This article tries to measure the cost of consumption fluctuations using an approach that does not require the specification of preferences and instead uses asset prices. It measure the marginal cost of consumption fluctuations, the per unit benefit of a marginal reduction in consumption fluctuations expressed as a percentage of...
The effects of piracy on the pricing behavior of producers of information goods are studied within a unified model. When the copying technology involves a marginal cost and no fixed cost, producers act independently. In this simple framework, the paper highlights the trade-off between ex ante and ex post efficiency...
The paper reveals that since the estate tax liability usually depends on how long one lives, it implicitly provides annuity income. Calculations of the annuity embedded in the U.S. estate tax show that people with $10 million of assets may be effectively receiving more than $100,000 a year financed at...
This paper examine the problem of optimal taxation in a dynamic economy with imperfectly competitive markets and finds that the optimal tax system will tend to provide subsidies for the purchase of capital goods to offset gaps between price and marginal cost. The average tax on capital income will be...
The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. The paper confirms that this difference remains substantial with newer elasticity...
Managerial accounting textbooks frequently fail to discuss the use of attributable costs in quantitative decision-making. They tend to focus on the use of absorption cost analysis or marginal cost analysis but these approaches carry dangers and are not apManagerial accounting textbooks frequently fail to discuss the use of attributable costs...
Though built with increasingly precise microfoundations, modern optimizing sticky price models have displayed a chronic inability to generate large and persistent real responses to monetary shocks. This is an ironic finding, since Taylor [1980] and other researchers were motivated to study sticky price models in part by the objective of...
High oil prices are due less to scarcity than to the Organisation of Petroleum Exporting Countries Opec exploiting its cartel power, according to a new report. Roger Stern of Johns Hopkins University estimates that the marginal cost of a barrel of High oil prices are...
This paper provides a model for choosing the optimal number of bundles and their prices in the context of designing markets for information goods. Selling bundled goods is a widespread phenomenon, and a recent paper showed that under conditions of zero marginal cost, and independent and identically distributed customer valuations,...
A stochastic simulation was developed to determine the marginal cost and a testing strategy test location and test intensity for an integrator conforming to the European Union traceability. Integrator's cost, the United States' risks, and premiums were determined for export of non-genetically modified (non-GM) wheat from the United States to...
This paper investigates the timing of adoption of product and process innovation by using a differential game in which firms may invest in both activities. The paper considers horizontal product innovation that reduces product substitutability, and process innovation that reduces marginal cost. It demonstrates that the incentive for cost-reducing investment...
A model has been developed in which a profit-maximizing monopolist with uncertain cost of production sells to loss-averse, yet rational, consumers. This paper first introduces portable techniques for analyzing the demand of such consumers, and then investigates the monopolist's pricing strategy. Compared to lower possible purchase prices, paying a higher...
This report considers a supply chain with one manufacturer who assembles an end-product consisting of two components A and B, where each component is purchased from multiple outside suppliers. The manufacturer's decision as to the contract to offer each supplier is complicated by two factors: each potential supplier is self-interested...
This article presents the news story of Glaxo, which made a deal by pricing Zantac, its new ulcer treatment, at a whopping premium to SmithKline Bechman's Tagamet. The story illustrates points that the price customers are willing to pay for goods and services has little to do with what they...
This paper explores the impact of trade on growth when firms are heterogeneous. It is found that greater openness produces anti- and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction and hence growth....
Unprecedented global flows in information, products, people, capital and ideas offer great potential for radical improvements in human development, but left unabated, they may also serve to worsen and entrench the spiral of poverty which already exists in many communities and countries. These flows are enabled by Information and Communications...
This paper examines the welfare implications of trade reforms in the presence of a government budget constraint. There is consensus about gains from opening up to trade. The less investigated question is, whether a coordinated tax reform, where the tariff revenue cuts are compensated with increases in distortionary domestic taxes,...
This paper presents a dynamic model of a competitive R&D and production duopoly subject to knowledge spillovers. Two asymmetric firms operate for a limited period of time and dispose their knowledge capital in the end. Both firms and the social planner prefer the R&D-cooperative strategy over the competitive one regardless...
This note presents a modest extension of the very useful "theorem of the deductible. The extension concerns ex post moral hazard in medical insurance. Under full insurance above a deductible, the marginal cost of treatment to the insured is zero, resulting in over-consumption. Co-insurance is the standard approach to mitigate...
The Internet has created a new way for companies and customers to interact. Manufacturers who had previously been one or more links in the supply chain away from the end users of their products can now reach their customers directly. Retailers who faced a significant investment to increase their market...
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