TARIFF POLICY AND ENTRY WITH COST-BASED INFORMATIONAL ASYMMETRIES

This study introduces a cost-based informational asymmetry into a two period signaling model. We examine the effects of import tariff policy within this environment of incomplete information and compare them to the standard, full information effects. When tariff rates can be credibly fixed, the standard effects of tariff policy may be significantly altered. For example, lower tariffs may discourage foreign entry because of the induced signaling effects of tariff policy. Moreover, because the impact of tariff policy depends on the cost structure of domestic firms, uninformed policymakers will not be able to predict the qualitative effects of tariff policy. ( JEL F12, F13)     

THE POLITICALLY OPTIMAL TARIFF: LEVELS OF TRADE RESTRICTIONS ACROSS DEVELOPED COUNTRIES

The degree to which countries restrain international trade varies significantly. This paper explains the pattern of tariff and non-tariff trade barriers for developed countries, in the context of politically optimal redistribution. The degree of trade restriction across countries is shown to be determined by differences in such factors as per capita income, the size of the government, and the size of the country.     

SHORT-RUN PRICING STRATEGIES TO INCREASE CORPORATE AVERAGE FUEL ECONOMY

Since 1974 the average fuel economy of new cars has doubled from fourteen to twenty-eight miles per gallon. Shifts in sales to more fuel efficient models within a product line accounted for little of the improvement. This paper explores the use of pricing strategies to shift sales to achieve a legislated fuel economy target. A multinomial logit model is used to compute surcharges and rebates that leave consumer satisfaction unchanged yet increase the sales-weighted average fuel economy. The results suggest pricing strategies are efficient for small improvements in fuel economy, but are expensive for large improvements.     

OFFSETTING BEHAVIOR EFFECTS OF THE CORPORATE AVERAGE FUEL ECONOMY STANDARDS

Research has concluded that regulatory attempts to improve fuel economy, such as the Corporate Average Fuel Economy (CAFE) Standards, lower the average weight of an automobile. Ceteris paribus , this reduction in weight is detrimental to the overall level of vehicle safety. However, this study attempts to explicitly measure possible behavioral responses on the part of drivers that could offset some of the loss in safety. The results indicate that CAFE, although increasing the vulnerability rate by approximately 20%, has reduced the accident rate by 26%. The net effect on the fatality rate is a decrease of approximately 6%.     

AVERAGE PREDICTIVE COMPARISONS FOR MODELS WITH NONLINEARITY, INTERACTIONS, AND VARIANCE COMPONENTS

In a predictive model, what is the expected difference in the outcome associated with a unit difference in one of the inputs? In a linear regression model without interactions, this average predictive comparison is simply a regression coefficient (with associated uncertainty). In a model with nonlinearity or interactions, however, the average predictive comparison in general depends on the values of the predictors. We consider various definitions based on averages over a population distribution of the predictors, and we compute standard errors based on uncertainty in model parameters. We illustrate with a study of criminal justice data for urban counties in the United States. The outcome of interest measures whether a convicted felon received a prison sentence rather than a jail or non-custodial sentence, with predictors available at both individual and county levels. We fit three models: (1) a hierarchical logistic regression with varying coefficients for the within-county intercepts as well as for each individual predictor; (2) a hierarchical model with varying intercepts only; and (3) a nonhierarchical model that ignores the multilevel nature of the data. The regression coefficients have different interpretations for the different models; in contrast, the models can be compared directly using predictive comparisons. Furthermore, predictive comparisons clarify the interplay between the individual and county predictors for the hierarchical models and also illustrate the relative size of varying county effects.     

DIFFERENCES IN AVERAGE PRICES ON THE INTERNET: EVIDENCE FROM THE ONLINE MARKET FOR AIR TRAVEL

Using daily ticket price quotes, this article examines whether there are systematic differences in the airfares obtained through different online travel Web sites. I find that after controlling for ticket availability and heterogeneities that affect ticket prices, there is little systematic difference in the average fares. The parity in average fares observed in 2002 data is in contrast to differences as large as 18% documented by Clemons et al. (2002), and stems in part from the fact that airlines directly compete for online travel dollars today, but did not in 1997. (JEL L2 )