Optimal pricing and investment for resources with alternative uses and capacity limits

Airport runways, radio spectrum, and hospital beds are resources with capacity limits used to provide multiple services with specific capacity requirements in separate markets, which contribute to recover capacity investment costs. A welfare-maximizing and (possibly) budget-constrained firm, whose operating costs significantly increase as total capacity use presses against capacity, chooses prices and capacity. When the equilibrium capacity is reached, second-best Ramsey prices must be adjusted, and mark-ups on marginal costs may be higher for services with higher demand elasticities, if they intensively use capacity. Moreover, for a given output vector, the firm invests more than in first best. Instead, the equilibrium capacity may be first best when there is excess capacity to reduce operating costs and thus improve welfare. Our model can be used as a benchmark to evaluate the efficiency of market mechanisms for resource allocation and pricing, or when market mechanisms are not adopted.

     

Gender preference gaps and voting for redistribution

Experimental Economics - There is substantial evidence that women tend to support different policies and political candidates than men. Many studies also document gender differences in a variety of...     

The welfare implications of COVID-19 for fragile and conflict-affected regions

Understanding the ramifications of the COVID-19 pandemic for households' welfare in regions subject to fragility, conflict, and violence (FCV) is important to inform programs and policies in this context. Harmonized data from high-frequency phone surveys indicates that, at the onset of the pandemic, a higher fraction of respondents in FCV regions relative to non-FCV ones faced adverse household income changes and reported to have stopped working since the outbreak of the crisis. On top of that, households in FCV regions were far less likely to have received government assistance than those in non-FCV regions. These findings suggest that, at the start of the COVID-19 pandemic, there was a widening of the preexisting economic gap between FCV and non-FCV regions, raising the recovery bar for the former.