A Primer on Profit Maximization

Although textbooks in intermediate microeconomics and managerial economics discuss the first-order condition for profit maximization (marginal revenue equals marginal cost) for pure competition and monopoly, they tend to ignore the second-order condition (marginal cost cuts marginal revenue from below). Mathematical economics textbooks also tend to provide only tangential treatment of the necessary and sufficient conditions for profit maximization. This paper fills the void in the textbook literature by combining mathematical and graphical analysis to more fully explain the profit maximizing hypothesis under a variety of market structures and cost conditions. It is intended to be a useful primer for all students taking intermediate level courses in microeconomics, managerial economics, and mathematical economics. It also will be helpful for students in Master’s and Ph.D. programs in economics and in MBA programs. Moreover, the paper provides instructors with an effective supplement when explaining the profit-maximization concept to student

Evaluating coasean bargaining experiments with meta-analysis

While the Coase Theorem has been a touchstone for understanding bargaining behavior, it has also been criticized for relying on unrealistic assumptions. In response, a line of experimental research analyzes bargaining behavior in laboratory settings. This paper uses meta-analysis to evaluate the Coasean bargaining literature by modeling the probability of an efficient bargain as a function of: (1) measures of transaction costs and related variables, and (2) measures of the social dimensions of a bargain. Results suggest that efficient solutions are more likely when explicit transaction costs do not exist, in the absence of a binding time limit, and when participants have perfect information on payoff schedules. Social dimension variables are found to have the potential to affect bargaining outcomes and are an important avenue for further research.Coase Theorem

Inducing Private Wildfire Risk Mitigation: Experimental Investigation of Measures on Adjacent Public Lands

Increasing private wildfire risk mitigation is an important part of the larger forest restoration policy challenge. Data from an economic experiment are used to evaluate the effectiveness of providing fuel treatments on public land adjacent to private land to induce private wildfire risk mitigation. Results show evidence of “crowding out” where public spending can decrease the level of private risk mitigation. However, a policy prescription that ameliorates this crowding out is identified. Participants undertake more mitigation when fuel treatments on publicly owned lands are conditional on a threshold level of private mitigation effort and information describing each participant’s spending is provided. Key Words:

Building Social Capital in Forest Communities: Analysis of New Mexico\u27s Collaborative Forest Restorative Program

In part because of its emphasis on building social capital, the Collaborative Forest Restoration Program (CFRP) in New Mexico represents a unique experiment in public lands management. This study uses logit probability modeling to investigate what factors determined CFRP funding, which totaled $26 million between 2001 and 2006. Results reveal program preferences for projects that encourage collaboration and improve forest health, especially in poor counties. Negative determinants of funding include measures of small-diameter material utilization and whether a project takes place across multiple land jurisdictions. There is no evidence of bias toward funding any particular applicant type or land jurisdiction

Inducing private wildfire risk mitigation: Experimental investigation of measures on adjacent public lands

Increasing private wildfire risk mitigation is an important part of the larger forest restoration policy challenge. Data from an economic experiment are used to evaluate the effectiveness of providing fuel treatments on public land adjacent to private land to induce private wildfire risk mitigation. Results show evidence of “crowding out” where public spending can decrease the level of private risk mitigation. However, a policy prescription that ameliorates this crowding out is identified. Participants undertake more mitigation when fuel treatments on publicly owned lands are conditional on a threshold level of private mitigation effort and information describing each participant’s spending is provided

Dictator Games: A Meta Study

Over the last 25 years, more than a hundred dictator game experiments have been published. This meta study summarizes the evidence. Exploiting the fact that most experiments had to fix parameters they did not intend to test, the meta study explores a rich set of control variables for multivariate analysis. It shows that Tobit models (assuming that dictators would even want to take money) and hurdle models (assuming that the decision to give a positive amount is separate from the choice of amount, conditional on giving) outperform mere meta-regression and OLS

The Temptation of Protectionism and American Trade Policy

The financial crisis that began in 2007 and gained momentum in 2008 shoved the world economy into a severe economic slump that some have called the Great Recession. The crisis originated in the United States housing market and quickly spread throughout the economies of the US, Canada and Europe. Soon these countries were importing fewer goods produced by emerging countries and the crisis became global. International trade collapsed at a pace unseen since the Great Depression of the 1930s. What accounted for the rapid decline in trade

The Temptation for Protectionism and American Trade Policy

The Great Recession of 2007–2009 originated in the United States and quickly spread throughout the economies of Canada and Europe. Soon these countries imported fewer goods produced by emerging countries and the crisis became global. International trade collapsed at a pace unseen since the Great Depression of the 1930s. As trade declined, countries increasingly faced the temptation to impose restrictions on imports so as to protect sales and jobs of domestic firms and workers. This paper examines the pressures for protectionism that have occurred during the Great Recession and its aftermath. It also examines the lessons from the escalation of protectionism during the 1930s and applies these to the current situation. Several cases of recent protectionist policies are examined to illustrate these points.

Addressing the Private Wildfire Risk Mitigation Paradox in a Climate-Altered Wildland Urban Interface

Increased climate variability is anticipated to increase the length and severity of wildfire seasons in the Western U.S. The continued expansion of the Wildland Urban Interface (WUI) compounds the threat homeowners living in these regions face from wildfire. Subsequently, there is a defined need to identify policy options that encourage WUI homeowners to undertake wildfire risk mitigation actions. Such behaviors not only reduce risk to the homeowner but to their neighbors as well. This chapter presents findings from a set of computerized economic experiments designed to examine the effectiveness of using costsharing and contingent insurance regimes to incentivize homeowner mitigation. Results suggest that, while the policy treatments were effective in increasing the probability, an experiment subject undertook at least some mitigation, there was “crowding out” under the treatment regimes. The dissemination of information on subject mitigation actions is shown to mute the potential for “crowding out”