The worst absolute surplus loss in the problem of commons: random priority versus average cost

A good is produced with increasing marginal cost. A group of agents want at most one unit of that good. The two classic methods that solve this problem are average cost and random priority. In the first method users request a unit ex ante and every agent who gets a unit pay average cost of the number of produced units. Under random priority users are ordered without bias and the mechanism successively offers the units at price equal to marginal cost. We compare these mechanisms by the worst absolute surplus loss and find that random priority unambiguously performs better than average cost for any cost function and any number of agents. Fixing the cost function, we show that the ratio of worst absolute surplus losses will be bounded by positive constants for any number of agents, hence the above advantage of random priority is not very large. I especially thank Herve Moulin for helpful comments and suggestions. I also appreciate the feedback from Justin Leroux and an anonymous referee.     

The price of anarchy of serial, average and incremental cost sharing

We compute the price of anarchy (PoA) of three familiar demand games, i.e., the smallest ratio of the equilibrium to efficient surplus, over all convex preferences quasi-linear in money. For any convex cost, the PoA is at least in the average and serial games, where n is the number of users. It is zero in the incremental game for piecewise linear cost functions. With quadratic costs, the PoA of the serial game is , and for the average and incremental games. This generalizes if the marginal cost is convex or concave, and its elasticity is bounded.      

Counterintuitive number effects in experimental oligopolies

Recent theoretical research on oligopolistic competition suggests that under certain conditions prices increase with the number of competing firms. However, this counterintuitive result is based on comparative-static analyses which neglect the importance of dynamic strategies in naturally-occurring markets. When firms compete repeatedly, supra-competitive prices can become sustainable but this is arguably more difficult when more firms operate in the market. This paper reports the results of laboratory experiments investigating pricing behavior in a setting in which (static) theory predicts the counterintuitive number effect. Under a random matching protocol, which retains much of the one-shot nature of the model, the data corroborates the game-theoretic prediction. Under fixed matching duopolists post substantially higher prices, whereas prices in quadropolies remain very similar. As a result, the predicted effect is no longer observed, and towards the end the reverse effect is observed.

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Electronic Supplementary Material  The online version of this article () contains supplementary material, which is available to authorized users.      

Networks of common property resources

A tragedy of commons appears when the users of a common resource have incentives to exploit it more than the socially efficient level. We analyze the situation when the tragedy of commons is embedded in a network of users and sources. Users play a game of extractions, where they decide how much resource to draw from each source they are connected to. We show that the network structure matters. The exploitation at each source depends on the centrality of the links connecting the source to the users. The equilibrium is unique and we provide a formula which expresses the quantities at an equilibrium as a function of a network centrality measure. Next we characterize the efficient levels of extractions by users and outflows from sources. We provide a graph decomposition which divides the network into regions according to the availability of sources. Then the efficiency problem can be solved region by region.     

Can the share economy cure our macroeconomic woes? Probably not

This paper introduces the major ideas in Martin Weitzman's The Share Economy. It notes that a “share” economy is one in which the marginal cost of labor is less than the average cost of labor; moreover, this condition can be induced by sharing revenues or profits. According to share theory, such contracts will lead firms to create more vacancies and thereby lower the average unemployment rate. Weitzman proposes to induce more share arrangements by giving a tax preference to share-type income.     

The Chamberlin and Stackelberg Duopoly Relation*

The paper investigates and identifies an important relationship between the Chamberlin and Stackelberg duopoly models. Under conditions of symmetry, linear demand and constant costs, the two iso-profit curves identifying the Stackelberg leadership points are shown to be tangent at the Chamberlin point. Under these conditions profit-maximising duopolists are indifferent to being Stackelberg output leaders and coalescing in an equal-shares-joint-monopoly solution. This result is shown to be sensitive to the constant cost and linear assumptions. Under increasing linear marginal costs, the joint monopoly solution is preferred by both sellers to a leader-follower solution.     

Irreversible investment with regime shifts

Under the real options approach to investment under uncertainty, agents formulate optimal policies under the assumption that firms’ growth prospects do not vary over time. This paper proposes and solves a model of investment decisions in which the growth rate and volatility of the decision variable shift between different states at random times. A value-maximizing investment policy is derived such that in each regime the firm's investment policy is optimal and recognizes the possibility of a regime shift. Under this policy, investment is intermittent and increases with marginal q. Moreover, investment typically is very small but, in some states, the capital stock jumps. Implications for marginal q and the user cost of capital are also examined.     

A New Solution to the Random Assignment Problem

A random assignment is ordinally efficient if it is not stochastically dominated with respect to individual preferences over sure objects. Ordinal efficiency implies (is implied by) ex post (ex ante) efficiency. A simple algorithm characterizes ordinally efficient assignments: our solution, probabilistic serial (PS), is a central element within their set. Random priority (RP) orders agents from the uniform distribution, then lets them choose successively their best remaining object. RP is ex post, but not always ordinally, efficient. PS is envy-free, RP is not; RP is strategy-proof, PS is not. Ordinal efficiency, Strategyproofness, and equal treatment of equals are incompatible. Journal of Economic Literature Classification Numbers: C78, D61, D63.     

Decentralization via Federal and Unitary Referenda

This paper studies a model where the power to set policy (a choice of project) may be assigned to central or regional government via either a federal or unitary referendum. The benefit of central provision is an economy of scale, while the cost is political inefficiency. The relationship between federal and unitary referenda is characterized in the asymptotic case as the number of regions becomes large, under the assumption that the median project benefit in any region is a random draw from a fixed distribution, G. Under some symmetry assumptions, the relationship depends only on the shape of G, not on how willingness to pay is distributed within regions. The relationship to Cremer and Palfrey's “principle of aggregation” is established. Asymptotic results on the efficiency of the two referenda are also proved.     

Impact of neutropenic complications on short-term disability in patients with cancer receiving chemotherapy

Abstract

Objectives: The study examined the impact of chemotherapy-induced neutropenic complications (CINC), defined as neutropenia with fever or infection, on short-term disability (STD) among cancer patients receiving chemotherapy.

Methods: The key outcome metrics were average monthly STD days and associated indirect costs. Patients with and without CINC were propensity score (PS) matched. Multivariate regressions were conducted on PS-matched cohorts to estimate the marginal impact of CINC.

Results: A total of 280 patients with CINC were PS-matched to 280 patients without CINC. Compared with matched patients, patients with CINC on average experienced 0.9 more STD day (3.2 vs. 2.3, p=0.046) and $155 more in indirect costs ($549 vs. 394, p=0.050) per month. After multivariate adjustment, patients with CINC experienced 1.0 more STD day (p=0.029), and incurred $200 more in indirect cost (p=0.016) per month.

Conclusions: Patients with CINC experience significantly greater STD leave than patients with no neutropenic complications from cancer chemotherapy. The overall study sample only included patients from large self-insured employers in the US and may not reflect the work loss experience of all employed patients in the US or other countries. Indirect costs associated with absenteeism and presenteeism were not measured.     

Taste-homogeneity of optimal jurisdictions in a Tiebout economy with crowding types and endogenous educational investment choices

We examine a local public goods economy with differentiated crowding. The main innovation is that we assume that the crowding effects of agents are a result of choices that agents make. For example, agents may be crowded (positively or negatively) by the skills that other members of their jurisdiction possess and these skills may be acquired through utility maximizing educational investment choices made in response to equilibrium wages and educational costs. In such an environment, we show that taste-homogeneous jurisdictions are optimal. This contrasts with results for both the standard differentiated crowding model and the crowding types model. We also show that the core and equilibrium are equivalent, and that decentralization is possible through anonymous prices having a structure similar to cost–share equilibrium prices.     

Elements of the institutionalization process of the forest and pasture commons in Romania as particular forms of social economy

In Romania, the study of jointly owned property (dev?lm??ie) has been of great interest for social scientists during the different political regimes of the country. After the fall of the communist regime and after over 50 years of state ownership, the forests and pasture commons (ob?ti and composeorate) returned to be private property of newly established associative forms. This paper aims to identify and define the contemporary Romanian commons by reference to the general characteristics of social economy organizations. In order to achieve this and obtain a clearer view of the place of the commons in Romania's organizational environment, presentation of some elements of the commons’ institutionalization process after the fall of the communist regime is included. The data used for answering these two objectives comes from the analysis of a database comprising 328 questionnaires applied to board members of commons in Romania and various legal documents. The main argument of the paper is that the restitution process that led to the re‐establishment of the Romanian commons from public property to common private property—marked by hardships, conflicts, misunderstandings or faults—deepened the scarce knowledge of the political actors, general public and other stakeholders in regard to these organizations and perpetuated their unclear position in the organizational field.     

Using Non Market Valuation to Inform the Choice Between Permits and Fees in Environmental Regulation

The purpose of this short note is to open an exploration regarding the use of non market valuation to help guide the selection of economically efficient pollution control instruments. As long as non market valuation techniques can correctly estimate the slope of the marginal benefit of abatement curve, this information along with engineering cost estimates of the unit costs or slope of the marginal abatement cost will provide useful information to policy makers in choosing between fees and permits. An illustrative review of the literature suggests that both stated and revealed preference methods have estimated slopes of marginal benefit functions for reducing several pollutants. To investigate the efficiency of permits versus fees, an illustrative review of corresponding marginal abatement costs is also made. For air pollutants affecting visibility, the slope of the marginal benefit curve is far greater than the slope of the marginal abatement costs, suggesting permits as the efficient instrument. For nitrates in groundwater used for drinking, the marginal benefit curve is flatter than the rather steep marginal abatement cost, suggesting fees/taxes would be a more efficient economic instrument. We hope this note stimulates more emphasis in non market valuation on estimating the slope of the marginal benefit function to enhance environmental economists ability to make policy recommendations regarding the choice of pollution instruments for specific pollutants.      

Endogenous cost asymmetry and insufficient entry in the absence of scale economies

The paper by Ghosh and Saha (Econ Theory 30:575–586, 2007) shows that entry can be socially excessive even if there are no scale economies. We show that exogenous cost asymmetry is responsible for this result. In a simple model with R&D investment by the more cost efficient firm, thus creating endogenous cost asymmetry, we show that entry is socially insufficient instead of excessive if the slope of the marginal cost of R&D is not very high.     

Altruistic behavior in a representative dictator experiment

We conduct a representative dictator game in which students and random members of the community choose both what charity to support and how much to donate to the charity. We find systematic differences between the choices of students and community members. Community members are much more likely to write in their own charity, community members donate significantly more ($17), on average, and community members are much more likely (32%) to donate the entire $100 endowment. Based on this evidence, it does not appear that student behavior is very representative in the context of the charitable donations and the dictator game.

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Electronic Supplementary Material  The online version of this article () contains supplementary material, which is available to authorized users.      

The impact of non-severe hypoglycemic events on daytime function and diabetes management among adults with type 1 and type 2 diabetes

Abstract

Objectives:

To describe daytime non-severe hypoglycemic events (NSHEs), assess their impact on patient functioning and diabetes self-management, and examine if these impacts differ by diabetes type or country.

Methods:

Internet survey to adults with diabetes in the US, UK, Germany, and France.

Results:

Of 6756 screened respondents, 2439 reported a daytime NSHE in the past month. NSHEs occurred while active (e.g., running errands) (45.1%), 29.6% while not active (e.g., watching TV), and 23.8% at work. On average, it took half a day to respond and recover from NSHE. Respondents monitored their glucose 5.7 extra times on average over the following week. On the day of event, type 1 respondents tested significantly more often than type 2 (p?<?0.05). Type 2 were less likely to confirm NSHE with glucose test (p?<?0.001). Following NSHE, 12.6% of respondents reduced total insulin by an average of 7.6 units (SD?=?8.3). Total units and days with reduced dosing was significantly less, whilst number of additional glucose tests and time to recover was significantly longer if NSHE occurred at work (p?<?0.001). Type 1 decreased insulin doses more often (p?<?0.001); however, type 2 decreased a greater number of units (p?<?0.01). Compared with other countries, US respondents were more likely to eat a light or full meal and respondents in France took significantly longer than all other countries to recognize (p?<?0.05), respond to (p?<?0.001), and recover from (p?<?0.001) NSHE, used significantly more monitoring tests the day of (p?<?0.05) and over the subsequent week (p?<?0.001), and decreased their normal insulin dose more (p?<?0.001). Limitations of the study include potential recall bias and selection bias.

Conclusions:

NSHEs are associated with a significant impact on patient functioning and diabetes management.     

Contingent valuation of inhaled insulin: a Canadian perspective

Summary

The objective of this study was to assess the preference and willingness-to-pay (WTP) for inhaled insulin from a random sample of general public perspective in Ontario, Canada. This was carried out using a mail survey using the contingent valuation method. Significantly more respondents preferred inhaled insulin (n=114) over subcutaneous insulin (n=6; p<0.001). The mean monthly WTP for inhaled insulin was CAN$68.59 ± 44.65 (95% confidence interval CAN$58.87–78.07), significantly more than the average subcutaneous insulin cost in Ontario of CAN$50. The WTP for inhaled insulin in the diabetic subgroup was CAN$98.52 ± 48.57, which is significantly higher than that of the general public (p<0.001). Multiple regression analysis showed a strong association between respondents’ income and diagnosis of diabetes and their WTP for inhaled insulin (p<0.001). Major influencing factors were convenience and household budget. The results of this study suggest that the general public in Ontario prefer inhaled insulin and are willing to pay significantly more per month than the current cost of subcutaneous insulin.     

COMPENSATORY RESTORATION IN A RANDOM UTILITY MODEL OF RECREATION DEMAND

Natural Resource Damage Assessment cases often call for compensation in non‐monetary or restoration equivalent terms. In this article, we present an approach that uses a conventional economic model, a travel cost random utility model of site choice, to determine compensatory restoration equivalents for hypothetical beach closures on the Gulf Coast of Texas. Our focus is on closures of beaches on the Padre Island National Seashore and compensation for day‐trip users. We identify restoration projects that compensate for beach closures and that have good alignment in terms of compensating those who actually suffer from the closures. (JEL Q26)     

The social costs of gun ownership

This paper provides new estimates of the effect of household gun prevalence on homicide rates, and infers the marginal external cost of handgun ownership. The estimates utilize a superior proxy for gun prevalence, the percentage of suicides committed with a gun, which we validate. Using county- and state-level panels for 20 years, we estimate the elasticity of homicide with respect to gun prevalence as between + 0.1 and + 0.3. All of the effect of gun prevalence is on gun homicide rates. Under certain reasonable assumptions, the average annual marginal social cost of household gun ownership is in the range $100 to $1800     

The Neoclassical Investment Model and a New Conservation Law

q ratio is derived. We also show that, along the quasi-turnpike path, Tobin's marginal q is equal to the maximum value of average q. But along the turnpike path, marginal q becomes equal to the limiting value of average q. Received September 15, 1999; revised version received January 25, 2001