42 research outputs found
Consumer behaviour in a social context : implications for environmental policy
No full textIn this paper we summarise some of our recent work on consumer behaviour, drawing on recent developments in behavioural economics, in which consumers are embedded in a social context, so their behaviour is shaped by their interactions with other consumers. For the purpose of this paper we also allow consumption to cause environmental damage. Analysing the social context of consumption naturally lends itself to the use of game theoretic tools, and indicates that we seek to develop links between economics and sociology rather than economics and psychology, which has been the more predominant field for work in behavioural economics. We shall be concerned with three sets of issues: conspicuous consumption, consumption norms and altruistic behaviour. Our aim is to show that building links between sociological and economic approaches to the study of consumer behaviour can lead to significant and surprising implications for conventional economic policy prescriptions, especially with respect to environmental policy
Legal uncertainty, competition law enforcement procedures and optimal penalties
No full textIn this paper we make three contributions to the literature on optimal Competition Law enforcement procedures. The first (which is of general interest beyond competition policy) is to clarify the concept of “legal uncertainty”, relating it to ideas in the literature on Law and Economics, but formalising the concept through various information structures which specify the probability that each firm attaches – at the time it takes an action – to the possibility of its being deemed anti-competitive were it to be investigated by a Competition Authority. We show that the existence of Type I and Type II decision errors by competition authorities is neither necessary nor sufficient for the existence of legal uncertainty, and that information structures with legal uncertainty can generate higher welfare than information structures with legal certainty – a result echoing a similar finding obtained in a completely different context and under different assumptions in earlier Law and Economics literature (Kaplow and Shavell, 1992). Our second contribution is to revisit and significantly generalise the analysis in our previous paper, Katsoulacos and Ulph (2009), involving a welfare comparison of Per Se and Effects- Based legal standards. In that analysis we considered just a single information structure under an Effects-Based standard and also penalties were exogenously fixed. Here we allow for (a) different information structures under an Effects-Based standard and (b) endogenous penalties. We obtain two main results: (i) considering all information structures a Per Se standard is never better than an Effects-Based standard; (ii) optimal penalties may be higher when there is legal uncertainty than when there is no legal uncertainty
Optimal climate change policies when governments cannot commit
No full textWe analyse the optimal design of climate change policies when a government wants to encourage the private sector to undertake significant immediate investment in developing cleaner technologies, but the relevant carbon taxes (or other environmental policies) that would incentivise such investment by firms will be set in the future. We assume that the current government cannot commit to long-term carbon taxes, and so both it and the private sector face the possibility that the government in power in the future may give different (relative) weight to environmental damage costs. We show that this lack of commitment has a significant asymmetric effect: it increases the incentive of the current government to have the investment undertaken, but reduces the incentive of the private sector to invest. Consequently the current government may need to use additional policy instruments – such as R&D subsidies – to stimulate the required investment
Consumption decisions when people value conformity
No full textIn this paper we assume that for some commodities individuals may wish to adjust their levels of consumption from their normal Marshallian levels so as to match the consumption levels of a group of other individuals, in order to signal that they conform to the consumption norms of that group. Unlike Veblen’s concept of conspicuous consumption this can mean that some individuals may reduce their consumption of the relevant commodities. We model this as a three-stage game in which individuals first decide whether or not they wish to adhere to a norm, then decide which norm they wish to adhere to, and finally decide their actual consumption. We present a number of examples of the resulting equilibria, and then discuss the potential policy implications of this model
Decision errors, legal uncertainty and welfare : a general treatment
No full textThis paper provides a general treatment of the implications for welfare of legal uncertainty. We distinguish legal uncertainty from decision errors: though the former can be influenced by the latter, the latter are neither necessary nor sufficient for the existence of legal uncertainty. We show that an increase in decision errors will always reduce welfare. However, for any given level of decision errors, information structures involving more legal uncertainty can improve welfare. This holds always, even when there is complete legal uncertainty, when sanctions on socially harmful actions are set at their optimal level. This transforms radically one’s perception about the “costs” of legal uncertainty. We also provide general proofs for two results, previously established under restrictive assumptions. The first is that Effects-Based enforcement procedures may welfare dominate Per Se (or object-based) procedures and will always do so when sanctions are optimally set. The second is that optimal sanctions may well be higher under enforcement procedures involving more legal uncertainty
University funding : impact on teaching and research
No full textWe address the following question: how does a higher education funding system influence the trade-off that universities make between research and teaching? We do so by constructing a model that allows universities to choose actively the quality of their teaching and research when faced with different funding systems characterised by the pivotal role of the university funding budget constraint. In particular, we derive the feasible sets that face universities under such systems and show how, as the parameters of the system (the research block grant element, the research quality premium and the incentives-triggering quality threshold) are varied, the nature of the university system itself changes. Different ‘cultures’ of the university system emerge such as the ‘research elite’ and the ‘binary divide’.Peer reviewe
ASEAN Free Trade Area (AFTA) : how far have we come? : analysis and evidence on effects of AFTA
No full textThis thesis addresses issues concerning trade effects of a particular RTA: AFTA. In the
first part of the thesis, 2 different but related gravity frameworks are constructed as to
evaluate the independent effects of AFTA on relevant countries’ trade flows. The first
paper proposes examining ‘AFTA-effects’ on members’ trade, specifically within the
AFTA context. This aims to distinguish trade effects that AFTA has had on early and
delayed members’ trading patterns. The panel ‘Gravity Model’ is constructed, pointing
to control for several biases commonly observed in the cross-section model. Although
the result implies that early members do share trade benefits from AFTA more than
non-members, the overall ‘AFTA-effects’ on the membership’s trade have not been
benign. Another paper measures ‘AFTA-effects’ on both members’ and non-members’
trade. This aims to assess whether AFTA has played a role as an export base for the
international market. In this case, ‘AFTA-effects’ appeared positive. Such effects are
driven by an enhancement in extra-export bias, suggesting that the membership’s
exports to outside destinations have increased post-AFTA. The last paper provides a
theoretical framework addressing the incidence of RTA-membership expansion. The
fact that AFTA was gradually established and empirical results indicating AFTA’s
impacts on members and non-members brings about the idea that bloc-membership
expansion could plausibly be explained by the economic effects that these countries
have received. The corollaries of trading with/without RTA-membership of a potential
member’s gains of trade and welfare levels are related to the decision towards
membership. Even though welfare effects are not always greater, the RTA-membership
status surely benefits member countries in gains from trade more than non-members. This can be perceived as one of the important reasons to explain the widespread
regionalism worldwide and why joining the RTA is often seen as a safe haven strategy
for a country
Optimal Enforcement Structures for Competition Policy: Implications of Judicial Reviews and of Internal Error Correction Mechanisms
No full textWe use the welfare-based framework proposed by Katsoulacos and Ulph (2009) to examine a number of questions related to enforcement structures for Competition Policy. Does the presence of judicial reviews, offering an independent judgement on Competition Authority (CA) decisions and checking procedural correctness, make effects-based decision approaches more attractive than Per Se? Under what conditions will judicial reviews and internal error correction mechanisms improve welfare? What are the implications of CAs' internal error correction mechanisms for decision procedures? In the presence of such mechanisms should decisions be reached unanimously or through a majority rule?We demonstrate that judicial reviews do not in general make effects-based decision approaches more attractive in decision error terms than Per Se. Further, judicial reviews and internal error-correction mechanisms subject to unanimity reduce deterrence. As a result, "confirmatory" procedures involving judicial appeals and internal error-correction mechanisms subject to unanimity are more likely to improve overall welfare when actions are "presumptively legal" than when they are "presumptively illegal". As regards in particular internal reviews we show that, ceteris paribus, final decisions in the CA should be taken unanimously when the action investigated is presumptively legal and through a majority rule when the action is presumptively illegal
Antitrust penalties and the implications of empirical evidence on cartel overcharges
No full textResearch for this paper was supported by a grant from the Economic and Social Research Council RES-062-23-2211In this paper we provide a number of extensions to the theory of antitrust fines and we use these, with existing and new datasets, to contribute to a better understanding of the current fining policies of Competition Authorities. In particular, we extend the theory linking cartel overcharges to optimal fines by introducing a number of additional considerations that authorities should take into account in setting fines and that are ignored by the existing literature. We then use existing empirical evidence on cartels and a new dataset relating to Abuse of Dominance cases to show that existing levels of fines are within the range supported by calculations of optimal fines. We then examine the reverse issue of how the toughness of the antitrust regime affects the level of cartel overcharges. We show that the effects are highly ambiguous, thus questioning some of the recent empirical findings on this issue, and the potential benefits of raising penalties.Peer reviewe
Moral behaviour, altruism and environmental policy
No full textThis work was supported by funding from the ESRCFree-riding is often associated with self-interested behaviour. However if there is a global mixed pollutant, free-riding will arise if individuals calculate that their emissions are negligible relative to the total, so total emissions and hence any damage that they and others suffer will be unaffected by whatever consumption choice they make. In this context consumer behaviour and the optimal environmental tax are independent of the degree of altruism. For behaviour to change, individuals need to make their decisions in a different way. We propose a new theory of moral behaviour whereby individuals recognise that they will be worse off by not acting in their own self-interest, and balance this cost off against the hypothetical moral value of adopting a Kantian form of behaviour, that is by calculating the consequences of their action by asking what would happen if everyone else acted in the same way as they did. We show that: (a) if individuals behave this way, then altruism matters and the greater the degree of altruism the more individuals cut back their consumption of a ’dirty’ good; (b) nevertheless the optimal environmental tax is exactly the same as that emerging from classical analysis where individuals act in self-interested fashion
