Entry deterrence and innovation in durable-goods monopoly

This paper investigates the efficiency of innovation investments in a durable-goods monopoly when a potential entrant threatens to innovate as well. We show that the durability of the good endows the monopolist with the power to discourage rival innovation since current sales alter the demand for a new generation of the good. The equilibrium is therefore determined not only by the incentive for intertemporal price discrimination in durable-goods monopoly, but also by the incumbent's concern for maintaining the technological leadership. We demonstrate that entry deterrence followed by no innovation always implies underinvestment in innovation.     

Critical factors in computing externalities for electricity resources

The New York State Environmental Externalities Cost Study and computerized externality model (EXMOD) are used to examine the specification of methods design and application factors in the computation of electricity externalities. We report the sensitivity of externality estimates with alternative specifications for 15 different factors in the analysis, including the selection of facility type, site, and operating characteristics; air emission assumptions and air modeling procedures; dose-response assumptions; economic valuation assumptions; and other modeling procedures and assumptions. Many of the factors that most influence externality computations can be well specified in the analysis, such as the facility type, age, characteristics, emission rates, whether there is SO₂ trading, and the inclusion of long range impacts. Most significant among the factors for which there remains significant scientific uncertainty are the selection and application of air dispersion models, selection of air pollution thresholds for health impacts, reduced life span risks associated with ozone exposure and with long-term exposure to PM₁₀, values for CO₂ damages, and the value to be applied to increased risks of reduced life span for individuals age 65 or older.     

Private R&;D and Spillovers in European Agriculture

The objective of this paper is to present econometric evidence of the effects of economic incentives, public policies, and institutions on national aggregate private agricultural R&D investments. The main hypothesis we will test in this paper is whether agricultural R&D spillovers represent a disincentive for national private R&D. More specifically, we will test if the spillovers function, which is a determinant of private R&D, follows a quadratic form and if private R&D is determined by the role of incentives and institutions.A previous draft of this paper was presented at the 57th International Atlantic Economic Conference, Lisbon, Portugal, 10–14 March 2004. Comments from participants have been very useful to improve the paper.     

Tradeable permits,missing markets,and technology

This paper examines the effects of missing markets, heterogeneous pollutants, and the pollution technology of firms on the efficacy of transferable pollution permits. Under the assumption of perfect competition in all markets, we show that if firms can substitute among pollutants, then setting the optimal number of permits for only one pollutant will not, in general, lead to an efficient outcome. The degree of the inefficiency will depend on the information set available to the regulator and the substitutability among pollutants by firms. When establishing transferable pollution rights regulators should, therefore, consider the technology of firms. If firms discharge pollutants in the same fixed proportions, then the regulator need only set a market for one of the pollutants to ensure an efficient outcome. Where firms can substitute among pollutants, however, establishing a market for only one pollutant provides an incentive for firms to substitute to unregulated ones. This is an important policy issue as substitutability among pollutants within and across production processes may dampen the dynamic advantages of a tradeable permit policy.     

Price determination and dynamic adjustments: An inverse demand system approach to meat products in the United States

In this study the process of retail meat price determination is depicted in the form of an inverse demand system taking into consideration the dynamic adjustments present in monthly consumption data. The general dynamic framework identifies both long run and short run effects in a systematic manner and allows direct estimation of the long run price and scale flexibilities that are consistent with theory. The empirical application based on monthly U.S. meat products data provides reasonable and promising results.The authors are senior econometrician, Department of Risk Management, TRS, American Express Co., Phoenix, and assistant professor, Department of Applied Economics, University of Minnesota, St. Paul, respectively. The work was performed when the first author was an assistant research scientist at the Center for Agricultural and Rural Development, Department of Economics, Iowa State University, Ames. Journal Paper No. J-15784 of the Iowa Agriculture and Home Economics Experiment Station, Ames, Iowa. Project No. 3109.     

Regional Comparisons,Spatial Aggregation,and Asymmetry of Price Pass-Through in U.S. Gasoline Markets

Spot to retail price pass-through behavior of the U.S. gasoline market was investigated at the national and regional levels, using weekly wholesale and retail motor gasoline prices from January 2000 to the present. Asymmetric pass-through was found across all regions, with faster pass-through when prices are rising. Pass-through patterns, in terms of speed and time for completion, were found to vary from region to region. Spatial aggregation was investigated at the national level and the East Coast with the aggregated cumulative pass-through being greater than the volume-weighted regional pass-through when spot prices increase. These results are useful to the petroleum industry, consumers, and policy makers by providing a basis to estimate the retail price effects that result from a change in spot price.     

The Impact of Farmland Transfers on Agricultural Investment in China: A Perspective of Transaction Cost Economics

There is growing concern that farmland transfers lead to less agricultural investment, which may adversely affect agricultural productivity growth in China. Prior research has primarily focused on the differences between owned cultivated land and rented plots, but little is known about how farmland transfers between relatives, which are popular in rural China, specifically affect agricultural investment. In this paper, we present a conceptual framework of transaction cost economics to compare different contracting strategies in China's farmland rental markets. As farmland rental markets in China are immature, land transfer between relatives establishes bilateral governance, which has the advantage of addressing the opportunistic activities of both parties and can ultimately increase investment by tenants. Based on data from two waves of household surveys, we empirically examine the impact of bilateral governance on the application of organic fertilizer, an indicator for agricultural investment. Our findings show that apart from economic factors, kinship is important to the functioning of farmland rental markets in rural areas.     

Party Discipline and Environmental Policy: The Role of “Smoke‐filled Back Rooms”*

We adopt the view that greater party discipline induces legislators to commit to promised policies after being elected. We then develop the hypothesis that the effect of party discipline on the stringency of environmental policy is conditional on the degree of government corruption. Our empirical work suggests that greater party discipline results in more stringent environmental policies when the level of corruption is relatively low, but in weaker policies when the level of corruption is comparatively high.     

Reactions to Shocks and Monetary Policy Regimes: Inflation Targeting Versus Flexible Currency Board in Sub‐Saharan Africa

The paper examines the monetary policy actions through which central banks in sub‐Saharan Africa have tried to eliminate the negative impacts of the shocks facing their economies. We compare two different monetary policy regimes: a currency board regime (in the CFA zone) and an inflation targeting policy regime (Ghana and South Africa) when central banks respond to demand, supply, and fiscal shocks. We extend the usual forecasting and policy analysis system models to replicate the economic features of these economies during the period 2002–12 and to evaluate the impact of several policies in response to these shocks. We find that both policies are inappropriate in helping the economies escape from the effects of negative demand shocks, both are essential when negative shocks to primary balance occur, while inflation targeting dominates the currency board regime as a strategy to cope with positive shocks to inflation.     

Farmers' Preference for Farming: Evidence From a Nationally Representative Farm Survey in India

Using data from a nationally representative farm survey in India, we have analyzed Indian farmers' stated preference for farming as a profession. Findings show that more than 40% of farmers dislike farming as a profession because of low profits, high risk, and lack of social status, yet they continue with it owing to a lack of opportunities outside agriculture. Farmers who express a preference for moving out of agriculture are mostly those with small landholdings, poor irrigation facilities, fewer productive assets including livestock, and follow a cereal‐centric cropping pattern. They also have relatively lower access to credit, insurance, and information, and are weakly integrated with social networks such as self‐help groups and farmers' organizations. Importantly, the disinclination for farming, conditional on other covariates, is not significantly differentiated by caste, an important indicator of social status in rural India. Yet, within a caste group, the dislike for farming moderates with larger landholdings.