Advertising effects on consumer welfare: Prices paid and liking for brands selected

The effect of advertising on consumer welfare has been the subject of dispute among economists, arising largely from disagreement among scholars regarding the persuasive versus the informative role of advertising. This paper reports two experiments that explore the welfare implications of advertising effects. Experiment 1 shows that the same advertisements can either increase or decrease prices paid for selected brands, depending on the degree to which the choice situation requires brands to be recalled in order to be considered. However, an increase in prices paid caused by advertising does not necessarily imply detrimental effects on consumer welfare. Experiment 2 shows that, even under circumstances in which differentiating advertising leads consumers to select brands with higher average prices, it can provide useful information to consumers that allows them to make purchases that are more in line with their personal tastes than are the choices of consumers not exposed to the advertisements.     

On the Endogenous Choice between Protection and Promotion

In a model of strategic interaction between firms in lobbying activity, I show that capitalists might prefer tariffs (protection) to production subsidies (promotion). This is due to the congestion problem arising from the government's convex welfare costs of providing subsidies as opposed to both the free-rider problem and the congestion problem acting in opposite directions in the case of tariffs. If an industry association exists, coordination can be achieved when lobbying for tariffs, but not in the case of production subsidies.     

Characterizing the sustainability problem in an exhaustible resource model

We provide a general condition under which consumption can be sustained indefinitely bounded away from zero in the continuous time Dasgupta–Heal–Solow–Stiglitz model, by letting augmentable capital substitute for a non-renewable resource. The assumptions made on the production function are mild, thus generalizing previous work. By showing that Hartwick?s rule minimizes the required resource input per unit of capital accumulation, and integrating the required resource input with respect to capital, we obtain a complete technological characterization without reference to the time path. We also use the characterization result to establish general existence of a maximin path.     

Estimating welfare changes from efficient pricing in public bus transit in India

Three different and feasible pricing strategies for public bus transport in India are developed in a partial equilibrium framework with the objective of improving economic efficiency and ensuring revenue adequacy, namely average cost pricing, marginal cost pricing, and two-part tariffs. These are assessed not only in terms of gains in economic efficiency, but also in changes in travel demand and consumer surplus. The estimated partial equilibrium price is higher in all three pricing regimes when compared to the current price. As a result, consumer surplus falls in all three cases. The price increase is much larger with average cost pricing compared to marginal cost pricing or two-part tariffs, and hence a larger fall in demand and consumer surplus occurs due to average cost pricing. While there is a gain in economic efficiency from marginal cost pricing and two-part tariffs, this improvement comes at the expense of reduced public bus transit demand and consumer surplus, given the price inelastic public bus transit demand estimated for India. Given the mobility needs and the developmental concerns of a growing economy such as India, the challenge for policy makers is to balance the gains in economic efficiency in the public bus transit sector against other social, political, and developmental goals.     

On equitable social welfare functions satisfying the Weak Pareto Axiom: A complete characterization

The present paper examines the problem of aggregating infinite utility streams with a social welfare function that respects the Anonymity and Weak Pareto Axioms. The paper provides a complete characterization of domains (of the one period utilities) on which such an aggregation is possible. A social welfare function satisfying the Anonymity and Weak Pareto Axioms exists on precisely those domains that do not contain any set of the order type of the set of positive and negative integers. The criterion is applied to decide on possibility and impossibility results for a variety of domains. It is also used to provide an alternative formulation of the characterization result in terms of the accumulation points of the domain.     

The measurement of income mobility: A partial ordering approach

Summary. Given a set of longitudinal data pertaining to two populations, a question of interest is the following: Which population has experienced a greater extent of income mobility? The aim of the present paper is to develop a systematic way of answering this question. We first put forth four axioms for income movement-mobility indices, and show that a familiar class of measures is characterized by these axioms. An unambiguous (partial) ordering is then defined as the intersection of the (complete) orderings induced by the mobility measures which belong to the characterized class; a transformation of income distributions is “more mobile” than another if, and only if, the former is ranked higher than the latter for all mobility measures which satisfy our axioms. Unfortunately, our mobility ordering depends on a parameter, and therefore, it is not readily apparent how one can apply it to panel data directly. In the second part of the paper, therefore, we derive several sets of parameter-free necessary and sufficient conditions which allow one to use the proposed mobility ordering in making unambiguous income mobility comparisons in practice. Received: July 12, 1995; revised version: May 13, 1997     

INTERTEMPORAL COMPLEMENTARITY AND OPTIMALITY: A STUDY OF A TWO‐DIMENSIONAL DYNAMICAL SYSTEM*

We study the underlying structure of the two‐dimensional dynamical system generated by a class of dynamic optimization models that allow for intertemporal complementarity between adjacent periods, but preserve the time‐additively separable framework of Ramsey models. Specifically, we identify conditions under which the results of the traditional Ramsey‐type theory are preserved even when the intertemporal independence assumption is relaxed. Local analysis of this theme has been presented by Samuelson (Western Economic Journal 9 (1971), 21–26). We establish global convergence results and relate them to the local analysis, by using the mathematical theory of two‐dimensional dynamical systems. We also relate the local stability property of the stationary optimal stock to the differentiability of the optimal policy function near the stationary optimal stock, by using the Stable Manifold Theorem.     

Characterization of the turnpike property of optimal paths in the aggregative model of intertemporal allocation

The present paper provides a complete characterization of the turnpike property of optimal paths in the (reduced form) aggregative model of intertemporal allocation. The characterization allows one to identify precisely the bifurcation point between globally stable and cyclical long-run optimal behavior. The complete characterization result is used to evaluate several sufficient conditions for global asymptotic stability of optimal paths that have been proposed in the published literature. It is also used to examine sufficient conditions for the emergence of competitive equilibrium cycles in two-sector models.