Carbon leakage: Grandfathering as an incentive device to avert relocation

Emission allowances are often distributed for free in an early phase of a cap-and-trade scheme (grandfathering) to reduce adverse effects on the profitability of firms. If the grandfathering scheme is phased out over time, firms may nevertheless relocate to countries with a lower carbon price once the competitive disadvantage of their home industry becomes sufficiently high. We show that this is not necessarily the case. A temporary grandfathering policy can be a sufficient instrument to avert relocation in the long run, even if immediate relocation would be profitable in the absence of grandfathering. A necessary condition for this is that the permit price triggers investments in low-carbon technologies or abatement capital

Market Share Dynamics in a Model with Search and Word-of-Mouth Communication

This paper analyzes price competition in an infinitely repeated duopoly game. In each period, consumers remember the existence and location of their previous supplier. New information is gathered via search or word-of-mouth communication. Market outcomes are history-dependent, and the Markov perfection refinement is used to narrow the set of equilibria. Firms are shown to use mixed pricing strategies in equilibrium. The resulting price dispersion generates non-trivial market share dynamics. The goal of the paper is to characterize these dynamics, and to reveal the driving forces behind them

Carbon leakage: Grandfathering as an incentive device to avert relocation

Emission allowances are often distributed for free in an early phase of a cap-and-trade scheme (grandfathering) to reduce adverse effects on the profitability of firms. If the grandfathering scheme is phased out over time, firms may nevertheless relocate to countries with a lower carbon price once the competitive disadvantage of their home industry becomes sufficiently high. We show that this is not necessarily the case. A temporary grandfathering policy can be a sufficient instrument to avert relocation in the long run, even if immediate relocation would be profitable in the absence of grandfathering. A necessary condition for this is that the permit price triggers investments in low-carbon technologies or abatement capital.climate policy; emissions trading; grandfathering; leakage; cap-and-trade

Market Share Dynamics in a Model with Search and Word-of-Mouth Communication

This paper analyzes price competition in an infinitely repeated duopoly game. In each period, consumers remember the existence and location of their previous supplier. New information is gathered via search or word-of-mouth communication. Market outcomes are history-dependent, and the Markov perfection refinement is used to narrow the set of equilibria. Firms are shown to use mixed pricing strategies in equilibrium. The resulting price dispersion generates non-trivial market share dynamics. The goal of the paper is to characterize these dynamics, and to reveal the driving forces behind them.repeat purchasing; search; customer loyalty; lock-in; mixed pricing

The Timing of Climate Agreements under Multiple Externalities

We study the potential of cooperation in global emission abatements with multiple externalities. Using a two-country model without side-payments, we identify the strategic effects under different timing regimes of cooperation. We obtain a positive complementarity effect of long-term cooperation in abatement on R&D levels that boosts potential bene?t of long-term cooperation and a redistributive effect that destabilizes long-term cooperation when countries are asymmetric. We show that whether and what type of cooperation is sustainable, depends crucially on the kind rather than on the magnitude of asymmetries

Modeling Institutional Production of Higher Education

This study examines the input-output relationship for private undergraduate education. The objective s to identify the relative contributions of human and physical resources in the production of quality undergraduate education. The research methods are noteworthy in three general respects. First, the theoretical orientation emphasized interdependence among inputs and outputs in higher education. The significance of simultaneity is demonstrated in an empirical model estimated via a three-stage least-squares technique. Second, the study introduces an original and promising data set for research in higher educational production. Of special note is an index of output reflecting the quantity and quality of institutional production. Finally, the exclusive emphasis on private undergraduate institutions offers a well focused perspective for policy decisions in higher education. The report is organized as follows. Section 1 discusses the focus and contribution of this research in relation to the economics literature. Section 2 specifies a simultaneous model of educational production. Section 3 describes the data, variables, and estimation procedures. Empirical results appear in Section 4. Section 5 presents concluding remarks and suggestions for future research

Modeling Institutional Production of Higher Education

This paper follows an earlier article in which we examined the production process of higher education. Two aspects of the original study serve as the basis for this paper and thus warrant brief review. First, we have argued that educational production does not lend it self to analysis as a production function in the classic sense. A simple production rendering ignores the fact that two of the more important factors, students and faculty, enter the process upon considerable self-selection, especially among the more highly qualified of these inputs. This reasoning led us to model educational production as a three-equation simultaneous system in which the quality of students , faculty, and college output were treated endogenously. The results of that research confirmed the strength of interdependencies existing among the endogenous variables, thus recommending simultaneous estimation as the appropriate methodology for evaluating factors in educational production

Assessing the Competitive Effects of Major League Baseball\u27s Reentry Draft

Major League Baseball’s reentry draft was instituted under the Basic Agreement of 1976. This contract marked the end of a rough ten-year period of increasing dispute between baseball owners and players, and the beginning of a significant modification in the labor market arrangements that governed the sport. Prior to the 1977 season, the reserve clause left players\u27 mobility, and thus bargaining strength, entirely to the discretion of the team with which they had signed as rookies. Revision of the reserve clause under the 1976 Agreement created a competitive auction market for the services of veteran players. To the public eye, the important consequences of this reentry market have appeared twofold: 1) the escalating player salaries; and 2) player reallocations, possibly to the detriment of competitive balance

Assessing the Impact of Expenditure on Achievement in Virginia Public Education

The strength of the relationship between student achievement and school resources has important implications for public policy in general, and for the appropriate role of state funding in local education in particular. It is well known that, to the extent that higher expenditures render improved educational performance, vexing issues of legal and economic equity arise. Of course, it is also well known that the findings of extensive empirical analysis suggest that the expenditure-achievement nexus is, at best, of secondary importance among the factors affecting education. This paper examines the relationship between achievement and expenditure in Virginia public schools. Our focus falls in the category of education production studies which have taken an essentially macro orientation. These studies use cross-sectional and/or longitudinal observations aggregated at a school or school district level. This method thus relates average achievement by district to the level of physical and financial resources (class-size, library volumes, instructional expenditure, etc.). While the policy inferences which can flow from this approach are straightforward, there is concern whether more highly aggregated data are able to capture important details of the educational process. This is the most common explanation offered for the failure of the more highly aggregated studies in demonstrating a significant link between school resources and achievement

Conduct, Performance, and Public Policy Implications of Baseball\u27s Reentry Draft

This paper examines issues of theory and evidence regarding the link between baseball\u27s reentry draft and league balance. The character of this relationship is important in at least two broad respects. First, from the standpoint of public policy, events which potentially affect competitiveness in professional baseball are especially significant in light of the sport\u27s rather curious antitrust immunity. Second, though the redistributive implications of baseball\u27s labor market have been set forth quite clearly in the economic literature, the conventional prediction that team balance will be unaffected by the reentry draft has not been tested