Competition between private and public schools: testing stratification and pricing predictions

When there are peer effects in education, private schools have an incentive to vary tuition to attract relatively able students. Epple and Romano [American Economic Review 88(1) (1998) 33] develop a general equilibrium model characterizing equilibrium pricing and student selection into schools when peer effects are present. The model predicts that competition will lead private schools to give tuition discounts to more able students, and that this will give rise to an equilibrium exhibiting stratification by income and ability between the public and private sectors and to a hierarchy of schools within the private sector. The model also yields a variety of comparative-static predictions. The predictions of the model are tested in this paper using a unique data set assembled by Figlio and Stone [Research in Labor Economics (1999) 115]. Tests of equilibrium predictions of the model reveal that: The propensity to attend private school increases with both income and ability, and, among private schools, the propensity to attend the highest-tuition schools rises with both income and ability. Within private schools, tuition declines with student ability, with a substantial number of even high-income households paying little or no tuition. The correlation between income and ability is greater in public than private schools. Tests of comparative static predictions of the model reveal that: Both income and ability become stronger predictors of private school attendance as public school expenditure falls. Income becomes increasingly important in determining placement in the private school hierarchy as public school expenditure falls. Discounts to ability in the lowest-quality private school decline as public school expenditure rises while discounts to ability in the highest-quality private school are little affected by changes in public school expenditure. Expenditure in private schools rises as expenditure in public schools increases. These empirical results are consistent with the predictions of the theoretical model.     

The payment mechanisms and liquidity effects

A general equilibrium model with multiple means of payment in segmented markets is constructed to study the liquidity effects. It is shown that, under certain conditions, stored value – money issued by private entrepreneurs weakens, but does not completely eliminate the liquidity effects that exist when stored value is prohibited. The Friedman rule can be optimal in the regime with floating stored value. The impact of monetary policy now depends not only on the monetary intervention of the central bank, but also on the quantity of the outstanding private money and its velocity.     

Core-stable rings in auctions with independent private values

We propose a semi-cooperative game theoretic approach to check whether a given coalition is stable in a Bayesian game with independent private values. The ex ante expected utilities of coalitions, at an incentive compatible (noncooperative) coalitional equilibrium, describe a (cooperative) partition form game. A coalition is core-stable if the core of a suitable characteristic function, derived from the partition form game, is not empty. As an application, we study collusion in auctions in which the bidders? final utility possibly depends on the winner?s identity. We show that such direct externalities offer a possible explanation for cartels? structures (not) observed in practice.     

A note on dynamic monopoly pricing under consumption externalities

We analyze dynamic monopoly pricing under consumption externalities, focusing on pricing under negative externalities. We also attempt to generalize models in the previous literature, which encompass both negative and positive externalities, by incorporating a consumer’s discount factor for past sales as a parameter. Analyzing our model reveals oscillation as the optimal price path in the presence of negative externalities.     

Inflation-targeting rules: History-dependent or forward-looking?

This note discusses the inflation-targeting strategy if price setting gives rise to a hybrid Phillips curve. The strategy is inverted relative to private sector pricing behavior: if private sector price setting is backward-looking, policy should be forward-looking, and vice versa.     

Nonlinear Pricing in General Equilibrium Models with Joint Production

This paper considers general equilibrium models of public utilities which produce either public goods or private goods. In the models, cases of increasing returns are not a priori excluded. The products of the public utilities and their costs are allocated to the consumers according to a rule that is dependent on information communicated to the public utilities. We show that if the public utilities follow a nonlinear pricing rule, the equilibrium allocations are always Pareto-optimal. Moreover, the message space is of finite dimensions.
JEL Classification Numbers: D51, D60, H41, H42.     

Estimating the environmental costs of electricity: An overview and review of the issues

This paper provides an overview of the issues associated with environmental costing and the specific questions raised by the effort to measure the environmental costs of electricity. It identifies the key methodology questions identified by these studies and discusses their relevance for more general applications of methods to estimate the monetary losses due to environmental externalities.     

Endogenous timing in private and mixed duopolies with emission taxes

This paper examines an endogenous timing game in product differentiated duopolies under price competition when emission tax is imposed on environmental externality. We show that a simultaneous-move (sequential-move) outcome can be an equilibrium outcome in a private duopoly under significant (insignificant) environmental externality, but this result can be reversed in a mixed duopoly. We also show that when environmental externalities are significant, public leadership yields greater welfare than private leadership, and that public leadership is more robust than private leadership as an equilibrium outcome. Finally, we find that privatization can result in a public leader becoming a private leader, but this worsens welfare.     

Agri-environmental policies in the EU and United States: A comparison

Agri-environmental policies (AEPs) in the United States and the European Union are examples of payments for environmental services that pay farmers to reduce the negative externalities of agricultural production, while serving as a means to transfer public funds to farmers. We show that despite similar origins, AEPs in the two regions differ both in their specific objectives and in their implementation. For example, AEPs in most member states of the EU-15 have the additional objective of using agriculture as a driver for rural development. This objective is achieved by compensating farmers for the private delivery of positive public goods, such as attractive landscapes, produced by agriculture. The rationale is market failure, and there is empirical evidence that Europeans are willing to pay for such positive externalities. No comparable provision exists in U.S. policy. By contrast, U.S. AEPs focus almost entirely on reducing agriculture's negative externalities, such as soil erosion. Second, we find that U.S. programs are more targeted than their EU counterparts, and take opportunity cost into account. The EU programs, on the other hand, address a wider range of externalities, and are focused more on the paying for a particular farming process than reducing specific negative externalities. The EU takes a broader view of AEPs than does the United States, both in terms of type of activity that can be funded, and by using less targeting by land characteristics, and so the European program could be more easily used as a mechanism for transferring income to producers. Despite this, we find evidence that many of the amenities targeted by the programs are demanded by the population.     

PLATFORM PRICING IN MIXED TWO‐SIDED MARKETS

When a consumer can appear on both sides of a two‐sided market, such as a user who both buys and sells on eBay, the platform may want to bundle the services it provides to two sides. I develop a general model for such “mixed” two‐sided markets and show that a monopolist platform's incentive to bundle and its optimal pricing strategy are determined by simple formulas using familiar price elasticities of demand, which embody the bundling effect, and price‐cost margins adjusted for network externalities, which incorporate “two‐sidedness.” The optimal pricing rule in such markets generalizes the familiar Lerner formula.     

Spillover effects and the science base of innovations reconsidered: an empirical approach

When quantifying spillover effects among technologies and between science and technology one faces the problem that clear-cut measurement procedures are difficult to define and to validate. The well-known approach by indexing certain outputs (patent documents) grasps only parts of the complex and feedback innovation-oriented processes. However, recently, new promising lines of research for understanding technological externalities have been embarked upon. New measurements of the science-technology-innovation interface are presented from three different aspects. First, the overall properties of technological spillover and, second, of science involvement in innovations are presented on a world-wide scale. The third main section of the results provides a panoramic view of scientific involvement in technology in terms of a country comparison. The contribution attempts to add quantitative evidence for an evolutionary understanding of the externalities between public science, latent public technology and private innovation.     

WELFARE‐MAXIMISING PRICING IN A MACROECONOMIC MODEL WITH IMPERFECT COMPETITION AND CONSUMPTION EXTERNALITIES

This paper develops a simple macroeconomic model with imperfect competition and consumption externalities, and uses it to examine whether the marginal cost pricing rule in the partial equilibrium framework can apply to the general equilibrium framework. It is shown that, for welfare to be maximised, average revenue should be set equal to marginal cost if consumption externalities are either absent or positive. However, for welfare to be maximised, average revenue should be set higher than marginal cost in the presence of negative consumption externalities.     

Regulation of common property resources under private information about resource externalities

Optimal marginal investment incentives and optimal entry regulations are developed for a case where heterogeneous firms exploit a common property natural resource. The government’s objectives are to correct for resource externalities and to tax away the resource rent. Both individual output and efficiency levels are subject to private information, i.e. it is a model with multi-agency, externalities, and countervailing incentives. There are asymmetric information about the net revenue of the firm and the size of the resource externalities that the firm inflicts on the other firms in the industry. The latter implies that external effects are present both in the firms’ net incomes and in the information rents.     

Innovation,externalities, and the state: a synergetic approach

A politicoeconomic model dealing with the interaction of private innovation and public regulation is presented. Causes and effects of this interdependence are investigated with special regard to the externalities which accompany innovations and make them into a partly public good. Our main hypothesis is that the collective character of inventive activity gives rise to synergetic effects. This hypothesis is supported by a microfoundation based on a nonlinear Markov process. Furthermore, the consequences of such synergetic innovation processes are examined: persistent disequilibrium, multiple equilibria, lock-in, path dependence, and chaos. Finally, some policy implications are derived concerning the effects of ageneral public promotion of innovations and of aselective industrial policy.     

Does Precommitment Raise Growth? The Dynamics of Growth and Fiscal Policy

We develop an endogenous growth model driven by externalities from both private and public capital. The government levies distortionary taxation to finance a publicly provided consumption good and public infrastructure. Firms face adjustment costs. We compare the optimal and time-consistent policies in a linear-quadratic approximation of the model. Although the time-consistent equilibrium is sub-optimal in terms of ex-ante intertemporal welfare, it yields higher long-run growth and welfare, through an accumulation of assets by the state and a cut in government consumption.     

Forms of Explanation; Rethinking the Questions in Social Theory

The aim of this study is to investigate whether the so-called crowding in effects of complementarity or the crowding out effects of substitution occurred between public investment and private investment in Brazil from 1982 to 2013. This will be carried out through a theoretical debate on the investment general dynamics and an econometric analysis of vector error correction (VEC) model for the Brazilian case. The trajectory of the Brazilian economy and the empirical results show the presence of crowding in between public and private investments in the period, in accordance with the Post-Keynesian approaches. The crowding in is justified by the effects on demand via the Keynesian multiplier and via the expansion of the domestic market (particularly provided by infrastructure) and by the effects on the supply of private capital through the reduction of production costs, the increase in productivity, and through structural changes facilitated by public policy. Complementarity with regard to both the investments of the public administration and of federal government-owned/controlled enterprises is confirmed. Furthermore, a significant causal relationship is observed between public investment and the output of industrial manufacturing, which, from the structuralist perspective, is a sector that is considered a driving force of the economy. The special contributions of this paper are its time series for public investment and the variety of models that show crowding in between public and private investment.     

PRICING IN PUBLIC ENTERPRISES

The pricing in private and public enterprise differs primarily on the supply side. In the long run, private enterprises must cover total costs and provide an adequate return necessary to attract venture capital. In contrast, extra-commercial considerations may influence pricing in public enterprises. They may incur losses in the public interest under explicit directives from the government. A number of theories of pricing in public enterprises have been put forward. Most important of these are: (1) marginal cost of production theory; (2) no profit, no loss theory; (3) average cost of production theory; (4) theory of making profits. All these theories suffer from a number of weaknesses and none of them taken individually is a satisfactory guide for determining the prices of the products of public enterprises. There however exists a strong case for public enterprises, particularly in developing countries, to earn reasonable profits in pricing their products. Public enterprises fostered on public revenues must yield surpluses which can be used either for their own expansion or for financing the general development plans of the country. The profits which a public enterprise can earn are an important indication of the justification for the use of economic resources in that economic activity. Upholding the test of profit not only lessens possibilities of the investment decisions being subjected to political pressures but also safeguards against inefficiency in management. A policy of profits is essential for attaining the goal of building a socialist society. The amount of profits expected from different enterprises, however, cannot be uniform because of diverse objectives sought in the setting up of public enterprises, degree of essentiality of their products, nature of the services provided by them, size of their market, class of their consumers and their paying capacity, conditions of market under which they operate, their role in stimulating growth and social benefits conferred by them.     

Instrument Choice and Motivation: Evidence from a Climate Change Experiment

Are prices or quantities the best regulatory instrument to align private actions with public interests in the presence of externalities? We add another dimension to this ongoing debate by experimentally analyzing the interaction between instrument choice and intrinsic motivation of regulated agents. The response of subjects facing a trade-off between real CO₂ emissions and private monetary payoffs to both a price and a quantity instrument are tested. We find evidence that taxes crowd out intrinsic motivation while emission standards are neutral. Crowding is short term persistent and not well explained by established cognitive theories of motivational crowding.     

A model of techno-economic evaluation for eco-industrial park project

An eco-industrial park or estate is a community of manufactaring and service businesses located together on a common property. The goat of ElP is to create a win-win harmonious development aspect of ecooomic development and environmental protection. This paper emphasizes that the external .effect of an EIP is its main characteristic of technoeconomic evaluation for eco-industrial park project. From the view of the property, rights, the EIP＇s product is typicalty public-private. The government should take some inca.rares for the quantitative analysis on ecological positive externalities of the enterprises in EIP, and also should adopt Coase＇s Theorem, which supports that the market transaction is the best way to deal with positive externalities （external economics or diseconoraics）, or Pigou＇s Theorem, which holds that the government anti-positive externalities programs are the best way to cope with positive externalities, to internalize the EIP＇s external effects, which is also a fundamental tool to encourage investors to actively invest in EIP projects, Furthermore. this paper thinks that the EIP ＇s income should be equal to the income of staple products of the private property, and that of its by-products of the public property. According to this principle, this paper has put forward three major indicators, net present value （NPV）, internal rate of renan （IRR）, and investment repayment period （IRP）, which are also extensively used indicators in ardinary project techno-economic evaluation model to evaluate EIP technoeconomic effects. Theoretically, the indicatory not only can be used in EIP project evaluation, but also can provide a quantitative measure toot for the government to support EIP＇s construction to the maximum. In the end. a case is analyzed.     

The real puzzle of blackmail: An informational approach

The “puzzle” of blackmail is that threats to reveal private information that would be harmful to someone in exchange for money are illegal, but revelation is not. The resolution is that concealment of information about product quality impedes the efficient operation of markets, whereas revelation promotes it. The real puzzle is why possessors are not naturally inclined to sell to uninformed parties, who value the information more than would-be blackmail victims. The answer has to do with the public good qualities of information, which create an appropriability problem in transactions with uninformed parties. The paper also discusses incentives to acquire compromising information.