Stephen Salant

... But it cannot sustain this market price forever. Since reserves acquired by the government are finite, they cannot satisfy the demand induced by the official price forever-even if the government initially purchased every drop of oil on the planet. ...

A modification of Chung and Fuchs’ (Mem. Amer. Math. Soc., 6 (1951), pp. 1-12) recurrence theorem for random walks leads to an analogous result for a different discrete parameter Markov process. This latter process is applicable to an analysis of price stabilization programs involving purchases and sales from a buffer stock.

In developing countries, consumers can buy many goods from either the formal sector or the informal sector and choose the sector to patronize based on the product's price there and anticipated quality. We assume that firms can produce in either sector and can adjust quality at a cost. In the long run, firms produce in the sector that is more

In markets for fruits, vegetables, and many imported goods, consumers cannot discern quality prior to purchase and can never identify the producer. Producing high-quality, safe goods is costly and raises the "collective reputation" for quality shared with rival firms. Minimum quality standards imposed on all firms improve welfare. If consumers can observe the country of origin of a product, quality,

In past experiments, committees voting under majority rule have often failed to choose the Condorcet alternative (the core). Since this failure of theory might be due to flaws in experimental design, we developed a voting procedure in which the unique element in the core is also the unique outcome when a Nash equilibrium in undominated strategies for the whole game induces a Nash equilibrium in undominated strategies for every subgame. Nevertheless, our committees frequently choose other alternatives. To explain these results, we formulated a new theory that takes account of threshold effects and identifies a "selection set" predicted to contain the committee's choice. The revised theory performs well both in our experiments and in past experiments.

ABSTRACT Efforts to limit cumulative emissions over the next century may be partially thwarted by the responses of fossil fuel suppliers. Current price-cost margins for major reserves are ample, leaving scope for significant price reductions if climate policies reduce demand for fossil fuels through conservation or substitution to clean alternatives. Most models simulating the consequences of climate policies completely disregard these supply responses. As for theoretical models, under standard assumptions they predict such strong supplier responses that climate policies may have no effect on cumulative emissions and may even leave society worse off, suffering damages from global warming sooner and with less time to adapt (the “green paradox”).We contribute to this literature by developing a richer theoretical model that takes account of the different extraction costs and emissons rates of different fossil reserves. We use this model to compare the qualitative effects of four policy options—accelerating cost reductions in the clean backstop technologies, taxing emissions, improving energy efficiency, and a clean fuel blend mandate. We also discuss the consequences of mandating carbon capture and sequestration. All policies can reduce cumulative emissions, but the backstop policy accelerates emissions while conservation policies (energy efficiency or blend mandates) delay emissions. We then calibrate the model using data on costs, reserves, and emissions factors for five major categories of oil. Using this calibrated model, we estimate the interemporal leakage rate—the percentage error in cumulative emissions reductions that would arise if no account is taken of the supply responses of oil producers. We find that conservation policies can have higher intertemporal leakage rates and backstop policies can have lower leakage than an emissions tax. Leakage rates generally decline as the policies become more stringent.

We examine the choice of quotas by legal volume-restricting organi-zations: cartels, commodity agreements, agricultural marketing boards, and prorationing boards. Unlike their illegal counterparts, legal cartels have published regulations and broader enforcement ...

Abstract We consider markets which exhibit collective reputation, that is markets in which consumers cannot discern an individual flrm’s product quality, but rather only the (quantity-weighted) average of all the qualities in the mar- ket. In particular, we consider a model of oligopoly in which flrms have both a quantity and a quality choice. We begin by showing that when the constant per unit cost of production is strictly convex in quality, a flrm would choose to produce only a single quality even if it could choose to produce simulta- neously a larger set of qualities. If identical flrms simultaneously choose its quality and quantity to maximize proflts, a unique Nash equilibrium exists in pure strategies and it is symmetric and interior. A monopolist will pro- duce the socially optimal quality level. As the market becomes less concen- trated, the equilibrium quality level declines. Minimum quality standards can improve economic welfare in less concentrated market structures. We...

We examine the problem of the intertemporal allocation of the solid waste of cities within the United States to spatially distributed landfills and incinerators, taking into account that capacity at existing and potential landfills is scarce. Amendments to the Solid Waste Disposal Act have been proposed to restrict waste flows between states by means of quotas and surcharges. We assess the aggregate surplus loss (and its regional distribution) resulting from proposed policies. In addition, we find that limitations on the size of shipments to any one state will have the perverse e#ect of substantially increasing interstate waste shipments as states export smaller volumes to more destinations. Keywords. Solid Waste, E#ciency JEL Classification System. C6, D6, Q3 Address. Eduardo Ley: FEDEA, Jorge Juan 46, ES-28001 Madrid. Phone: (+34-1) 435 0401. Fax: (+34-1) 577 9575. Email: edley@fedea.es. Molly Macauley: Resources for the Future, 1616 P St NW, Washington DC 20036. Pho...

this paper are entirely those of the author(s) and not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent.Working papers describe research in progress by the author(s) and are published to elicit comments and to further debate Summary Although much interesting work has been done by economists such as Francis, Kremer and Philipson on infectious diseases, this literature does not set out the general structure of the externalities involved in such situations. This paper provides a general framework for discussing these externalities and the role for government interventions to offset them. It moves the discussion away from its focus on HIV, a fatal infection for which there are few interventions, and its focus on vaccinations, that are plausibly discrete decisions, to more general ideas of prevention and cure that are applicable to many more diseases in which interventions exhibit a continuum of intensities subject to diminishing...

Stabilizing greenhouse gas concentrations requires limiting cumulative emissions over the next century. Yet efforts to do so may be offset by emissions leakage, not only between countries but over time. Current price-cost margins for some of the world's largest reserves are considerable, so there is ample scope for price reductions if clean substitutes become cheap enough to threaten to lure consumers away from fossil fuels. Furthermore, a faster transition to clean energy may accelerate emissions. We contribute to the "green paradox" literature by comparing the effects of five policy options: accelerating cost reductions in the clean backstop, taxing emissions, improving energy efficiency, mandating a blend of fossil and clean fuels, and mandating carbon capture and sequestration (CCS). We examine these alternative policies in a model where reserves differ in extraction costs. In a stylized two-pool model used to motivate our analysis, we identify four "regions&q...

We examine the choice of quotas by legal volume-restricting organi-zations: cartels, commodity agreements, agricultural marketing boards, and prorationing boards. Unlike their illegal counterparts, legal cartels have published regulations and broader enforcement ...

ABSTRACT Efforts to limit cumulative emissions over the next century may be partially thwarted by the responses of fossil fuel suppliers. Current price-cost margins for major reserves are ample, leaving scope for significant price reductions if climate policies reduce demand for fossil fuels through conservation or substitution to clean alternatives. Most models simulating the consequences of climate policies completely disregard these supply responses. As for theoretical models, under standard assumptions they predict such strong supplier responses that climate policies may have no effect on cumulative emissions and may even leave society worse off, suffering damages from global warming sooner and with less time to adapt (the “green paradox”).We contribute to this literature by developing a richer theoretical model that takes account of the different extraction costs and emissons rates of different fossil reserves. We use this model to compare the qualitative effects of four policy options—accelerating cost reductions in the clean backstop technologies, taxing emissions, improving energy efficiency, and a clean fuel blend mandate. We also discuss the consequences of mandating carbon capture and sequestration. All policies can reduce cumulative emissions, but the backstop policy accelerates emissions while conservation policies (energy efficiency or blend mandates) delay emissions. We then calibrate the model using data on costs, reserves, and emissions factors for five major categories of oil. Using this calibrated model, we estimate the interemporal leakage rate—the percentage error in cumulative emissions reductions that would arise if no account is taken of the supply responses of oil producers. We find that conservation policies can have higher intertemporal leakage rates and backstop policies can have lower leakage than an emissions tax. Leakage rates generally decline as the policies become more stringent.

ABSTRACT Previous analyses assumed that ?firms must surrender permits as they pollute. If so, then the price of permits may remain constant over measurable intervals if the government injects additional permits at a ceiling price or may even collapse if more permits are injected through an auction (Hasegawa and Salant 2012). However, no cap-and-trade program actually requires continual compliance. The three federal bills and California'?s AB-32, for example, instead require that ?firms surrender permits only periodically to cover their cumulative emissions since the last compliance period. Anticipated injections of additional permits during the compliance period should have different effects than under continual compliance. We develop a methodology for analyzing the effects of such permit injections. Using it, we explain why the sales provisions of one federal bill (Kerry-Lieberman) might generate a speculative attack in the permit market and why one provision of AB-32 may undermine the very existence of an equilibrium.

As developing countries become major consumers of the global supply of commercial energy, it is essential to understand the determinants of future energy prices. At the same time, many developing countries are relying on exports of their own natural resources - tropical hardwoods, oil, tin, gold, and other minerals - to generate badly needed foreign exchange. Government policies influence how

The length of time people spend on average looking for work is viewed by many as an important index of economic welfare. It would seem that such information could be readily obtained by consulting the monthly report on the "duration of unemployment" compiled by the Bureau ...

A modification of Chung and Fuchs’ (Mem. Amer. Math. Soc., 6 (1951), pp. 1-12) recurrence theorem for random walks leads to an analogous result for a different discrete parameter Markov process. This latter process is applicable to an analysis of price stabilization programs involving purchases and sales from a buffer stock.