Impact of the GST and Wine Tax Reform on Australia’s Wine Industry: A CGE Analysis

This study analyses the impacts of the Goods and Services Tax (GST) introduced on 1 July 2000, and the associated wine tax reform, on both the premium and non‐premium segments of the grape and wine industry using a computable general equilibrium (CGE) model of the Australian economy. Through input cost reductions, the grape and wine industry is projected to gain from the GST tax package. Thus the industry can still gain even though wine consumption is taxed a little more heavily after than before the introduction of the GST. This is particularly so for the export‐oriented premium wine segment. A switch from the current ad valorem to a revenue‐neutral volumetric tax on wine under the GST is shown also to favour the premium segment of the industry, but at the expense of the non‐premium segment.     

INTERTEMPORAL CHOICE AND DEVELOPMENT POLICY: NEW EVIDENCE ON TIME‐VARYING DISCOUNT RATES FROM VIETNAM AND RUSSIA

Assuming that individual discount rates are constant over time has important implications for policies and programs that involve intertemporal decision making. Using original data from Vietnam and Russia, we find evidence that discount rates do change over time for many individuals, implying that preferences for savings and credit might not be intertemporally consistent. We find that commonly held beliefs about gender and age influences do not hold once having children and location are controlled for. Within countries, however, residency does matter. Rural Vietnamese populations have higher discount rates, and living in a Russian trading town is associated with significantly higher discount rates and present bias than living in a government town. We argue that these behaviors are particularly likely to influence resource allocation in developing economies because there are fewer formal institutions and competitive markets to temper their effects.     

Price Bands and Buffer Funds

Price-band stabilization schemes are widely used although they have generally been regarded as second-best options. In this paper, it is shown that a class of control problems with plausible social welfare functions yields price-band stabilization as the optimal solution. Thus the proponents of price-band schemes need not be regarded as satisficers.     

Will U.S. companies substantiate advertising claims directly to consumers?

Substantiation of advertising claims has been a source of concern for consumerists, government and business for over a decade. The research reported in this article uses earlier studies as a benchmark for determining whether advertisers are any more willing to provide proof of advertising claims directly to consumers than they were in the 1970s. Seventy-one per cent of advertisers contacted responded to consumer requests for proof of claims made in television and magazine advertisements. However, only 21 per cent of the original requests resulted in successful substantiation. This finding parallels results obtained by Coney and Patti (1979)⁴ with the chief difference being fewer unsuccessful attempts at substantiation and more responses that made no attempt at substantiation. Implications for consumer education, public policy and marketing practice are discussed.     

A Reconsideration of Rent‐to‐Own

Rent‐to‐own agreements (RTO) are traditionally seen as disguised installment contracts imposed on uninformed consumers at usurious interest rates. After the flaws and omissions in these interest rate calculations are addressed, the implied annual percentage rates (APRs) remain extraordinarily high. It is shown that alternatives to RTO, such as layaway and long‐term rental, yield comparable APRs. The appeal of rent‐to‐own is then attributed to its structure that includes an initial pure rental phase of high value to persons in volatile financial and/or personal situations followed by an installment phase. Should these situations be resolved, the consumer exercises an imbedded option to acquire a perhaps otherwise unobtainable installment agreement at a competitive interest rate.     

Learning to Wait: A Laboratory Investigation

Human subjects decide when to sink a fixed cost C to seize an irreversible investment opportunity whose value V is governed by Brownian motion. The optimal policy is to invest when V first crosses a threshold V * = (1 + w *) C , where the wait option premium w * depends on drift, volatility, and expiration hazard parameters. Subjects in the Low w * treatment on average invest at values quite close to optimum. Subjects in the two Medium and the High w * treatments invested at values below optimum, but with the predicted ordering, and values approached the optimum by the last block of 20 periods.