A nonparametric analysis of multi-product oligopolies

We develop revealed preference tests for models of multi-product oligopoly, building on the work in Carvajal et al. (Econometrica 81(6):2351–2379, 2013). We analyze a Cournot model with multiple goods and show that it has testable restrictions when at least one good is produced by two or more firms. We also develop a revealed preference test for Bertrand oligopoly in a setting where each firm produces a single differentiated good, and these goods are potentially substitutes for each other. Our tests require qualitative assumptions on the shape of the demand curves and (in the Bertrand case) their evolution across observations, but they do not rely on the estimation of market demand.     

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.     

Pricing of off‐balance sheet debt: how do bond market participants use the footnote disclosures on operating leases and postretirement benefit plans?

In this study, we examine whether the public debt market prices information on off‐balance sheet debt arising from operating leases and postretirement plans. We find that bond‐rating agencies price off‐balance sheet debt arising from operating leases and the coefficient on off‐balance sheet debt measure of operating leases is similar to that of capital leases on the balance sheet. Regarding postretirement benefit plans, we find that bond‐rating agencies do price postretirement benefit obligations that are reported in balance sheet but do not price such obligations disclosed in footnotes. We find similar results when we examine corporate bond yields on new debt issues.     

Fundamental Analysis: Combining the Search for Quality with the Search for Value

Using cross‐sectional forecasts, we combine fundamental analysis strategies based on quality, such as the FSCORE from Piotroski (2000) and the GSCORE from Mohanram (2005), with strategies based on value, such as the V/P ratio from Frankel and Lee (1998) and the PEG ratio. While all four strategies generate significant hedge returns, combining quality‐driven and value‐driven approaches substantially improves the efficacy of fundamental analysis. Our parsimonious two‐dimensional approach can be applied to a wide cross section of stocks and outperforms common practitioner approaches that require a lengthy time series of data. The improvements in hedge returns hold for a variety of partitions and are robust to controls for risk factors and other determinants of stock returns. While the efficacy of fundamental analysis has declined in recent years, this can partially be attributed to investors arbitraging away excess returns by investing in fundamental strategies.     

Dynamics of environmental quality and economic development: the regional experience from Yangtze River Delta of China

This article investigates the dynamic relationship between economic progress and environmental quality at a regional level. An important economic intuition in this context is that environmental degradation will be limited by human behaviour if costs and benefits of such degradation are local since economic agents will then be incentivized to choose appropriate corrective action. Therefore, we note the likelihood that regional economic development can help regions ‘grow out of’ environmental problems. Using a new data set from Yangtze River Delta of China, we find a strong confirmation of the intuition that human can and will resolve the environmental problem by altering the damaging behaviour of economic agents. A very interesting finding of this study is that the relationship between environmental quality and economic progress measured by per capita income can display a wave-like function in the case of water pollution, as opposed to the much dramatized environmental Kuznets curve, with significant policy implications.     

SOCIAL ACCOUNTING MATRIX FOR INDIA

This paper provides the latest Social Accounting Matrix (SAM) of the year 2003–2004 for the Indian economy with a wide variety of disaggregation for the Energy sector and the sectors that are relevant for environmental and climate policy evaluation. This SAM shows the interaction between production, income, consumption and capital accumulation. It can be used to provide an analysis of the interrelationship between the production structure of an economy and the distribution of incomes and expenditures of different household groups. In addition, it can be used for multiplier analysis to capture direct, indirect and induced impact on input use due to any exogenous changes in the economy. This SAM consists of 85 sectors of the economy, three factors of production and nine categories of occupational households. The Indian economy is becoming structurally biased towards capital intensive sectors, such as service and energy production. The energy production sector itself is the most energy intensive sector as of 2003–2004.     

Terms of Trade and Welfare for a Developing Economy with an Imperfectly Competitive Sector

The effect of terms of trade on the welfare of a small open economy is analyzed. It exports a homogeneous good and imports some brands of a differentiated good. It also produces some brands of the differentiated good which are not traded. A terms-of-trade deterioration causes resources to move to the nontraded, import-competing sector. The economy's income rises and the price index for the differentiated good falls, resulting in higher welfare. This accords well with the experience of developing economies of East and Southeast Asia.     

Statistical Analysis with Linked Data

Computerised Record Linkage methods help us combine multiple data sets from different sources when a single data set with all necessary information is unavailable or when data collection on additional variables is time consuming and extremely costly. Linkage errors are inevitable in the linked data set because of the unavailability of error‐free unique identifiers. A small amount of linkage errors can lead to substantial bias and increased variability in estimating parameters of a statistical model. In this paper, we propose a unified theory for statistical analysis with linked data. Our proposed method, unlike the ones available for secondary data analysis of linked data, exploits record linkage process data as an alternative to taking a costly sample to evaluate error rates from the record linkage procedure. A jackknife method is introduced to estimate bias, covariance matrix and mean squared error of our proposed estimators. Simulation results are presented to evaluate the performance of the proposed estimators that account for linkage errors.     

Observability and Sorting in a Market for Names

Can firm names be tradeable assets when changes in name ownership are observable? Earlier literature focuses on trading of firm names when trading is not observable to the consumer. Yet, casual empiricism suggests that shifts in name ownership are often publicly known. This paper studies how firm names can be traded even under full observability. In equilibrium, even when consumers see a reputed name being divested they continue to trust it and so, these names are tradeable. I further demonstrate an appealing “sorting” property of these equilibria. Competent firms can separate themselves by buying valuable names, and incompetent firms can give themselves away by using worthless names.