INEQUALITY AVERSION CAUSES EQUAL OR UNEQUAL DIVISION IN ALTERNATING‐OFFER BARGAINING

A solution to Rubinstein (1982)'s open‐ended, alternating‐offer bargaining problem for two equally patient bargainers who exhibit similar degrees of inequality aversion is presented. Inequality‐averse bargainers may experience envy if they are worse off, and guilt if they are better off, but they still reach agreement in the first period under complete information. If the guilt felt is strong, then the inequality‐averse bargainers split a pie of size one equally regardless of their degree of envy. If the guilt experienced is weak, then the agreed split is tilted away from the Rubinstein division towards a more unequal split whenever the degree of envy is smaller than the discounted degree of guilt. Envy and weak guilt have opposite effects on the equilibrium division of the pie, and envy has a greater marginal impact than weak guilt. Equally inequality‐averse bargainers agree on the Rubinstein division if the degree of envy equals the discounted degree of guilt. As both bargainers' sensation of inequality aversion diminishes, the bargaining outcome converges to the Rubinstein division.     

Seasonalities in the German stock market

Financial Markets and Portfolio Management - This paper suggests innovative investment strategies drawing on return seasonalities. By means of an out-of-sample study of the German stock market, we...     

Who Will Shape the New World Order?

Intereconomics - The economic consequences of the war could potentially be used to postpone climate policy, energy saving and the shift to renewable energy. This includes investments in atomic...     

A Deeper Union: From a Failed Project to the European Quality Lead

Intereconomics - After President Trump’s departure, many expected that the transatlantic partnership would return to its previous state with the US playing a leading role. This article...     

Bureaucrats or Markets in Innovation Policy? – a critique of the entrepreneurial state

The Review of Austrian Economics - This paper takes stock of recent suggestions that the state apparatus is a central and underappreciated actor in the generation, diffusion and exploitation of...     

Price Ceilings on Milk Production Quota Values: Future or Folly?

Since the inception of supply management in Canada during the 1970s, milk production quota has been used to regulate output and participation in the dairy industry. In recent years, milk quota values have increased dramatically, almost tripling in value since the mid 1980s. This led to the Dairy Farmers of Ontario intervening on the milk production quota exchange on two occasions: first, in November 2006 with a progressive transfer assessment and then in July 2009, replacing the former policy with a firm price ceiling—fixing the unit price of quota at $25,000. These policies represent a significant redistribution of economic benefits from milk producers selling their quota to those remaining in the industry. The objective of this study is to first explore the reasons for the increase in production quota values; and second, to assess the welfare and distributional effects of each of the two quota policy schemes. Our results suggest that the increase in quota values were driven by basic economic factors and that the efficiency losses from intervention in the quota exchange are nontrivial. We conclude by suggesting there are several alternative policy options that could minimize efficiency losses while moderating the escalation in quota values. Depuis la mise en place du système de gestion de l’offre au Canada dans les années 1970, les quotas laitiers sont utilisés pour régulariser la production et la participation dans l’industrie laitière. Au cours des dernières années, la valeur des quotas laitiers a fait un bond considérable et a pratiquement triplé depuis le milieu des années 1980. Cette situation a amené la Dairy Farmers of Ontario à intervenir à deux reprises dans le système d’échange de quotas laitiers : en novembre 2006, en imposant l’établissement d’un transfert progressif et en juillet 2009, en remplaçant la politique précédente par l’établissement d’un prix plafond ferme fixéà 25 000 $. Ces politiques permettent une importante redistribution des avantages économiques lorsque des producteurs de lait vendent leurs quotas à des producteurs qui demeurent dans le secteur. La présente étude visait d’abord à examiner les raisons qui sous‐tendent l’augmentation de la valeur des quotas de production et ensuite àévaluer le bien‐être et les effets distributifs de chaque plan de quotas. Les résultats de notre étude autorisent à penser que l’augmentation de la valeur des quotas a été motivée par des facteurs économiques fondamentaux et que les pertes d’efficacité découlant de l’intervention dans les échanges de quotas n’étaient pas sans importance. En conclusion, nous estimons qu’il existe plusieurs politiques de rechange qui pourraient minimiser les pertes d’efficacité tout en modérant l’escalade de la valeur des quotas.     

Investment and employment from large-scale photovoltaics up to 2050

Investments in renewable energy were at US$211 billion in 2010 and developing economies overtook developed ones for the first time in terms of new financial investments in renewable energy. Photovoltaics for generation of electricity from sunlight has the highest growth rate among the competing forms of renewable energy and has now begun to achieve grid parity in some regions. If these trends of investments continue, solar energy will play a major economic role. We analyze these developments and assess the ensuing amounts of investment and employment for a range of sizes of the sector of solar energy. We find that by 2050 electricity from photovoltaics could cover up to 90% of total global energy demand, with a then global capital investment in our main scenario in photovoltaic manufacturing capacity at 500 billion US$211 billion in 2010 and developing economies overtook developed ones for the first time in terms of new financial investments in renewable energy. Photovoltaics for generation of electricity from sunlight has the highest growth rate among the competing forms of renewable energy and has now begun to achieve grid parity in some regions. If these trends of investments continue, solar energy will play a major economic role. We analyze these developments and assess the ensuing amounts of investment and employment for a range of sizes of the sector of solar energy. We find that by 2050 electricity from photovoltaics could cover up to 90% of total global energy demand, with a then global capital investment in our main scenario in photovoltaic manufacturing capacity at 500 billion US₂₀₁₀ by around 2030 and 1,500 billion by 2050. Employment in photovoltaic manufacturing is predicted to rise to 6 million by 2050. Sensitivity analysis with respect to the core parameters of assumptions is supplied.     

Regional and environmental impacts of expanding the heavy duty vehicle charge to the secondary road network in Austria

In road freight transport a particularly large share of the total social costs generated is not borne by road users. To correct for this, many European countries use pricing instruments specifically targeted at heavy duty vehicles, so far targeted almost exclusively at the primary road network. In line with the overall EU objective of greening the transport sector, we discuss the possibility of expanding the road charging system to a more comprehensive, area-wide one. The degree to which peripheral or disadvantaged regions are hit over-proportionally by such a measure remains an open question in the literature on heavy duty vehicle road pricing. We combine an input–output and a computable general equilibrium approach to analyse the case for Austria. We find that while it is not the sectors of highest economic importance in the periphery regions that are hit by the charge, those sectors that are hit are those which are relatively more important in peripheral regions (with up to a twofold share in value added) and for whom production price impacts tend to be relatively strong. The short term consumer price effect of extending the current primary road network charges to the secondary network is found not to exceed 0.15%. In terms of the principles of sustainable transport we find that extending charge coverage is compatible with most core principles, the exception being the principle of regional need. In terms of environmental impact, for example, expanding heavy duty vehicle charges to the secondary road network reduces heavy duty vehicle kilometres in the overall network (and related emissions) by roughly 2%. However, in order to comply with the needs principle, suitable complementary transfer policies need to be designed and implemented for peripheral regions.