Prices vs. Quantities with incomplete enforcement and different enforcement probabilities

Regulating inter-country externalities, like climate change, raises various enforcement problems. It is often argued that international pricebased regulations (e.g. emission taxes) are more difficult to enforce than quantity-based regulations (e.g. tradable pollution permits). In this paper, we analyze the relative performance of price-based and quantity-based instruments for cases where costs and benefits are uncertain and enforcement of quantity regimes is stricter than for price-based regimes. We show that under these conditions, instrument choice solely based on the relative slopes of the marginal costs can be inefficient. If enforcement probabilities differ, rational policy choice should also take into account the level of the marginal benefit curve, as well as institutional parameters. In contrast to earlier analyses on Prices vs. Quantities, we find that the difference in welfare for both policy instruments also depends on the variance of the marginal abatement costs. Furthermore, numerical simulations of our stylized model suggest that, for climate policies, quantity-regulations might well be preferable to price-based approaches after all. --market-based instruments,incomplete enforcement,environmental regulation,uncertainty

Universal Quantum Computing with Spin and Valley

We investigate a two-electron double quantum dot with both spin and valley degrees of freedom as they occur in graphene, carbon nanotubes, or silicon, and regard the 16-dimensional space with one electron per dot as a four-qubit logic space. In the spin-only case, it is well known that the exchange coupling between the dots combined with arbitrary single-qubit operations is sufficient for universal quantum computation. The presence of the valley degeneracy in the electronic band structure alters the form of the exchange coupling and in general leads to spin-valley entanglement. Here, we show that universal quantum computation can still be performed by exchange interaction and single-qubit gates in the presence of the additional (valley) degree of freedom. We present an explicit pulse sequence for a spin-only controlled-NOT consisting of the generalized exchange coupling and single-electron spin and valley rotations. We also propose state preparations and projective measurements with the use of adiabatic transitions between states with (1,1) and (0,2) charge distributions similar to the spin-only case, but with the additional requirement of controlling the spin and the valley Zeeman energies by an external magnetic field. Finally, we demonstrate a universal two-qubit gate between a spin and a valley qubit, allowing universal gate operations on the combined spin and valley quantum register.Comment: 18 pages, 3 figures, 1 tabl

Optimization of electron pumping by harmonic mixing

For a symmetric bridge coupled to infinite leads, in the presence of a dipole-coupled external ac-field with harmonic mixing, we solve the Schr\"odinger equation in the time-domain using open boundary conditions as well as in the energy-domain using Floquet scattering theory. As this potential breaks parity and generalized parity, we find a non-vanishing average current. We then optimize the relative amplitude ratio between the fundamental and the second harmonic leading to a maximum in the pump current.Comment: 13 pages, 6 figures, accepted at Phys. Rev. B, http://prb.aps.org/accepted/B/7b073O7dMc412f17647d3877ee3ac5c3e271dcb1

Prices vs. Quantities with Fiscal Cushioning

Regulating international externalities, like climate change, raises various enforcement problems. It is often argued that international price-based regulations (e.g. emission taxes) are more difficult to enforce than quantity-based regulations (e.g. tradable pollution permits). In this paper, we analyze the relative performance of price-based and quantity-based instruments when costs and benefits are uncertain and enforcement of quantity regimes is stricter than that of price regimes. We show that under these conditions, instrument choice solely based on the relative slopes of the marginal curves can yield inefficient results. If policy enforcement differs, rational policy choice should also take into account the level of the marginal benefit curve, as well as institutional parameters. In contrast to earlier analyses on "Prices vs. Quantities", we find that the choice of instrument also depends on the variance of the marginal abatement costs. Numerical simulations of our stylized model suggest that, for climate policies, quantity-regulations might well be preferable to price-based approaches after all.market-based instruments, incomplete enforcement, uncertainty, environmental regulation

Loan Rate Stickiness: Theory and Evidence

Financial deregulation in the 1980s saw the lifting of regulations on interest rates charged by banks. In general, lending rates now respond more quickly to changes in banks’ cost of funds than they did in the regulated period. However, lending rates still do not always move one for one with changes in banks’ marginal cost of raising funds. This paper canvasses four theoretical explanations, other than collusive behaviour, for loan rate stickiness. These theories are based on equilibrium credit rationing, switching costs, implicit risk sharing and consumer irrationality. Using regression analysis, we also examine the degree of stickiness of Australian interest rates on secured and unsecured personal loans, credit cards, small and large business overdrafts, and housing loans. We find significant differences in the degree of interest rate stickiness among the different rates, even after allowing for lags in adjustment. The rate on credit cards is found to be the most sticky, followed by personal loan rates, the housing loan rate and the small business overdraft rate. The large business overdraft rate is found to adjust one for one with banks’ marginal cost of funds. We briefly examine the behaviour of selected U.S., U.K. and Canadian interest rates. The general order and magnitude of interest rate stickiness is similar to that found for Australia. Although it is not possible to empirically discriminate between the different theories of loan rate stickiness, we interpret the results as providing strong evidence for the switching cost explanation. In addition, implicit risk sharing probably plays an important role in the stickiness of the housing loan rate.

Some Tests of Competition in the Australian Housing Loan Market

In this paper we investigate the degree of competition in the market for housing loans by examining a new data set, the asset composition of individual banks. We construct a Herfindahl index of concentration in this market, and estimate a model of conjectural variations to examine the reactions of each bank to changes in the value of loans made by other banks. Certain forms of competition are nested within this framework. Our findings lead us to decisively reject the hypotheses of perfect competition and perfect collusion. We are unable to reject the hypothesis that this market can be characterised as a Cournot oligopoly.