Suchergebnisse

Using a graphical approach, we characterize explicitly variations in optimizing behavior from risk avoidance (e.g., insurance buying) to risk taking (e.g., "gambling") in terms of risk preferences, market insurance terms, and exogenous changes in endowed incomes. An individual who is a "risk avoider" at one income position may become a "risk taker" at another income position. Moreover, both low- and high-income risk-averse individuals may engage in risk-taking activities at the same time. These results imply that predictions about attitude towards risk cannot be made independently of income positions or economic opportunities.

AbstractThis paper examines how cross‐border ownership and restrictions affect commercial policies optimally chosen by the government of an importing country. Focusing on import competition in an oligopoly market served by two local producers and a foreign firm, we study and compare two partial ownership arrangements without corporate control: unilateral ownership by the foreign firm over a local producer and bilateral ownership between the two entities. The main findings are as follows: (i) When foreign ownership is unilateral, the optimal trade and industrial policies are an import tariff and a production subsidy, respectively. (ii) When foreign ownership is bilateral, the trade policy can be an import subsidy, and the industrial policy is a production subsidy. These results differ from the benchmark equilibrium without ownership, under which the optimal policy mix consists of an import tariff and a production subsidy. (iii) Unilateral foreign ownership always reduces domestic welfare. However, bilateral foreign ownership can increase domestic welfare when local producers' cost disadvantages are substantially high. (iv) Considering the usual lump‐sum transfer for a balanced budget, bilateral ownership entails a lower public burden than two other scenarios for the government to finance its strategic use of trade and industrial policies.

Abstract
This paper examines the performance of two environmental regulation policies – emission taxes and absolute standards – in a vertical market where an upstream foreign monopolist sells a specific input to two downstream multiproduct firms that generate pollution in the domestic country. Specifically, we use a three-stage game to analyze and compare the two policies for regulating downstream pollution. In the first stage, the domestic government determines an optimal tariff and sets one of the two instruments (taxes or standards) by maximizing social welfare, in stage two, the upstream foreign monopoly sets its input price, and finally, the downstream domestic firms independently make their output and abatement decisions for profit maximization. We find that total emissions are lower under the absolute standard. Nevertheless, the tax dominates the standard in terms of domestic welfare, consumer surplus, and downstream multiproduct firms' profits. Thus, the tax equilibrium leads to a win-win-win situation compared to the standard equilibrium. These results show the non-equivalence of emission taxes and absolute standards in regulating downstream pollution. The analyses suggest that a pollution tax is an economically and politically feasible policy.