The Campus Parking Game: A Demonstration of Price Discrimination and Efficiency

This article presents a classroom game that allows students to directly experience the welfare improvements that can result from price discrimination. The demonstration uses a very familiar decision-making scenario, campus parking, to introduce the concept of price discrimination as well as reinforce the concepts of opportunity cost, consumer surplus, and search costs. This game can be used in a variety of classes, including principles, intermediate theory, industrial organization, or environmental economics, and can be conducted in a 50-minute class period with follow-up discussion in the next class.     

How U.S. Farm Programs and Crop Revenue Insurance Affect Returns to Farm Land

A simulation model incorporating price and yield variability is used to examine the impact of government farm program and crop revenue coverage (CRC) insurance payments on the probability distribution of returns to land. Results indicate that Marketing Loan Program payments have the greatest impact on both the mean and standard deviation of returns. Agricultural Market Transition Act payments shift the distribution of returns without changing the variability, creating a reduction in relative risk. Market loss assistance payments increase the mean, reduce variability, and increase skewness. When combined, farm programs substantially increase the value that risk-averse producers place on the residual returns to land and substantially reduce the certainty equivalent value of CRC.     

Driving forces and barriers to a sustainable global economy

The major drivers of globalness are presented here from the perspective of the global economy as an emerging macrosystem. Key driving forces include not only technology, but also ideas and events. Special attention is given to ideas that have created more globalness in recent years and those that may be powerful in the future, and on possible macroevents that could act positively or negatively. Finally some barriers to further globalness are discussed.     

Memory for implied versus directly stated advertising claims

An experiment tested young adults' memory for advertising slogans that either stated a strong claim directly or only implied the same claim by stating it in a much weaker form. Several advertising slogans were inserted into a story. There were two versions of each slogan, asserted and implied. The asserted version made a claim very directly and strongly (e.g.Alka-Seltzer stops common aches). The implied version only suggested the stronger claim (e.g. Alka-Seltzer helps lessen common aches ). Subjects read the story, which contained one of the two versions of each ad. After subjects finished reading the story, they were asked to recall all the brands and products. Then they performed a multiple choice task testing memory for the content of the advertising claims. While results showed no difference on the recall task, subjects on the multiple choice task frequently falsely recognized implied claims as asserted but seldom the reverse. Although they correctly recognized more asserted than implied claims, they were more confident in their correct memory for the implied claims. Results were applied to the problem of deceptive advertising.     

Electricity wheeling and incentive regulation

This paper relates social contract regulation strategies to a particularly important comtemporary issue in energy regulation—electricity wheeling; we find that substantial gains in economic efficiency may be possible. First, social contracts give potential wheelers more monetary incentive than traditional regulatory procedures to provide wheeling services to interested third parties. Second, social contract regulation gives potential wheelers better incentives to measure marginal costs accurately. Third, under social contract regulation, wheelers have proper incentives to install efficient amounts of transmission capacity, thereby avoiding Averch-Johnson and other regulatory distortions that emerge in traditional regulation.     

Sectoral adjustment of employment to shifts in outsourcing and trade: evidence from a dynamic fixed effects multinomial logit model

This paper analyzes the effects of trade and outsourcing on the transition probabilities of employment between sectors, using a dynamic multinomial logit framework with fixed effects. The data cover a sample of individual Austrian male workers over the period 1988–2001. Our results strongly support the view that international economic forces are important determinants of labor market turnover. In particular, an increase in the outsourcing intensity negatively affects the probability of staying in or changing into the manufacturing sector, even more so for industries with a comparative disadvantage. Copyright © 2007 John Wiley & Sons, Ltd.     

What Determines Financial Development? Culture,Institutions or Trade

This paper endeavours to determine in how far theories emphasising cultural values, dysfunctional institutions or impediments to trade can explain the vast differences in the size of financial systems across the globe. To account for endogeneity, an instrumental variables approach is pursued. For a cross-section of countries, we find that trade openness and institutions constraining the political elite from expropriating financiers tend to promote financial development. Conversely, there is only limited evidence that cultural beliefs and the cost of enforcing financial contracts significantly hamper financial development. JEL no.  F36, G2, O16     

What's In It for Me? CEOs Whose Firms Are Acquired

We study benefits received by target chief executive officers(CEOs) in completed mergers and acquisitions. Certain targetCEOs negotiate large cash payments in the form of special bonusesor increased golden parachutes. These negotiated cash paymentsare positively associated with the CEO's prior excess compensationand negatively associated with the likelihood that the CEO becomesan executive of the acquiring company. Regression estimatessuggest that target shareholders receive lower acquisition premiain transactions involving extraordinary personal treatment ofthe CEO. Target CEOs experience very high turnover rates bothat the time of acquisition and, for those who remain employed,for several years thereafter.     

VAT attacks!

Like the theory of the second best that the 2006 congress marks, the value added tax (VAT) is now fifty years old. Judged by the extent and speed of its spread around the world, and the revenue that it raises, the VAT would seem to have been a remarkable success. Over the last few years, however, it has come under a series of attacks. This paper considers three of the most prominent of these. One is the fear (raised mainly in the United States) that the VAT actually does too good a job of raising tax revenue—which raises the empirical question of whether it has indeed proved as effective a source of revenue as its proponents claim and its opponents fear. The second is the view that the VAT does a bad job of taxing the informal sector—and that tariffs might consequently be a better revenue-raising instrument for many developing countries. The third attack is the most literal, by criminals rather than theorists: in the European Union and elsewhere, sophisticated VAT fraud, targeting its refund provisions, has become a serious concern. The paper also argues, more generally, that the many unanswered questions concerning the VAT reflect an unfortunate disconnect between the development of the tax itself and of second best tax analysis. I am grateful to Ben Lockwood and Stephen Smith for allowing me to draw on our joint work, and to Vidar Christiansen, Sijbren Cnossen, Isaias Coelho, Alain Jousten, Victoria Perry, and Emil Sunley for many helpful comments and suggestions. Views and errors remain mine alone, and should not be attributed to the International Monetary Fund.