direct but not the indirect poverty effects of changes in the number of children and changes in income from child support and alimony are examined

where modern macroeconomics went wrong this paper provides a critique of the dsge models that have come to dominate macroeconomics during the past quarter century it argues that at the heart of the failure were the wrong microfoundations which failed to incorporate key aspects of economic behaviour e g incorporating insights from information economics and behavioural economics inadequate modelling of the financial sector meant they were ill suited for predicting or responding to a financial crisis and a reliance on representative agent models meant they were ill suited for analysing either the role of distribution in fluctuations and crises or the consequences of fluctuations on inequality the paper proposes alternative benchmark models that may be more useful both in understanding deep downturns and responding to them

third degree price discrimination consumption externalities and social welfare this paper analyses monopolistic third degree price discrimination in the presence of consumption externalities within two separate markets assuming linear inverse demands we investigate an associated change in social welfare the sum of the consumers surpluses and the producer s profit with the regime change from uniform pricing to price discrimination when both markets are open under either regime it is shown that social welfare can improve even if total output is unaffected by the regime change moreover it is possible that the sum of the consumers surpluses also increases

new estimates of quality of life in urban areas implicit markets capture compensation for intraurban and interregional differe nces in amenities and yield differences in housing prices and wages these pecuniary differences become preference based weights in a qual ity of life index hedonic equations are estimated using microdata fr om the 1980 census and assembled county based amenity data on climati c environmental and urban conditions ranking of 253 urban counties reveals substantial variation within as well as among the 185 urba n areas the quality of life differences across counties within one s msa is almost one half of the difference between the top and bottom ranked counties in the nation copyright 1988 by american economic association

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

public information and inflation expectations microeconometric evidence from a natural experiment abstract governments provide public information to reduce information imperfections do households rely on public signals to inform themselves about market conditions to identify the importance of public information in households price expectations we take advantage of a unique natural experiment in ecuador where the published inflation rate had been different from the correct rate over a period of fourteen months due to a software error we find that the public signal about prices plays an important role in households price expectations and the change in price expectations affects their savings choices the effect is stronger for better educated and older people

the general equilibrium effects of congestion externalities abstract this is the second in a series of three articles on the topic of congestion externalities we use an urban general equilibrium model to compute two types of cities the market equilibrium city in which congestion externalities occur and the optimum city the optimum city has a more dispersed distribution of employment and a more concentrated distribution of residence if the population of the city is fixed the optimum pricing of transportation generates a per capita welfare gain of 3 78 per week if the population of the city is endogenous the internalization of congestion externalities causes the city to grow

a comparative study of alternative methods of quantifying qualitative survey responses using napm data this article examines the effectiveness of a subjective probability approach to quantify three category qualitative responses from expectations surveys since one cannot make a judgment on the validity of estimated expectations by comparing them with ex post outcomes we use the national association of purchasing managers survey data on materials buying prices and compare them with the producer price index for intermediate materials and components for manufacturing we experimented with normal logistic and scaled f distributions and found that the approach could explain approximately 60 of the variation in the monthly series marginal improvement in the explanatory power of the procedure was noted when the imperceptible parameter was allowed to be asymmetric and variable over time

efficiency of uniform pricing in universal service obligations we provide an efficiency justification for the imposition of the uniform pricing constraint in universal service obligations uso where uso are defined as a set of constraints imposed on firms belonging to a network industry in addition to the uniform pricing up constraint which is an obligation to serve all consumers at an identical price constraints considered are the coverage constraint cc which is an obligation imposed on one of the firms to serve a given segment of the market and the license constraint lc which is a minimum or a maximum coverage restriction that is imposed on entrants we show that adding the up constraint to both a cc and a lc leads to an increase in welfare our contribution comes from the full recognition of the role of a lc in well designed uso and we illustrate this role with the particular case of linear demand

microfoundations and the demand for money the reader should note that i write this piece in a style that aims to be accessible to that much neglected representative agent the woman on the eurostar train hence unlike the man on the clapham omnibus i assume my intrepid traveller has reasonable knowledge of monetary economics and econometrics but not of the details of the demand for money space constraints force me to indulge in a certain amount of poetic licence but i hope this results in poetic justice there have been many wars fought on this particular battlefield some with almost religious zeal on the theoretical side of the debate we sometimes have the equivalent of religious fundamentalists be they muslims jews christians etc who would dismiss almost any evidence unless it were associated with a strong microtheoretic basis as laid down in the koran talmud or bible the empirical side encompasses agnostics atheists as well as born again econometricians pure theorists inhabit the sunlit uplands while applied economists and policymakers flounder in the muddy plain below occasionally gaining solace from their copy of zen and the art of motorcycle maintenance in general in economics we do not have the luxury of controlled experiments as is the case in the natural sciences what distinguishes good microfoundations from bad and how to weight priors and statistical evidence is subject to much dispute leamer i983 hendry et al i990 as in religion sometimes there is the occasional miracle proclaimed after a suitable interval a new saint may be declared and disciples flock to the new shrine later doubts may arise as to whether a miracle really did occur human behaviour is difficult to explain let alone predict so the search for the equivalent of the holy grail ark of the covenant etc is bound to be arduous in scholarly journals we generally read of the success of the demand for money like diplomats who are sent abroad to lie for the good of their country publication may require applied economists to be somewhat economical with the actualite lovell i983 leamer i983 in this article i want to be as honest as possible about our success and failures in this area the prior information an armchair economist would consider when thinking about the demand for money over the past 40 years in western industrialised countries which have experienced moderate inflation might

employer paid parking mode choice and suburbanization abstract this paper constructs a theoretical model that facilitates analysis of the effects of employer paid parking on mode choice road investment and suburbanization the model simplifies urban space by dividing it into two zones islands center and suburbs which are connected by a congested road and a public transit line each road commuter requires an allotment of cbd land for parking and because the central zone s area is fixed parking land reduces the amount available for central residences and cbd production the model characterizes optimal resource allocation from the perspective of a social planner the planning solution can be decentralized which requires employee rather than employer paid parking congestion tolls and a tax subsidy to offset the road capacity deficit surplus the analysis then considers the effect of switching to employer paid parking with the burden of parking costs shifting from road users to employers thus reducing the wage for all workers this switch inefficiently increases road usage and capacity investment while spurring an inefficient increase in suburbanization

a note on third degree price discrimination with interdependent demands by incorporating symmetric interdependency into linear demands this note shows that monopolistic third degree price discrimination can improve social welfare even if total output remains the same a result that counters one of the main results presented in layson this journal 1998 it is also shown that this positive change in social welfare benefits the monopoly side but that consumers surplus decreases as a whole

market opening under third degree price discrimination there are frequently regulatory and antitrust pressures for firms to cease price discrimination and practice uniform pricing such pressures however generally have negative welfare consequences when they lead to weaker markets not being served this paper derives conditions that determine when price discrimination will induce service to a market market opening that would not be served under a regime of price uniformity the factors that favor market opening under price discrimination are a large market share for the strong market profit margins in the two markets that are far apart and concave rather than convex demand curves copyright 1994 by blackwell publishing ltd

comment on m bruno theoretical developments in the light of macroeconomic policy and empirical research the paper by michael bruno is a very interesting and thought provoking survey of the key new likely desirable developments in macroeconomics as seen by a distinguished economist and policymaker i like and agree with most of bruno s arguments and assessments so all i will do is add three further reflections on points in his paper this is a comment in a volume dealing with no less than the development of macroeconomics therefore i have chosen to discuss grand subjects where all i can do is outline the problems and leave the answers to the reader let me begin with bruno s comments on the re emergence of the pricewage spiral in economic theory the importance of the cola the importance of external price rises etc broadly speaking these remarks deal with the importance of institutions for the dynamics of prices and wages i think these remarks are part of a complex something we all should have faced long ago maybe we academic economists have been led astray by analytical convenience into almost universal acceptance of a belief that we should never have accepted without solid empirical support even if it

income class modal choice and urban spatial structure abstract this paper analyzes the impacts of urban transportation system changes and income changes on the welfare of people and on the urban spatial structure in a setting where the income level differs between two groups and two transportation modes compete with each other in a city it is demonstrated that an improvement in some transport facility will not necessarily increase the welfare level of every household and at times decreases the welfare of some households it also is argued that under particular situations an improvement in a particular transport mode may produce a contraction in the city size rather than an expansion similarly an increase in income of one group might have an adverse effect on the welfare of another income group as a result of competition in the land market

third degree price discrimination in linear demand markets effects on number of markets served and social welfare author affiliation victor kaftal department of mathematical sciences 839 c old chemistry building university of cincinnati cincinnati oh 45221 usa victor kaftal uc edudebashis pal department of economics 1204 crosley tower university of cincinnati cincinnati oh 45221 debashis pal uc edu corresponding author acknowledgment we are grateful to rick harbaugh laura razzolini david sappington and two anonymous reviewers debashis pal is also grateful to taft research center for financial support 1 introductiondoes monopolistic third degree price discrimination reduce social welfare the question has continued to intrigue economists and policy makers for more than half a century the seminal work of robinson 1933 shows that if a monopolist with a constant marginal cost sells in two distinct and independent markets having linear demands then welfare falls with third degree price discrimination almost half a century later schmalensee 1981 reexamines robinson s result and demonstrates that for any number of markets with linear demands third degree price discrimination lowers welfare schmalensee 1981 also establishes more generally that price discrimination increases welfare only if it increases aggregate output subsequently using ingenious duality approaches varian 1985 and schwartz 1990 generalize the results for correlated demands and nonlinear marginal costs 1it is therefore well known that for linear market demands and constant marginal costs monopolistic third degree price discrimination indeed lowers welfare it is important to note however that the welfare reducing effect of third degree price discrimination is derived under a crucial assumption it is assumed that if the monopolist is forced to charge the same price in all markets uniform pricing the monopolist would sell a positive quantity in each market in a recent article cowan 2007 considers various forms of nonlinear demands and presents the necessary and sufficient and or sufficient conditions for price discrimination to reduce welfare cowan 2007 however also assumes that all markets are served under uniform pricing yet when this assumption does not hold the welfare effects of monopolistic third degree price discrimination turn out to be significantly more intricate observe that when all markets are not served under uniform pricing price discrimination may increase welfare because price discrimination may serve markets that would not be served under uniform pricing thus relative to uniform pricing price discrimination has two countervailing effects on welfare aggregate welfare goes down in those markets that are originally served under uniform pricing whereas welfare goes up in those markets that are not served under uniform pricing therefore the additional welfare from the new markets under price discrimination may offset any loss of welfare in the markets that are originally served under uniform pricing the point is strongly emphasized in schmalensee s 1981 seminal work in the context of prescription drugs an identical sentiment is recently echoed in varian 2000 in the context of two markets the possibility of price discrimination opening up new markets is first analyzed graphically by battalio and ekelund 1972 layson 1994 also considers two markets but includes nonlinear demands and presents conditions for opening of new markets based on endogenous features such as elasticities in the context of patent policy opening of new markets by price discrimination is explicitly incorporated by hausman and mackie mason 1988 using two markets they show that price discrimination by a patent holder is socially desirable in many cases because it allows the patent holder to open new markets there is a related literature in spatial economics beginning with greenhut and ohta 1972 and holahan 1975 that deals with spatial price discrimination and market opening with linear demand

are perceptions of inflation rational some evidence for sweden this survey paper argues that walrasian markets and monetary exchan ge are alternative not complementary arrangements for coordinating economic activity that if one realizes this many informational anomalies and price rigidities that appear irrational in a walrasia n context can be understood as the outcome of maximizing behavior in a monetary economy and that the precautionary approach to modelin g the demand for money takes on a particular importance in this way of looking at things empirical evidence on the demand for money is cite d in support of this point of view which tends to reinstate the quantity of money as an important economic variable in contrast to the new classical vision of the economy whi ch downgrades money s importance this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

heterogeneity learning and information stickiness in inflation expectations in this paper we propose novel techniques for the empirical analysis of adaptive learning and sticky information in inflation expectations these methodologies are applied to the distribution of households inflation expectations collected by the university of michigan survey research center to account for the evolution of the cross section of inflation forecasts over time and measure the degree of heterogeneity in private agents forecasts we explore time series of percentiles from the empirical distribution our results show that heterogeneity is pervasive in the process of inflation expectation formation we identify three regions of the distribution that correspond to different underlying mechanisms of expectation formation a static or highly autoregressive region on the left hand side of the median a nearly rational region around the median and a fraction of forecasts on the right hand side of the median formed in accordance with adaptive learning and sticky information

frequency bias in consumers perceptions of inflation an experimental study we investigate whether the perception of economy wide inflation is affected by the frequency with which various goods prices are observed we provide novel experimental evidence that consumers perceptions of aggregate inflation are systematically biased toward the perceived inflation rates of the frequently purchased items this frequency bias may affect consumers consumption and investment decisions and thus have important macroeconomic consequences it may also explain why consumers typically over estimate inflation in surveys during periods where frequently purchased non durable goods are inflating faster than durables