Discrete choice model analysis of mobile telephone service demand in Japan

This paper analyzes the demand for mobile telephones including second generation (2G) and third generation (3G) by using a discrete choice model called a mixed logit model. First, we examine the substitution patterns of the demand for mobile telephones and show that demand substitutability among alternatives is stronger within the provider nest category than within the standard nest category in mobile telephone services. The closest substitute for NTT’s 3G service is NTT’s 2G service, rather than KDDI’s 3G service, for example. Second, we investigate the elasticities of demand for various functions including e-mail, Web browsing, and moving picture delivery. Consequently, we cannot observe marked differences between 2G and 3G services based on these calculated elasticities, indicating that it takes time for 3G subscribers to gain proficiency with such new services.      

An Empirical Analysis of the Effects on Firms’ Economic Performance of Implementing Environmental Management Systems

This paper investigates whether environmental management system (EMS) implementation influences a firm’s value added, one of the indices of economic performance. Because it is expected that EMS implementation increases a firm’s value added through an increase in demand and an improvement in productivity, a simple model to identify how these effects influence a firm’s value added is developed and is empirically investigated using panel data for Japanese manufacturing firms in the period 1996–2007. The main findings are as follows. For the full sample, EMS implementation increases a firm’s value added through an increase in demand and improvement in productivity. Among these firms, however, the positive effect of the implementation through an increase in demand mainly exists for export-oriented firms. At the industry level, the effects of EMS implementation vary among different industries. These results empirically prove that there are plural paths for EMS implementation to improve a firm’s economic performance.     

From ultimatum to Nash bargaining: Theory and experimental evidence

We consider a sequential two-party bargaining game with uncertain information transmission. When the first mover states her demand she does only know the probability with which the second mover will be informed about it. The informed second mover can either accept or reject the offer and payoffs are determined as in the ultimatum game. Otherwise the uninformed second mover states his own demand and payoffs are determined as in the Nash demand game. In the experiment we vary the commonly known probability of information transmission. Our main finding is that first movers’ and uninformed second movers’ demands adjust to this probability as qualitatively predicted, that is, first movers’ (uninformed second movers’) demands are lower (higher) the lower the probability of information transmission. JEL Classification C72 · C78 · C92     

Optimal pricing and capacity choice for a public service under risk of interruption

We develop rules for pricing and capacity choice for an interruptible service that recognize the interdependence between consumers’ perceptions of system reliability and their market behavior. Consumers post ex ante demands, based on their expectations on aggregate demand. Posted demands are met if ex post supply capacity is sufficient. However, if supply is inadequate all ex ante demands are proportionally interrupted. Consumers’ expectations of aggregate demand are assumed to be rational. Under reasonable values for the consumer’s degrees of relative risk aversion and prudence, demand is decreasing in supply reliability. We derive operational expressions for the optimal pricing rule and the capacity expansion rule. We show that the optimal price under uncertainty consists of the optimal price under certainty plus a markup that positively depends on the degrees of relative risk aversion, relative prudence and system reliability. We also show that any reliability enhancing investment—though lowering the operating surplus of the public utility—is socially desirable as long as it covers the cost of investment.     

Pareto and contemporary economic theory

This paper provides explanations for Pareto’s apparently contradictory approach to demand theory in simultaneously insisting that measurability of utility is not needed to explain the equilibrium of consumers in competitive markets, and embracing concavifiability and thus measurability of utility when this implies restrictions on consumers’ behavior such as the law of demand. It also treats his method of calibrating an aggregate demand function by employing his law of income distribution, so as to reproduce “Gregory King’s law”. Finally, some disputed issues are dealt with concerning the nature of Pareto’s contributions to welfare economics. (JEL: B13, D11, D60).     

Pricing inputs to induce efficient Make-or-Buy decisions

We investigate input pricing regimes that induce efficient Make-or-Buy decisions by entrants when there is constant returns in the production of the input(s) and simultaneous noncooperative price competition in downstream retail markets. Necessary and sufficient conditions for efficient Make-or-Buy decisions are derived. The necessary condition shows that input prices are relevant for Make-or-Buy decisions except under restrictive and often unverifiable assumptions on the demand structure, and that the least informationally-demanding way to ensure efficient Make-or-Buy decisions is to price inputs at marginal cost provided changes in the entrant’s cost have a “normal” effect on the entrant’s profit. The conditions also show that pricing the incumbent’s input at the entrant’s marginal cost always ensures efficient Make- or-Buy decisions. The extent to which input prices can depart from marginal cost while still inducing efficient Make-or-Buy decisions increases with the efficiency differential between the incumbent and entrant and with the demand displacement ratio.      

Italian households’ debt: the participation to the debt market and the size of the loan

This paper analyses Italian households’ participation to the debt market, separating the probability of demanding a loan from the probability of being rationed by lenders; on the supply side of the market specific attention is paid to enforcement costs of the loan contract when customers default. A new result is that the age of the household head acts essentially as a demand factor, rather than a variable influencing the lender’s choice. Both current and future households’ income increase the demand for loans and reduce credit rationing. Self-employed workers are more rationed by lenders. Credit constraints are also linked to the area where the household lives, partly because of different enforcement costs. The final part of the paper analyses the equilibrium quantity of the loan, for households who have a loan and are not constrained. The loan size is positively linked to household net wealth and income profile. An important contribution of this paper is the finding that, not only the participation to the debt market, but also the loan size is negatively affected by enforcement costs.      

Dictator game giving: altruism or artefact?

Experimental dictator games have been used to explore unselfish behaviour. Evidence is presented here, however, that subjects’ generosity can be reversed by allowing them to take a partner’s money. Dictator game giving therefore does not reveal concern for consequences to others existing independently of the environment, as posited in rational choice theory. It may instead be an artefact of experimentation. Alternatively, evaluations of options depend on the composition of the choice set. Implications of these possibilities are explored for experimental methodology and charitable donations respectively. The data favour the artefact interpretation, suggesting that demand characteristics of experimental protocols merit investigation, and that economic analysis should not exclude context-specific social norms.

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

Latent Consideration Sets and Continuous Demand Systems

This paper develops a theoretically consistent continuous demand system model that incorporates latent, probabilistic consideration sets. In contrast to existing discrete choice consideration models, the proposed model is econometrically tractable with consumption data for many goods. The model’s empirical properties are illustrated with an 89-site recreation data set from the 1994 National Survey of Recreation and the Environment (NSRE). Parameter and welfare estimates suggest that the latent consideration set models fit the data better and may imply a bias-variance tradeoff relative to traditional models.      

A Note on Clean Technology Adoption and its Influence on Tradeable Emission Permits Prices

In this paper, we give an example in which the price of tradable emission permits increases despite firms’ adoption of less polluting technology, a result that is in contrast with Montero (J Environ Econ 44:23–44, 2002) and Parry (J Regul Econ 14:229–254, 1998), among others. If two Cournot players switch to a cleaner technology, the price for permits may increase due to an increase in the net demand for permits and a decrease in the net supply of permits after the clean technology is adopted. This is only the case when output demand is quite elastic.     

Coverage area expansion, customer switching, and household profiles in the Japanese broadband access market

This paper examines the diffusion process of Internet broadband access in Japan by modeling the household choice of access modes. Estimates reveal that the characteristics of users, rather than those of the access modes, play a significant role in demand substitution across the modes. Simulation exercises indicate that had optic fibers (fiber-to-the-home; FTTH) been made available to the whole country in 2005, only 10% of households would have switched to that mode. This result implies that once chosen, the household choice of access mode persists, and that indirect network effects are an important element in decisions to adopt the new technology of broadband. Finally, policy implications are discussed.     

Parental education and wages: Evidence from China

This paper investigates the relationship between parents’ education and children’s wage using two nationally representative data sets in China. Controlling for other things, both father’s and mother’s education are positively correlated with children’s wage. Nevertheless, returns to father’s education are lower in more market-oriented segments of the economy, including coastal regions, the non-state sector, and the later period of the reform era (post-1992), while the opposite is true for mother’s education. We argue that this new empirical evidence is consistent with the story that father’s education mainly indicates family connections useful for locating a better-paying first job, while mother’s education primarily captures unmeasured ability.     

中国研发投入的动态演化

R&D investment is enterprises’ strategy based on the market demand on innovative products and its production capacity for them. Enlarging market demand would spur the enterprises’ R&D input and the enhancement of technology state in production ability could have a complex effect on less developed countries’ R&D expenditure. With the measurement of China’s technology state compared to the United States and Japan, this paper explores with the state space model the dynamic effects of determinants on China’s R&D expenditure with the data during 1987–2006. The result illustrates that the growing national income, a proxy of domestic market demand, impedes the further R&D investment in China due to the enormous demand for necessities dominated by lower income class, and the income inequality is the major incentive for R&D investment via the higher pricing on the wealthy group, and that the improvement of technology state reduces the innovation risk and plays an important role in stimulating R&D expenditure.      

Quality upgrades and bypass under mandatory access

We analyze the interaction between the incumbent’s incentive to upgrade the quality of its network and the entrant’s incentive to build a bypass network when the regulator sets a two-part access tariff to the incumbent’s network. Under this context, the entrant’s investment in a bypass network is delayed with a higher incumbent’s investment in quality. Moreover, the possibility of investment in a bypass network by the entrant has a positive effect on the incumbent’s incentive to upgrade quality. We show that a regulator cannot achieve the first best with a constant access tariff. If he wants to design an alternative welfare improving access tariff, he should set an access fee increasing (decreasing) in quality if the business-stealing effect of quality upgrades is weak (strong). The analysis suggests that if the entrant’s investment costs are declining or its market share is increasing over time, it is not always optimal to require the incumbent to lease facilities at cost-based prices.     

Distributional Preferences and the Incidence of Costs and Benefits in Climate Change Policy

We explore the relationship between willingness to pay (WTP) for climate change mitigation and distributional preferences, by which we mean individuals’ opinions about who should be responsible for climate change prevention and whether the share of climate change impacts borne by the poor is a cause for concern. We use 1,770 responses to an online stated preference survey. The domestic costs in our survey’s policy choice scenarios are expressed as a set of randomized shares across four different payment vehicles, and the international cost shares are randomized across four groups of countries. We also elicit respondents’ perceptions of the likely regressivity of climate change impacts under a policy of business-as-usual. WTP is higher when larger cost shares are borne by parties deemed to bear a greater responsibility for mitigation, and when respondents believe (and care) that the impacts of climate change may be borne disproportionately by the world’s poor. That WTP for an environmental policy depends on the distributional consequences of the policy is an unsettling result: efficiency assessments are typically assumed to be separate from equity considerations in most benefit-cost analyses.     

Are we nice(r) to nice(r) people?—An experimental analysis

We experimentally investigate whether individuals can reliably detect cooperators (the nice(r) people) in an anonymous decision environment involving “connected games.” Participants can condition their choices in an asymmetric prisoners’ dilemma and a trust game on past individual (their partner’s donation share to a self-selected charity) and social (whether their partner belongs to a group with high or low average donations) information. Thus, the two measures of niceness are the individual donation share in the donation task, and the cooperativeness of one’s choice in the two games. We find that high donors achieve a higher-than-average expected payoff by cooperating predominantly with other high donors. Group affiliation proved to be irrelevant. Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification C91, C72, D3     

Demand estimation and market definition for broadband Internet services

This paper analyses residential demand for Internet access in Austria with a focus on broadband Internet connections. Austria has cable network coverage of about 50% and is, therefore, a good candidate to analyse the elasticity of demand for DSL where cable is available and where it is not. We also include mobile broadband via UMTS or HSDPA in our analysis and estimate various nested logit models to derive conclusions for market definition. The estimation results suggest that demand for DSL is elastic and that cable networks are likely to be in the same market as DSL connections both at the retail and at the wholesale level. We discuss possible implications for the regulation of wholesale broadband access markets. All views expressed are solely the authors’ and do not bind RTR or the Telekom-Control-Kommission (TKK) in any way nor are they official position of RTR or TKK.     

‘Regular’ choice and the weak axiom of stochastic revealed preference

We explore the relation between two ‘rationality conditions’ for stochastic choice behavior: regularity and the weak axiom of stochastic revealed preference (WASRP). We show that WASRP implies regularity, but the converse is not true. We identify a restriction on the domain of the stochastic choice function, which suffices for regularity to imply WASRP. When the universal set of alternatives is finite, this restriction is also necessary for regularity to imply WASRP. Furthermore, we identify necessary and sufficient domain restrictions for regularity to imply WASRP, when the universal set of alternatives is finite and stochastic choice functions are all degenerate. Results in the traditional, deterministic, framework regarding the relation between Chernoff’s condition and the weak axiom of revealed preference follow as special cases. Thus, general conditions are established, under which regularity can substitute for WASRP as the axiomatic foundation for a theory of choice behavior.     

中国货币政策的二元传导机制——"两中介目标、两调控对象"模式研究

The research, using VAR model and economic and financial data starting from January 1998 and expiring by June 2006, by econometric methods and theoretical analysis, examines the intermediate target and transmission channel of China’s monetary policy. The results are as followings: (1) Monetary supply M2 is a good indicator for China’s monetary policy, its prediction ability to economic variables is far above other monetary variables; (2) M2 is China’s monetary intermediate target because M2 reacts systematically to the industrial added value and CPI, and M2 innovation is made by the People’s Bank of China (PBC); (3) Monetary transmission channel does not exist in China basically, the main transmission channel is bank loans, credit quota is a de facto intermediate target, which regulates macroeconomy directly and induces the changes in M2, so there are two intermediate targets—credit quota and M2, which is fundamentally the same as the situation before 1998; (4) The two intermediate targets function in different fields—credit quota for real economy and M2 for the financial market, which is a realistic choice and PBC has successfully coordinated them. These conclusions are meaningful for the practices of China’s monetary policy, which indicates that we should pay more attention to the credit quota and take it as the core variable to regulate macroeconomy. Of course, this monetary transmission mode is only effective temporarily because there are many limitations in it. In the future, it is necessary to adopt the interest rate, which is more informative, as the intermediate target, which takes the marketization of the interest rate and exchange rate as the preconditions. __________ Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2008, (10): 37–51     

Are There Income Effects on Global Willingness to Pay for Biodiversity Conservation?

This paper is concerned with the empirical relationship between biodiversity conservation values and income. We use random effects panel models to examine the effects of income, and then GDP per capita, on willingness to pay for habitat and biodiversity conservation. In a meta-analysis, 145 Willingness To Pay estimates for biodiversity conservation where existence value plays a major role were collected from 46 contingent valuation studies across six continents. Other effects included in the meta-analysis were the study year; habitat type; continent; scope as presented to respondents; whether WTP bids were for preventing a deterioration or gaining an improvement in conservation, whether a specific species or specific habitat was protected; whether the questionnaire used a dichotomous choice or an open-ended format; distribution format; and the choice of payment vehicle. GDP per capita seemed to perform as well as an explanatory variable as respondent’s mean stated income, indicating that it is wealth in society as a whole which determines variations in WTP. Even if large variation, our main conclusion is, that the demand for biodiversity conservation rises with a nation’s wealth, but the income elasticity of willingness to pay is less than one.