What Price Drug Use? The Contribution of Economics to an Evidence‐Based Drugs Policy

Abstract.  This paper presents a review of the recent economics literature in the area of illicit drug use. Particular attention is paid to the economics of addiction and the rational addiction model, the welfare economics framework for analysing the social costs of drug use, and the attempts that have been made by economists to evaluate recent or proposed policy interventions. A dominant theme in this review is the problem of poor data availability. This is particularly true when it comes to implementing the Rational Addiction model, but it is also apparent in the literature on estimating the costs of illicit drug use to society as a whole. One of the main conclusions of this review is that until recently public policy has not been particularly influenced by research carried out by economists. It is not clear whether this is because economists have had to grapple with inadequate data, and hence their conclusions are couched in uncertainty, or whether it is because drugs researchers have assumed a very limited role for economists in their analysis.     

Tiebout's tale in spatial economies: Entrepreneurship, self-selection, and efficiency

This paper establishes the existence and efficiency of equilibrium in a local public goods economy with spatial structures by formalizing Hamilton's [Hamilton, B.W., 1975. Zoning and property taxation in a system of local governments Urban Studies 12, 205–211] elaboration of Tiebout's [Tiebout, C., 1956. A pure theory of local public expenditures. Journal of Political Economy 64, 416–424] tale. We use a well-known equilibrium concept from Rothschild and Stiglitz [Rothschild, M., Stiglitz, J.E., 1976. Equilibrium in competitive insurance markets: an essay on the economics of imperfect information. Quarterly Journal of Economics 40, 629–649] in a market with asymmetric information, and show that Hamilton's zoning policy plays an essential role in proving the existence and efficiency of equilibrium. We use an idealized large economy following Ellickson, Grodal, Scotchmer and Zame [Ellickson, B., Grodal, B., Scotchmer, S., Zame, W.R., 1999. Clubs and the market, Econometrica 67, 1185–1217] and Allouch, Conley and Wooders [Allouch, N., Conley, J.P., Wooders, M.H., The Tiebout Hypothesis: On the Existence of Pareto Efficient Competitive Equilibria, (2004), mimeograph]. Our theorem is directly applicable to the existence and efficiency of a discrete spatial approximation of mono- or multi-centric city equilibria in an urban economy with commuting time costs, even if we allow the existence of multiple qualities of (collective) residences, when externalities due to traffic congestion are not present.     

Constrained inefficiency in GEI: A geometric argument

In this paper we use global analysis to study the welfare properties of general equilibrium economies with incomplete markets (GEI). Our main result is to show that constrained Pareto optimal equilibria are contained in a submanifold of the equilibrium set. This result is explicitly derived for economies with real assets and fixed aggregate resources, of which real numéraire assets are a special case. As a by product of our analysis, we propose an original global parametrization of the equilibrium set that generalizes to incomplete markets the classical one, first, proposed by Lange [Lange, O., 1942. The foundations of welfare economics. Econometrica 10, 215–228].     

Progressive Taxes and the Labour Market: Is the Trade–off Between Equality and Efficiency Inevitable?

Does an income tax harm economic efficiency more the more progressive it is? Public economics provides a strong case for a definite ‘yes’. But at least three forces may pull in the other direction. First, low–wage workers may on average have more elastic labour supply schedules than high–wage workers, in which case progressive taxes contribute to a more efficient allocation of the total tax burden. Second, in non–competitive labour markets, progressive taxes may encourage wage moderation, and hence reduce the equilibrium level of unemployment. And third, if wage setters have egalitarian objectives, progressive taxes may reduce the need for redistribution in pre–tax wages, and hence increase the demand for low–skilled workers. This paper surveys the theoretical, as well as the empirical literature about labour supply, taxes and wage setting. We conclude that in a second best world, the trade–off between equality and efficiency is not always inevitable.     

Game contingent claims in complete and incomplete markets

A game contingent claim is a contract which enables both the buyer and the seller to terminate it before maturity. For complete markets Kifer [Finance and Stochastics 4 (2000) 443–463] shows a connection to a (zero-sum) Dynkin game whose value is the unique no-arbitrage price of the claim. But, for incomplete markets one needs a more general approach. We interpret the contract as a generalized non-zero-sum stopping game. For the complete case this leads to the same results as in Kifer [Finance and Stochastics 4 (2000) 443–463]. For the general case we show the existence of an equilibrium point under the condition that both the seller and the buyer have an exponential utility function. For other utility functions such a point need not exist in the context of incomplete markets.     

The initial value problem for the trade cycle in euclidian space

[Ten Raa, 1984] has shown how arithmetics ideas carry over to distributions over space and can be used to solve open, static spatial problems such as the determination of urban equilibrium. This article extends the approach to dynamic spatial economics by tracing spatial distributions through time. It is shown that the basic ideas of ordinary differential equations carry over to the present context, provided that ‘functions’ are spatially distributed valued. The consequent differential equations for the distributions are solved. [Puu, 1982] spatial trade cycle model falls out as a special case and its associated initial value problem can now be completely solved.     

关于城市经济学学科建设的几点看法

我国城市经济学要走出低谷,需在以下几个方面有所突破:在学科概念和特征方面,要突出城市特色和经济学的分析方法;在学科研究思路和内容方面,应明确应用主体,保持务实精神,以城市问题为导向,从案例研究入手,强化内容的逻辑性和实用性;在学科发展的动力方面,需刺激城市政府和社会的需求,以实践性的课题和学科群体的合作攻关带动学科发展;在学科的建设方面应加强中国特色.     

Existence of an equilibrium for infinite horizon economies with and without complete information

This work proves the existence of an equilibrium for an infinite horizon economy where trade takes place sequentially over time. There exist two types of agents: the first correctly anticipates all future contingent endogenous variables with complete information as in Radner [Radner, R. (1972). Existence of equilibrium of plans, prices and price expectations in a sequence of markets. Econometrica, 289–303] and the second has exogenous expectations about the future environment as in Grandmont [Grandmont, J. M. (1977). Temporary general equilibrium theory. Econometrica, 535–572] and information based on the current and past aggregate variables including those which are private knowledge. Agents with exogenous expectations may have inconsistent optimal plans but have predictive beliefs in the context of Blackwell and Dubbins [Blackwell, D., Dubins, L. (1962). Merging of opinions with increasing information. The Annals of Mathematical Statistics, 882–886] with probability transition rules based on all observed variables. We provide examples of this framework applied to models of differential information and environments exhibiting results of market selection and convergence of an equilibrium. The existence result can be used to conclude that, by adding the continuity assumption on the probability transition rules, we obtain the existence of an equilibrium for some models of differential information and incomplete markets.     

Drivers of optimal prices in two-sided markets: the state of the art

In two-sided markets, a platform has two groups of customers and enables their interactions. Demand on one market side depends on demand on the other; therefore, when platforms set prices, they must consider this interdependency and set prices on both sides simultaneously. By surveying the vast theoretical marketing and economics literature, this article provides a clear and systematic overview of profit-maximizing pricing in two-sided markets. It identifies and structures the various drivers of those optimal prices. Using this framework, it summarizes the findings from prior research and offers an assessment of the state of the art with regard to drivers of optimal prices and their impacts on a platform’s price setting. This improves understanding of both the principles of two-sided markets and their optimal pricing. Finally, this state of the art paper suggests some directions for further research.     

When haste makes sense: Cracking down on street markets for illicit drugs

This paper presents an analytical approach to the tactical question: ‘What level of enforcement over time allows one to eliminate a street market for illicit drugs while expanding the least possible total effort?’ The analysis is done in the context of Caulkins' model [6] which predicts the rate of change of dealers as a function of enforcement level and several market parameters. Our analysis suggests that the simple strategy of using the maximum available enforcement intensity until the market has been eliminated minimizes the total enforcement effort required.     

On the relationship between product substitutability and tacit collusion

This paper examines the effect of increased product substitutability on quantity‐setting firms’ ability to sustain tacit collusion in a market. It uses a general demand function and the trigger strategy of Friedman (Friedman JW. 1971. A non‐cooperative equilibrium for supergames. Review of Economic Studies 38: 1–12) to show that while increased product substitutability hinders sustainability of tacit collusion in the case of linear and concave demand functions, it may either hinder or facilitate firms’ ability to sustain tacit collusion in the case of convex demand functions. Thus, this paper adds to the growing view that one must use a case‐by‐case analysis in judging whether firms in more homogenous product markets find it easier or harder to tacitly collude. Copyright © 1999 John Wiley & Sons, Ltd.     

The New Economic Sociology of Prices: An Analysis Inspired by the Austrian School of Economics

The new economic sociology includes some reference studies on the sociology of prices. They have not until now been studied by economists, and this article attempts to fill that gap by offering a detailed analysis, inspired by the Austrian School of Economics, of their object and approach. We first show that, from a theoretical point of view, the explanations advanced by these sociologists are based implicitly on basic models of economics, such as the “law of supply and demand” and the “law of costs,” and that they cannot therefore replace economic explanations of prices. Secondly, from a methodological point of view, these studies are based on field surveys that provide concrete information on certain markets but they lose sight of an aspect that is fundamental to the Austrian School, the interdependence of prices in different markets. And when this interdependence is taken into account, namely, in the case of the relationship between cost and price, the causal link postulated by sociologists goes from cost to price when Austrian economists argue that it goes in the opposite direction.     

中国财经类高校EMBA教学国际化现状及发展策略研究——以上海财经大学EMBA为例

本文以中国财经类高校EMBA项目的教学国际化为研究内容,通过国内外财经类高校以及国内财经类高校与综合性高校EMBA项目的相关比较分析（国外财经类院校以伦敦政治经济学院为例）,探讨中国财经类高校EMBA项目在教学国际化领域的发展状况、困境及可持续发展策略等问题.并以上海财经大学EMBA实践为例,为中国财经类高校EMBA项目在教学国际化领域的健康发展提供有益借鉴.     

Can street markets be a sustainable strategy to mitigate food insecurity in emerging countries? Insights from a competitive facility location model

This research explores the sustainability of street markets to grant access to fruits and vegetables (F&Vs) to underserved communities in emerging economies. Specifically, this paper studies the impact of adding new street markets to satisfy the demand of end consumers in a real case. To do so, we developed a novel non-linear mathematical model to establish the location and number of street markets. This model, a variant of the competitive facility location problem, includes specific features of street markets, such as their itinerant nature and the dynamic shopping behavior of customers. To feed the model, we collected data from both primary and secondary sources: we surveyed the main competitors of the street markets (i.e., small, family-owned retailers or nanostores) to investigate their market share and purchasing habits. The problem was solved with an ad-hoc iterative method. The results suggest that street markets can provide better access to F&Vs to food-insecure households to some extent. Still, their management, operational complexity, and financial sustainability may limit their applicability in the long term.     

Assessing the potential demand for electric cars

An ordered logit specification for use on ranked individual data is used to analyze survey data on potential consumer demand for electric cars. In many situations in economics and marketing we would like to be able to forecast consumer demands for goods which have not yet appeared in actual markets. By defining goods as a bundle of underlying attributes, we can use discrete choice models to estimate consumer evaluations. Then new good demand is forecast by use of the estimated coefficients to compare consumer evaluation of the new good to existing choices. When ranked individual data are available, we can estimate separate coefficients for each individual rather than assuming identical coefficients as is usual with logit models. Our results indicate considerable dispersion in individual coefficients. This finding can have important implications for new product analysis.     

Fun with matched firm-employee data: Progress and road maps

With a worldwide burgeoning development of matched firm-employee data now underway, it is worthwhile to examine the possibilities for using these data. This essay discusses a variety of areas in which some progress has been made and presents ideas for future research in a number of others, including the study of labor demand, search and unemployment, wage determination and time use. It concludes that such data could be as important for labor economics, and for generating new knowledge about labor markets, as have been longitudinal household datasets, but with existing restrictions on access this kind of success will be difficult to achieve.     

Are regulations the answer for emerging stock markets? Evidence from the Czech Republic and Poland

Does the emergence of a stock market require a well-developed legal and/or regulatory system? Although historical work by Neal and Davis [Neal, L., & Davis, L. (2005). The evolution of the rules and regulations of the first emerging markets: The London, New York, and Paris stock exchanges, 1792–1914. Quarterly Review of Economics and Finance, 45, 296–311] and Stringham [Stringham, E. (2003). The extralegal development of securities trading in seventeenth century Amsterdam. Quarterly Review of Economics and Finance, 43, 321–344] suggests that securities markets have successfully developed with little government oversight, numerous authors [including Black, B. (2001). The legal and institutional preconditions for strong securities markets. University of California Law Angeles Law Review, 48, 781–855; Coffee, J. (1999). Privatization and corporate governance: The lessons from securities market failure. Journal of Corporation Law, 25, 1–39; Frye, T. (2000). Brokers and bureaucrats: Building market institutions in Russia. Ann Arbor: University of Michigan Press; Glaeser, E., Johnson, S., & Shleifer, A. (2001). Coase versus the Coasians. Quarterly Journal of Economics, 116, 853–899; Mlčoch, L. (2000). Restructuring of property rights: An institutional view. In L. Mlčoch et al. (Eds.), Economic and Social Changes in Czech Society After 1989. Prague: The Karolinum Press; Pistor, K. (2001). Law as a determinant for equity market development – the experience of transition economies. In Peter Murrell (Ed.), The Value of Law in Transition Economies (pp. 249–287). Ann Arbor: Michigan University Press; Stiglitz, J. (1999). Whither reform. Ten years of the transition. Keynote Address, Annual Bank Conference on Development Economics, Washington, DC, April 28–30, 1999; Zhang, X. (2006). Financial market governance in developing countries: Getting the political underpinnings right. Journal of Developing Societies, 2, 169–196] argue that the Czech Republic and other Eastern European governments need more regulation for their newly created stock markets. They maintain that the Warsaw Stock Exchange, which is seen as more regulated, has outperformed the Prague Stock Exchange which is seen as largely unregulated. Thus increased regulations are a key to increased performance. This article, however, maintains that the evidence from the Czech experience has been misinterpreted. This article provides an in depth case study of the Czech stock market and finds that (a) Czech capital markets have been hindered by government intervention from their beginning, (b) that the evidence on Poland's superior performance is not as strong as suggested, and (c) that Czech regulators seem to be unqualified, lack the proper incentives, and are unlikely to benefit the market. Under these circumstances it appears that Neal and Davis (2005:311) are correct that increased government involvement is unlikely to improve the situation.     

Quantity and price controls by the firm under demand uncertainty and welfare implications

A monopoly facing an uncertain demand can affect its profit distribution through the choice of ex ante controls. This paper compares two modes of behavior - price-setting and quantity-setting - in the context of a mean-variance model. The main results are: (a) With nonlinear cost, the monopoly will not be indifferent between the two modes. In the particular case of quadratic cost, conditions for the dominance of price-setting over quantity-setting behavior are derived. (b) Whereas it is well-known that the risk averse, quantity-setting monopoly will produce less under uncertainty than under certainty (or risk neutrality), the price-setting monopoly increases its expected output when faced by uncertain demand, possibly exceeding even the competitive output under uncertainty. (c) Using expected social surplus as a welfare criterion, price-setting emerges as the welfare-dominant behavior when there is a conflict between the privately and the socially preferred modes. (d) Finally, there exist conditions where price-setting monopolies welfare-dominate a competitive industry facing the same random demand.     

Kernel estimation for disequilibrium models for floorspace efficiency in retailing

Conclusions In this paper we have proposed new techniques for simplifying the estimation of disequilibrium models by avoiding constrained maximum likelihood methods (which cannot avoid numerous theoretical and practical difficulties mentioned above) including an unrealistic assumption of the independence of errors in demand and supply system of equations. In the proposed first stage, one estimates the relative magnitude of the residuals from the demand and supply equations nonparametrically, even though they suffer from omitted variables bias, because the coefficient of the omitted variable is known to be the same in both equations. The reason for using nonparametric methods is that they do not depend on parametric functional forms of biased (bent inward) demand and supply equations. The first stage compares the absolute values of residuals from conditional expectations in order to classify the data points as belonging to the demand or the supply curve. We estimate the economically meaningful scale elasticity and distribution parameters at the second stage from classified (separated) data.We extend nonparametric kernel estimation to the r = 4 case to improve the speed of convergence, as predicted by Singh's [1981] theory. In the first stage, r = 4 results give generally improved R² and ¦t¦ values in our study of the Dutch data—used by many authors concerned with the estimation of floorspace productivity. We find that one can obtain reasonable results by our approximate but simpler two stage methods. Detailed results are reported for four types of Dutch retail establishments. More research is needed to gain further experience and to extend the methodology to other disequilibrium models and other productivity estimation problems.This paper was processed by W. Eichhorn.     

Theorems on the core of an economy with infinitely many commodities and consumers

It is known that the classical theorems of Grodal [Grodal, B., 1972. A second remark on the core of an atomless economy. Econometrica 40, 581–583] and Schmeidler [Schmeidler, D., 1972. A remark on the core of an atomless economy. Econometrica 40, 579–580] on the veto power of small coalitions in finite dimensional, atomless economies can be extended (with some minor modifications) to include the case of countably many commodities. This paper presents a further extension of these results to include the case of uncountably many commodities. We also extend Vind’s [Vind, K., 1972. A third remark on the core of an atomless economy. Econometrica 40, 585–586] classical theorem on the veto power of big coalitions in finite dimensional, atomless economies to include the case of an arbitrary number of commodities. In another result, we show that in the coalitional economy defined by an atomless individualistic model, core–Walras equivalence holds even if the commodity space is non-separable. The above-mentioned results are also valid for a differential information economy with a finite state space. We also extend Kannai’s [Kannai, Y., 1970. Continuity properties of the core of a market. Econometrica 38, 791–815] theorem on the continuity of the core of a finite dimensional, large economy to include the case of an arbitrary number of commodities. All of our results are applications of a lemma, that we prove here, about the set of aggregate alternatives available to a coalition. Throughout the paper, the commodity space is assumed to be an ordered Banach space which has an interior point in its positive cone.