PRODUCT MARKET DISTORTIONS AND THE RETURNS TO BROILER CHICKEN RESEARCH IN CANADA

The economic returns to Canadian federal broiler chicken research between 1968 and 1984 were estimated using the economic surplus approach. The impact of distortions in the product market and of the excess burden of taxes on the net benefits of research and the distribution of gross benefits between producers and consumers were assessed. Rates of return to research investments at the margin over this period were estimated to be between 52% and 60%. All of the benefits of this research have accrued to consumers, and producers have actually been made worse off by broiler research under the existing regime of supply management.     

Evaluating wireless carrier consolidation using semiparametric demand estimation

The US mobile phone service industry has dramatically consolidated over the last two decades. One justification for consolidation is that merged firms can provide consumers with larger coverage areas at lower costs. We estimate the willingness to pay for national coverage to evaluate this justification for past consolidation. As market level quantity data are not publicly available, we devise an econometric procedure that allows us to estimate the willingness to pay using market share ranks collected from the popular online retailer Amazon. Our semiparametric maximum score estimator controls for consumers’ heterogeneous preferences for carriers, handsets and minutes of calling time. We find that national coverage is strongly valued by consumers, providing an efficiency justification for across-market mergers. The methods we propose can estimate demand for other products using data from online retailers where product ranks, but not quantities, are observed.

Recent Advances in Structural Econometric Modeling: Dynamics, Product Positioning and Entry

In the empirical analysis of consumer markets, recent literature has begun to explore the dynamics in both consumer decisions as well as in firms' marketing policies. Other research has begun to explore the strategic aspects of product line design in a competitive environment. In both cases, structural models have given us new insights into consumer and firm behavior. For example, incorporating consumer and firm dynamics may help explain patterns in our data that are not well-captured by static models. Similarly, the strategic aspects of firm entry and product-positioning may be intrinsically linked to firm conduct and the intensity of competition in a market. Structural analysis of these consumer and firm decisions raise a number of substantial computational challenges. We discuss the computational challenges as well as specific empirical applications. The discussions are based on the session “Structural Models of Strategic Choice” from the 2004 Choice Symposium.     

Farmers' Perceived Costs of Wetlands: Effects of Wetland Size, Hydration, and Dispersion

We survey landowners to investigate the costs associated with the presence of permanent or seasonal wetland areas in cropland. We find, as predicted by our conceptual model, that dispersion of wetland areas imposes substantial inconvenience costs for producers but that costs respond nonlinearly and irregularly to changes in the frequency of hydration. Producer attitudes toward conservation and environmental regulation have a significant impact on perceived costs, as do some demographic attributes. The analysis suggests that incentives to aggregate dispersed wetlands into larger contiguous areas could benefit landowners and at the same time provide a net increase in wetland area.     

Environmental Externalities,Comparative Advantage,and the Location of Production: An Application to the Canadian Dairy Industry

The traditional theory of comparative advantage has not been well integrated with the theories of externalities and location. In this paper we develop a conceptual framework which undertakes such an integration at the firm and regional levels. We call this the General Equilibrium with Individual Spatial Heterogeneity and Externalities (GEISHE) model. We use the model to study the effect of spatial heterogeneity in emission intensity on the spatial distribution of production under a uniform emission standard. This model suggests that the introduction of an emission restriction can have differential effects on the spatial patterns of production, depending on local production intensity. We also present empirical analysis of intraprovincial movement of production for the Canadian dairy industry using 1996 and 2006 Census data. Ceteris paribus, areas that had higher dairy production intensities in 1996 also tended to experience higher declines in their dairy cow populations between 1996 and 2006, which is consistent with the GEISHE model. These results suggest that environmental pressure may change the patterns of comparative advantage within a supply managed industry, even if relocation of production across provincial boundaries is not permitted. Expression of environmental comparative advantages seems to be taking place within provinces.     

Time-varying forecasts by variational approximation of sequential Bayesian inference

Methods developed for making time-varying forecasts in economic and financial analysis include (a) equal-weighted moving-window (or rolling) regression, (b) time-weighted (e.g. exponentially weighted) regression, (c) the Kalman filter (KF) and (d) adaptive Kalman filters. This paper developed a new method based on variational approximation of sequential Bayesian inference (VASB). Concepts and notions of the sequential Bayesian analysis and the variational approximation of an intractable posterior are simple and straightforward. Our VASB algorithm is not complicated and is easy to code. For a regression on multiple time-series, the regression coefficients, standard errors, prediction and residual error are time-varying and are estimated jointly at every time step. For a single time-series (e.g. price returns of an asset), its mean and variance are time-varying and are predicted jointly at every time step. The VASB algorithm performs better than the rolling and time-weighted statistics or regressions and the KF in terms of higher predictive power and stronger robustness. Derivations of the VASB algorithm are presented in the appendices.     

Reference technology sets,Free Disposal Hulls and productivity decompositions

Diewert and Fox (2013) proposed decompositions of a Malmquist-type productivity index into explanatory factors, with a focus on extracting technical progress, technical efficiency change and returns to scale components. A major problem with their decompositions is that it may be difficult to determine the appropriate reference technologies. Using relatively unrestrictive regularity conditions, the paper develops a data envelopment type approach for decomposing productivity growth for a panel of production units into explanatory factors based on the Free Disposal Hull methods pioneered by Tulkens and his co-authors.