1,721,005 research outputs found
The Allen/Uzawa Elasticity of Substitution as a Measure of Gross Input Substitutability
No full textThe Allen/Uzawa elasticity of substitution, still commonly used in the empirical studies to account for net substitutability, has been subject to a number of theoretical criticisms. In this paper we reconsider the Allen/Uzawa elasticity of substitution as a measure of gross substitutability, and show that to this relevant purpose it can be meaningfully interpreted in conjunction with the returns-to-scale properties of the technology
Pricing to Market in the Krugman Model
No full textWe examine the role of per capita income in closed and open economy models of monopolistic competition based on non-homothetic directly additive preferences à la Dixit-Stiglitz, as in Krugman (1979). In a closed economy with free entry income is always neutral on markups and firm size. In a two-country trade model without transport costs, markups are higher in the country with higher income if the elasticity of substitution is decreasing in consumption. Pricing to market also emerges with transport costs
Note sulla teoria dell'intervento mediante spesa pubblica
No full textL'articolo è una rassegna di recenti contributi riguardanti la teoria economica del comportamento delle imprese pubbliche
Why regulate prices? Some notes on the price cap methods
No full textWe consider some recent criticisms of price cap methods of regulation, suggesting that many theoretical arguments, based on the so-called Bayesian approach, do not in fact provide practicable alternatives. We then investigate the use of quantity regulatory methods, i.e. output floors, and find that on closer examination these methods seem less promising than one might have thought. As a preliminary conclusion, we retain the opinion that price caps still stand as a sound regulatory method
A Note on Third-Degree Price Discrimination and Output
Full text linkIt is known that monopolistic third-degree price discrimination decreases aggregate welfare if total output falls. In contrast to Adachi (this Journal, 2002), this note shows that welfare must decrease under price discrimination even if total output remains constant
Monopolistic Price Flexibility and Social Welfare: The Linear Case
Full text linkWe re-examine the case for uniform pricing in a monopolistic third-degree price-discrimination setting by introducing differentiated costs. Intuitively, the monopolist would like to use differentiated pricing also to decrease the average total cost, unless marginal costs are “perversely” correlated with demand elasticities. Indeed, monopolistic price differentiation can improve welfare and also aggregate consumer surplus even if, as in the benchmark linear case, total output does not increase. Accordingly, the welfare criterion based on total output fails and should be replaced by the computation of well-defined price indexes. These results pave the way for a more optimistic assessment of monopolistic pricing
Reserve prices in all-pay auctions with incomplete information
No full textWe introduce reserve prices in the literature concerning all-pay auctions with complete information, and reconsider the case for the so-called Exclusion Principle (namely, the fact that the seller may find it in her best interest to exclude the bidders with the largest willingness to pay for the prize). We show that a version of it extends to our setting. However, we also show that the Exclusion Principle: a) does not apply if the reserve price is large enough; 2) does not extend if the seller regards bidders’ valuations as identically independently distributed according to a monotonic hazard rate. Preliminary results for the case of independent ex-ante asymmetric bidders suggest that the case for it in settings with positive reserve prices is actually tenuous
Monopolistic Marginal Cost Pricing
No full textIt is usually argued that the monopolistic pricing distortion arises because "a monopoly can raise its price above marginal cost without losing all its clients" (Tirole, 1988). We discuss a simple well-behaved example in which: i) monopoly price gets as close as desired to marginal cost, and ii) nevertheless it is associated to a significant dead-weight welfare loss
Logarithmic quasi-homethetic preferences
Full text linkWe study a class of quasi-homothetic preferences, which result in demands that are logarithmic in own prices when these have a negligible impact on aggregate prices (as in monopolistic competition models). Thus marginal revenues are computationally friendly and well behaved
Some notes on CE(S) production functions
Full text linkWe reconsider the CES production functions, focusing on their additive separability properties and the constraints these impose on dual elasticites of gross substitution and complementarity. In particular, we offer some alternative characterizations of the (standard) homogeneous cases that seem to have gone unnoticed, as far as we know. We also start exploring the cases of the (additively separable) non-homothetic technologies that satisfy constancy conditions for the mentioned dual elasticities
- …
