Price caps and the error in X-factor calculations

Calculation of the X-factor used for price caps has a fundamental flaw when it is based on conventional growth accounting total factor productivity analysis. This error is discussed and the appropriate corrective action is indicated. In an example based on the X-factor used for determining the change in the price for local exchange carriers’ interstate access service in the United States, it is shown that the appropriate X-factor is about 25 percent greater than that based on conventional growth accounting total factor productivity analysis.     

A Simple Test of a Screening Procedure for Economics Faculty: A Note

This article discusses a graphical framework for classroom presentation of interactions between balance-of-payments flows and foreign exchange market equilibrium.     

Price floors and competition

A potential source of instability of many economic models is that agents have little incentive to stick with the equilibrium. We show experimentally that this can matter with price competition. The control variable is a price floor, which increases the cost of deviating from equilibrium. According to traditional theory, a higher floor allows competitors to obtain higher profits. Behaviorally, the opposite result obtains with two (but not with four) competitors. An error model, which builds on Luce (Individual Choice Behavior, 1959), can adequately describe supra-Nash pricing with a low-floor, but then fails to capture the overall pro-competitive effect of a high-floor seen for duopolies.     

Risk attitude in lotteries offering real products and monetary outcomes

Using two auction mechanisms, the second price auction and the Becker, DeGroot, and Marschak mechanism, we examined individuals’ buying and selling bidding patterns in three types of binary lotteries: a lottery offering only real products, a lottery offering only monetary outcomes and mixed lotteries offering both real products and monetary value outcomes. Participants’ willingness to pay and willingness to accept for the product lottery suggest risk neutrality. In contrast, participants’ bidding prices for the monetary and mixed lotteries suggest risk aversion. These findings suggest that an individual's risk attitude depends upon the type of lottery, perhaps indicating a “product illusion.”     

On defining geographic markets

A number of different approaches for empirically defining a geograhic market are explored in this paper. It is demonstrated that the rest proposed by Horowitz, and even a generalization of it,provide conflicting and inconsistent results. Correlation analysis, while appealing in its simplicity, has the potential for providing misleading results. Finally, the notion of causality as applied here, seems to be a promising approach to the issue.     

Government policy and the development and use of biopesticides

Biopesticides developed and used in the future will emerge against the backdrop of the environmental effects associated with the use of conventional pesticides and government policies designed to control these effects. In the final analysis, farmers' choices on pesticides will be influenced by the prevailing costs and benefits of conventional pesticides and their alternatives including biopesticides. The outlook for pesticide use is complicated, though some directions can be perceived. There are a number of factors that will serve potentially to impact pesticide use which in turn will affect the development of biopesticides. These include pesticide regulation, the FAIR Act, the crops planted, the management of ecologically-based systems, and consumer demand for ‘green' products.     

A tourist's “vision quest” in an African game reserve

This essay deals with the role of guides in the Moremi Wildlife Reserve of Botswana and the frictions that arise between them and visitors to the reserve. The guides' role as “interpreters” is juxtaposed with the tourists' desire for first-hand “communion” with nature, which is here treated as similar to a “vision quest.” The essay analyzes the interactions between the Tswana guides on the one hand and South African tourists on the other, focusing on the relegation of the former by the latter to the (basically menial) role of pathfinders and assistants that most Africans fill in the tourists' home culture. Attention is drawn to a possible crisis brewing in tourist-guide relationships, due to the fact that guides are unsuccessful, or even redundant, mediators in “vision quest” tourism.     

Valuation of assets on a markov state space

In the absence of opportunities for arbitrage, a very general valuation equation is derived for risky assets. This derivation exploits the linear operators associated with the transition probabilities of the state process.