The Limit of Public Policy: Endogenous Preferences

In designing public policy it is not enough to consider the possible reaction of individuals to the chosen policy.Public policy may also affect the formation of preferences and norms in a society.The endogenous evolution of preferences, in addition to introducing a conceptual difficulty in evaluating policies, may also eventually affect actual behavior.In order to demonstrate the implications of endogenous preferences on the design of optimal public policy, we present a model in which a subsidy policy is set to encourage contributions towards a public good.However this policy triggers an endogenous preference change that results in a lower level of contribution towards the public good despite the explicit monetary incentives to raise that level.public policy

Longitudinal flying qualities criteria for single-pilot instrument flight operations

Modern estimation and control theory, flight testing, and statistical analysis were used to deduce flying qualities criteria for General Aviation Single Pilot Instrument Flight Rule (SPIFR) operations. The principal concern is that unsatisfactory aircraft dynamic response combined with high navigation/communication workload can produce problems of safety and efficiency. To alleviate these problems. The relative importance of these factors must be determined. This objective was achieved by flying SPIFR tasks with different aircraft dynamic configurations and assessing the effects of such variations under these conditions. The experimental results yielded quantitative indicators of pilot's performance and workload, and for each of them, multivariate regression was applied to evaluate several candidate flying qualities criteria

Consent and Exchange

In some cases, the law permits a party that unilaterally provides a benefit to another party to recover the estimated value of this benefit. Despite calls for expanding the set of cases to which such a restitution rule applies, the law commonly applies a mutual consent rule under which a party providing another with a benefit cannot obtain any recovery without securing the advance consent of the beneficiary to the transaction. We provide an efficiency rationale for the undesirability of broad use of the restitution rule by identifying significant adverse ex ante effects of the rule that are avoided by the consent requirement. Even assuming that courts' errors in estimating buyer benefits would be unbiased, a restitution rule would strengthen sellers' hand by providing them with a put option that they may but do not have to use. As a result, the restitution rule would encourage inefficient market entry by low-quality sellers that would not contribute to any efficient transactions but would be able to extract payments from buyers seeking to avoid an exchange with them. Furthermore, the restitution rule would discourage efficient market entry by some or all potential buyers of a good or service. Beyond the restitution rule, we extend our analysis to show that similar adverse effects can also arise from other "pricing" rules that provide buyers or sellers with call or put options to force an exchange at a judicially-determined price.

The Market for Corporate Law

This paper develops a model of the competition among states in providing corporate law rules. The analysis provides a full characterization of the equilibrium in this market. Competition among states is shown to produce optimal rules with respect to issues that do not have a substantial effect on managers' private benefits but not with respect to issues (such as takeover regulation) that substantially affect these private benefits. We analyze why a Dominant state such as Delaware can emerge, the prices that the dominant state will set and the profits it will make. We also analyze the roles played by legal infrastructure, network externalities, and the rules governing incorporations. The results of the model are consistent with, and can explain, existing empirical evidence; they also indicate that the performance of state competition cannot be evaluated on the basis of how incorporation in Delaware in the prevailing market equilibrium affects shareholder wealth.

Willingness to Pay: A Welfarist Reassessment

From a welfarist perspective, willingness to pay (WTP) is relevant only as a proxy for individual preferences or utilities. Much of the criticism levied against the WTP criterion can be understood as saying that WTP is a bad proxy for utility, or that WTP contains limited information about preferences. Specifically, critics of WTP claim wealth effects prevent it from serving as a good proxy for utility. I formalize and extend this critique by developing a methodology for quantifying the informational content of WTP. The informational content of WTP depends on how WTP is measured and applied. First, I distinguish between two types of policies: (i) policies that are not paid for by the individuals they affect and (ii) policies that are paid for by the individuals they affect. Second, I distinguish between two types of WTP measures: (i) individualized WTP and (ii) uniform, average WTP (like the value of a statistical life). When the cost of the policy is not borne by the affected individuals, individualized WTP has low informational content and increases wealth disparity. Uniform, average WTP has higher informational content and reduces wealth disparity, at least in the case of universal benefits. Therefore, when possible, a uniform, average WTP should be preferred in this scenario. When the cost of the policy is borne by the affected individuals, individualized WTP has high informational content but increases wealth disparity. Uniform, average WTP has lower informational content and indeterminate distributional implications. Here, the choice between individualized WTP and uniform, average WTP is more difficult

Bundling and Consumer Misperception

This Essay studies bundling of two (or more) products as a strategic response to consumer misperception. In contrast to the bundling and tying studied in the antitrust literature-strategies used by a seller with market power in market A trying to leverage its market power into market B-bundling in response to consumer misperception may occur in intensely competitive markets. The analysis demonstrates that such competitive bundling can be either welfare enhancing or welfare reducing. The Essay considers several unbundling policies that can protect consumers and increase welfare in markets where bundling is undesirable