We consider the regulation of a monopoly facing consumers that may evade payments, an important issue in public utilities. To maximize total surplus, the regulator sets the price and socially costly transfers, ensuring that the monopoly breaks-even. With costly effort, the firm can deter...

We characterize the degree of microeconomic inflexibility in several Latin American economies and find that Brazil, Chile and Colombia are more flexible than Mexico and Venezuela. The difference in flexibility among these economies is mainly explained by the behavior of large establishments,...

We link survey data containing Danish people's perceptions of where they rank in various reference groups and fairness views with administrative records on their income history, life events, and reference groups. People know their income positions well, but believe others are closer to...

Estimating market power is often complicated by the lack of reliable measures of marginal cost. Instead, policy-makers often rely on other summary statistics of the market, thought to be correlated with price cost margins---such as concentration ratios or the HHI. In many industries, these...

We link survey data containing Danish people’s perceptions of where they rank in various reference groups and fairness views with administrative records on their income history, life events, and reference groups. People know their income positions well, but believe others are closer to...

We apply and extend the cost-based approach to bundling and tying under competition developed in Evans and Salinger (2004a) to over-the-counter pain relievers and cold medicines. We document that consumers pay much less for tablets with multiple ingredients than they would to buy tablets with...

In this paper, a theoretical relationship is obtained to measure the effect that inefficiency has on marginal costs, degree of economies of scale and technical change. It is shown that when the relationship between inefficiency and output level is ignored, the estimation of marginal costs and...

How well do people know their social position relative to others in society and how does their position shape their views on the fairness of unequal outcomes? We provide new answers to these long-standing questions by combining survey-elicited perceptions on income positions and fairness views...

Standard consumption models assume a notional consumption flow that does not distinguish between nondurable and durable consumption. Such notional-consumption models generate notional marginal propensities to consume (MPC). By contrast, empirical work and policy discussions often highlight...

This paper provides a primer on the economics of environmental innovation. Our intention is not to write a pure review paper, but to also provide an up-to-date textbook treatment on the issue. Thus, we start by defining the marginal costs of both emissions and of emissions abatement. We then...

Market power arises in the case where a seller is aware that raising output will depress price. In the profit-maximizing equilibrium with market power, price exceeds marginal cost. The Lerner index---the ratio of price less marginal cost to the price---is a widely accepted measure of market...

Advocates of market mechanisms for addressing greenhouse gases and other pollutants typically argue that it is a necessary step in pricing polluting goods at their social marginal cost (SMC). Retail electricity prices, however, deviate from social marginal cost for many reasons. Some cause...

The markup of price over marginal cost reveals market power. The distinction between marginal and average cost is key. Average cost is easy to measure, but the price/average cost ratio understates the price/marginal cost ratio when fixed costs are present. In particular, in free-entry...

Market power arises in the case where a seller is aware that raising output will depress price. In the profit-maximizing equilibrium with market power, price exceeds marginal cost. The Lerner index---the ratio of price less marginal cost to the price---is a widely accepted measure of market...

The markup of price over marginal cost reveals market power. The distinction between marginal and average cost is key. Average cost is easy to measure, but the price/average cost ratio understates the price/marginal cost ratio when fixed costs are present. In particular, in free-entry...

How strong are strategic complementarities in price setting across firms? In this paper, we provide a direct empirical estimate of firms' price responses to changes in prices of their competitors. We develop a general framework and an empirical identification strategy to estimate the...

Decision makers facing abatement targets need to decide which abatement measures to implement, and in which order. This paper investigates the ability of marginal abatement cost (MAC) curves to inform this decision, reanalysing a MAC curve developed by the World Bank on Brazil. Misinterpreting...

In several industries downstream competitors form upstream partnerships. An important rationale is that higher aggregate upstream volume might generate efficiencies that reduce both fixed and marginal costs. Our focus is on the latter. We show that if upstream marginal costs are decreasing in...

How strong are strategic complementarities in price setting across firms? In this paper, we provide a direct empirical estimate of firm price responses to changes in prices of their competitors. We develop a general framework and an empirical identification strategy to estimate the elasticities...

Recent theoretical research shows that exporters are more productive than nonexporters. We show that this result holds almost trivially for the case of constant marginal cost of production, as mainly assumed in the literature, but it may not hold true if the marginal cost is not constant. Our...

The New Keynesian Phillips Curve (NKPC), driven by unit labor costs has been criticized for failing to match inflation dynamics and for explaining the duration of price contracts. This paper extends recent attempts in the literature to improve the fit of the NKPC, by introducing a fuller...

This article proposes the estimation of marginal cost of individual firms using semiparametric and nonparametric methods. These methods have a number of appealing features when applied to cost functions. The empirical analysis uses data from a unique sample of the California electricity industry...

Recent theoretical research shows that exporters are more productive than nonexporters. We show that this result holds almost trivially for the case of constant marginal cost of production, as mainly assumed in the literature, but it may not hold true if the marginal cost is not constant. Our...

Price competition with increasing marginal costs, though relevant for many markets, appears as an under-researched field in the experimental oligopoly literature. We provide results from an experiment that varies the number of firms as well as the demand rationing and matching schemes in...