EXCISE TAXES AND COMMODITY PROMOTION: BAYESIAN RETRIEVAL OF THE OPTIMUM

This article shows how the solution to the promotion problem--—the problem of locating the optimal level of advertising in a downstream market--—can be derived simply, empirically, and robustly through the application of some simple calculus and Bayesian econometrics. We derive the complete distribution of the level of promotion that maximizes producer surplus and generate recommendations about patterns as well as levels of expenditure that increase net returns. The theory and methods are applied to quarterly series (1978:2S1988:4) on red meats promotion by the Australian Meat and Live-Stock Corporation. A slightly different pattern of expenditure would have profited lamb producers.Bayesian estimation, commodity promotion as an experiment, distribution of the optimum, Taylor-series expansion, Livestock Production/Industries, Marketing,

Adoption of Certified Organic Production: Evidence from Mexico

Adoption of organic production and subsequent entry into the organic market is examined using Mexican avocado producers as a case study. Probit analysis of a sample of 183 small-scale (<15ha) producers from Michoacán suggests that adoption is positively influenced by management and economic factors (e.g. production costs per hectare and making inputs), but also by social factors (e.g. membership of a producers’ association). Experience in agriculture has a significant but negative effect. Effective policy design must be therefore be aware of both the economic and social complexities surrounding adoption decisions

Competition and Human Capital Accumulation: A Theory of Interregional Specialization and Trade

We consider a model with several regions whose technological ability and factor endowments are identical and in which transport costs between regions are non-negligible. Nonetheless, certain goods are sometimes produced by multiple firms all of which are located in the same region. These goods are then exported from the regions in which their production is agglomerated. Regional agglomeration of production and trade stem from two forces. First, competition between firms for the services of trained workers is necessary for the workers to recoup the cost of acquiring industry-specific human capital. Second, the technology of production is more efficient when plants are larger than a minimum efficient scale and local demand is insufficient to support several firms of that scale. We also study the policy implications of our model.

Bayesian Ranking and Selection of Fishing Boat Efficiencies

The steadily accumulating literature on technical efficiency in fisheries attests to the importance of efficiency as an indicator of fleet condition and as an object of management concern. In this paper, we extend previous work by presenting a Bayesian hierarchical approach that yields both efficiency estimates and, as a byproduct of the estimation algorithm, probabilistic rankings of the relative technical efficiencies of fishing boats. The estimation algorithm is based on recent advances in Markov Chain Monte Carlo (MCMC) methods—Gibbs sampling, in particular—which have not been widely used in fisheries economics. We apply the method to a sample of 10,865 boat trips in the US Pacific hake (or whiting) fishery during 1987–2003. We uncover systematic differences between efficiency rankings based on sample mean efficiency estimates and those that exploit the full posterior distributions of boat efficiencies to estimate the probability that a given boat has the highest true mean efficiency.Ranking and selection, hierarchical composed-error model, Markov Chain Monte Carlo, Pacific hake fishery, Resource /Energy Economics and Policy, Q2, L5, C1,

The Relative Rigidity of Monopoly Pricing

This paper seeks to explain why monopolies keep their nominal prices constant for longer periods than do tight oligopolies. We provide two possible explanations. The first is based on the presence of a small fixed cost of changing prices. The second, on small costs of discovering the optimal price. The incentive to change price for duopolists producing differentiated products exceeds that of a single monopolistic firm which produced the same tange of products as the duopoly.

A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms

This paper studies implicitly colluding oligopolists facing fluctuating demand. The credible threat of future punishments provides the discipline that facilitates collusion. However, we find that the temptation to unilaterally deflate from the collusive outcome is often greater when demand is high. To moderate this temptation,the optimizing oligopoly reduces its profitability at such times,resulting in lower prices. If the oligopolists' output is an input to other sectors, their output may increase too. This explains the co-movements of outputs which characterize business cycles. The behavior of the railroads in the 1880's, the automobile industry in the 1950's and the cyclical behavior of cement prices and price-cost margins support our theory. (J.E.L. Classification numbers:020, 130, 610).

Quotas and the Stability of Implicit Collusion

This paper shows that the imposition of an import quota by one country can lead to increased competitiveness; protection can reduce the price in the country that imposes the quota, the foreign country, or both. This emerges from a model in which the firms are assumed to sustain collusion by the threat of reversion to more competitive pricing. We consider both prices and quantities as the strategic variables and study competition both in the domestic and the foreign market taken individually, and in the two markets taken together.

Cloning Dropouts: Implications for Galaxy Evolution at High Redshift

The evolution of high redshift galaxies in the two Hubble Deep Fields, HDF-N and HDF-S, is investigated using a cloning technique that replicates z~ 2-3 U dropouts to higher redshifts, allowing a comparison with the observed B and V dropouts at higher redshifts (z ~ 4-5). We treat each galaxy selected for replication as a set of pixels that are k-corrected to higher redshift, accounting for resampling, shot-noise, surface-brightness dimming, and the cosmological model. We find evidence for size evolution (a 1.7x increase) from z ~ 5 to z ~ 2.7 for flat geometries (Omega_M+Omega_LAMBDA=1.0). Simple scaling laws for this cosmology predict that size evolution goes as (1+z)^{-1}, consistent with our result. The UV luminosity density shows a similar increase (1.85x) from z ~ 5 to z ~ 2.7, with minimal evolution in the distribution of intrinsic colors for the dropout population. In general, these results indicate less evolution than was previously reported, and therefore a higher luminosity density at z ~ 4-5 (~ 50% higher) than other estimates. We argue the present technique is the preferred way to understand evolution across samples with differing selection functions, the most relevant differences here being the color cuts and surface brightness thresholds (e.g., due to the (1+z)^4 cosmic surface brightness dimming effect).Comment: 56 pages, 22 figures, accepted for publication in Ap