scholarly journals Digitization and Pre-Purchase Information: The Causal and Welfare Impacts of Reviews and Crowd Ratings

2021 ◽  
Vol 111 (6) ◽  
pp. 1944-1971
Author(s):  
Imke Reimers ◽  
Joel Waldfogel
Keyword(s):  
Fixed Effects ◽  
Book Publishing ◽  
Consumer Surplus ◽  
Consumer Welfare ◽  
Demand Model ◽  
Welfare Impacts ◽  
Aggregate Effect ◽  
Creative Products ◽  
Structural Demand ◽  
Professional Critics

Digitization has led to many new creative products, straining the capacity of professional critics and consumers. Yet, the digitization of retailing has also delivered new crowd-based sources of pre-purchase information. We compare the relative impacts of professional critics and crowd-based Amazon star ratings on consumer welfare in book publishing. Using various fixed effects and discontinuity-based empirical strategies, we estimate their causal impacts on sales. We use these causal estimates to calibrate a structural demand model. The aggregate effect of star ratings on consumer surplus is, in our baseline estimates, more than ten times the effect of traditional review outlets. (JEL D83, L15, L81, L82)

scholarly journals ESTIMATING THE ECONOMIC IMPACTS OF CLIMATE CHANGE ON 16 MAJOR US FISHERIES

2020 ◽  
pp. 2150002
Author(s):  
CHRIS MOORE ◽  
JAMES W. MORLEY ◽  
BRIAN MORRISON ◽  
MICHAEL KOLIAN ◽  
ERIC HORSCH ◽  
...  
Keyword(s):  
Consumer Surplus ◽  
Marine Species ◽  
Consumer Welfare ◽  
Commercial Fishing ◽  
Climate Scenarios ◽  
Demand Model ◽  
Present Value ◽  
Welfare Impacts ◽  
The Us ◽  
Impacts Of Climate Change

Observational evidence shows marine species are shifting their geographic distribution in response to warming ocean temperatures. These shifts have implications for the US fisheries and seafood consumers. The analysis presented here employs a two-stage inverse demand model to estimate the consumer welfare impacts of projected increases or decreases in commercial landings for 16 US fisheries from 2021 to 2100, based on the predicted changes in thermally available habitat. The fisheries analyzed together account for 56% of the current US commercial fishing revenues. The analysis compares welfare impacts under two climate scenarios: a high emissions case that assumes limited efforts to reduce atmospheric greenhouse gas and a low emissions case that assumes more stringent mitigation. The present value of consumer surplus impacts when discounted at 3% is a net loss of $2.1 billion (2018 US$) in the low emissions case and $4.2 billion in the high emissions scenario. Projected annual losses reach $278–901 million by 2100.

Where did all that Money Go? Understanding how Consumers Allocate their Consumption Budget

2008 ◽  
Vol 72 (6) ◽  
pp. 109-131 ◽  
Author(s):  
Rex Y. Du ◽  
Wagner A. Kamakura
Keyword(s):  
Environmental Changes ◽  
Consumer Welfare ◽  
The United States ◽  
Consumer Expenditure ◽  
Demand Model ◽  
Consumer Spending ◽  
Full Spectrum ◽  
Trade Offs ◽  
Policy Simulations ◽  
Structural Demand

All types of consumer expenditures ultimately vie for the same pool of limited resources—the consumer's discretionary income. Consequently, consumers’ spending in a particular industry can be better understood in relation to their expenditures in others. Although marketers may believe that they are operating in distinct and unrelated industries, it is important to understand how consumers, with a given budget, make trade-offs between meeting different consumption needs. For example, how much would escalating gas prices affect consumer spending on food and apparel? Which industries would gain most in terms of extra consumer spending as a result of a tax rebate? Answers to these questions are also important from a public policy standpoint because they provide insights into how consumer welfare would be affected as consumers reallocate their consumption budget in response to environmental changes. This study proposes a structural demand model to approximate the household budget allocation decision, in which consumers are assumed to allocate a given budget across a full spectrum of consumption categories to maximize an underlying utility function. The authors illustrate the model using Consumer Expenditure Survey data from the United States, covering 31 consumption categories over 22 years. The calibrated model makes it possible to draw direct inferences about the trade-offs individual households make when they face budget constraints and how their relative preferences for different consumption categories vary across life stages and income levels. The study also demonstrates how the proposed model can be used in policy simulations to quantify the potential impacts on consumption patterns due to shifts in prices or discretionary income.

scholarly journals Malpractice Environment vs Direct Litigation: What Drives Nursing Home Exit?

2018 ◽  
Vol 55 ◽  
pp. 004695801878799
Author(s):  
R. Tamara Konetzka ◽  
Hari Sharma ◽  
Jeongyoung Park
Keyword(s):  
Nursing Home ◽  
Nursing Homes ◽  
Fixed Effects ◽  
Online Survey ◽  
Market Competition ◽  
Consumer Welfare ◽  
Data Sets ◽  
For Profit ◽  
The Impact ◽  
The Relationship

An ongoing concern about medical malpractice litigation is that it may induce provider exit, potentially affecting consumer welfare. The nursing home sector is subject to substantial litigation activity but remains generally understudied in terms of the effects of litigation, due perhaps to a paucity of readily available data. In this article, we estimate the association between litigation and nursing home exit (closure or change in ownership), separating the impact of malpractice environment from direct litigation. We use 2 main data sources for this study: Westlaw’s Adverse Filings database (1997-2005) and Online Survey, Certification and Reporting data sets (1997-2005). We use probit models with state and year fixed effects to examine the relationship between litigation and the probability of nursing home closure or change in ownership with and without adjustment for malpractice environment. We examine the relationship on average and also stratify by profit status, chain membership, and market competition. We find that direct litigation against a nursing home has a nonsignificant effect on the probability of closure or change in ownership within the subsequent 2 years. In contrast, the broader malpractice environment has a significant effect on change in ownership, even for nursing homes that have not been sued, but not on closure. Effects are stronger among for-profit and chain facilities and those in more competitive markets. A high-risk malpractice environment is associated with change of ownership of nursing homes regardless of whether they have been directly sued, indicating that it is too blunt an instrument for weeding out low-quality nursing homes.

scholarly journals The Erroneous Foundations of Law and Economics

2021 ◽  
pp. 1-114
Author(s):  
Mark Glick ◽  
Gabriel A. Lozada
Keyword(s):  
Law And Economics ◽  
Consumer Surplus ◽  
Political Influence ◽  
Consumer Welfare ◽  
Pareto Efficiency ◽  
Wealth Maximization ◽  
The Status ◽  
Definition Of ◽  
Ethical Failures ◽  
The 19Th Century

The fundamental originating principle of law and economics (L&E) is that legal decisions should be (and are) based on maximizing efficiency. But L&E proponents do not define “efficiency” in the way agreed to by most economists, as Pareto Efficiency. A Pareto optimal condition is obtained when no one can be made better off without making someone worse off. Pareto Improvements are win-win changes where no losers exist. In the judicial system, however, there are always winners and losers, because under Article III § 2 of the Constitution a legal case does not exist unless there is a justiciable “case or controversy” in need of resolution. Unable to use Pareto Efficiency, L&E scholars have been forced to adopt alternative definitions of efficiency. Most L&E scholars claim to define “efficiency” based on the work of Kaldor and Hicks, but (perhaps unwittingly) instead use a definition of “efficiency” derived from the 19th century idea of consumer surplus, which encompasses L&E notions such as “wealth maximization,” and “consumer welfare” in antitrust. Neither of these alternative definitions is viable, however. Outside of L&E, the Kaldor-Hicks approach has long been recognized to be riddled with logical inconsistencies and ethical failures, and the surplus approach is even more deficient. Remarkably, virtually none of the numerous L&E textbooks even hint at such problems. Critically, all definitions of efficiency improvements in economics are biased in favor of wealthy individuals or firms, either because they are dependent on the status quo ante distribution of assets, or because they bestow large advantages on parties with political influence or who can afford to bring lawsuits quickly. Many L&E practitioners treat efficiency improvements instead as being objectively good, an error revealing that L&E is primarily motivated by its neoliberal policy agenda.

The Sustainable Forestry Initiative’s impact on stumpage markets in the US South

2005 ◽  
Vol 35 (8) ◽  
pp. 2056-2064 ◽  
Author(s):  
Roger Brown ◽  
Daowei Zhang
Keyword(s):  
Consumer Surplus ◽  
Sustainable Forestry ◽  
Consumer Welfare ◽  
Us South ◽  
Equilibrium Displacement Model ◽  
Equilibrium Displacement ◽  
The Us ◽  
Producer Surplus ◽  
Nonindustrial Private Forest ◽  
Displacement Model

Using survey data and an equilibrium displacement model, we estimate the market and economic impacts of the American Forest and Paper Association's Sustainable Forestry Initiative (SFI) on stumpage markets in the US South. We examine four timber product markets: softwood pulpwood, softwood sawtimber, hardwood pulpwood, and hardwood sawtimber. In each market we calculate changes in producer and consumer welfare using the equilibrium displacement model that accounts for reductions in timber inventories caused by SFI compliance. We find that SFI compliance costs the US South's economy about $36 million annually. SFI-compliant stumpage producers lose more than $33 million each year in producer surplus as a result of SFI compliance, and consumers lose about $12 million annually in consumer surplus due to higher product prices. These costs are offset partially by benefits to nonindustrial private forest producers, non-SFI-compliant industry producers, and public forest producers, who collectively gain about $10 million in producer surplus annually as a result of higher stumpage prices.

Sponsored Data: Smarter Data Pricing with Incomplete Information

2021 ◽  
Author(s):  
Xiaowei Mei ◽  
Hsing Kenneth Cheng ◽  
Subhajyoti Bandyopadhyay ◽  
Liangfei Qiu ◽  
Lai Wei
Keyword(s):  
Consumer Surplus ◽  
Mobile Network ◽  
Complete Information ◽  
Consumer Welfare ◽  
High Definition ◽  
Mobile Data ◽  
Data Intensive ◽  
Data Consumption ◽  
New Business ◽  
The Impact

With the development of data-intensive internet services, the world has witnessed explosive growth in mobile data consumption during the last couple of years. The upcoming generation of 5G-capable phones and networks will continue and even accelerate that process. At the same time, consumers are becoming more conscious about their data consumption because their monthly caps of mobile data plans can be easily exhausted by premium content, such as high-definition videos and virtual-reality games. In response, the mobile network operators (MNOs) have proposed a new business model, the so-called sponsored data plans, to subsidize consumers by transferring at least part of the data bills from consumers to content providers. Although industry practitioners claim that sponsored data plans increase consumer welfare, our analysis reveals that the impact of sponsored data on consumer surplus depends crucially on whether the MNO has complete information of the consumers’ valuation of mobile data. Our analysis helps provide a clearer picture of the impact of sponsored data on consumer surplus while reconciling the conflicting views from scholars, digital rights groups, and the network carriers.

Traffic and Welfare Impacts of Credit-Based Congestion Pricing Applications: An Austin Case Study

2020 ◽  
pp. 036119812096013
Author(s):  
Weijia (Vivian) Li ◽  
Kara M. Kockelman ◽  
Yantao Huang
Keyword(s):  
Travel Demand ◽  
Congestion Pricing ◽  
Consumer Surplus ◽  
Net Benefit ◽  
Welfare Impacts ◽  
Administrative Costs ◽  
Demand Models ◽  
The Difference ◽  
Almost All

This study seeks smart credit-based congestion pricing (CBCP) solutions for maximally improving travelers’ welfare by varying toll levels and locations across the Austin, Texas network. Scenarios evaluated include selecting links with maximum delays by variably tolling bridges and by recognizing congestion externalities across all links. Travel demand models deliver inputs for normalized logsum differences to quantify and compare consumer surplus changes across traveler types, around the region. Results suggest limited tolling locations under four broad times of day can do more harm than good, unless travelers shift out of the PM and AM peak periods or revenues are returned to travelers as credits. When using CBCP across all congested links at congested times of day (with 10% of revenues retained to cover system administrative costs), an average net benefit of $1.61 per licensed driver per weekday is estimated, with almost all travelers benefiting. For example, 95% of the traffic analysis zones’ lowest value of travel time (VOTT) group (VOTT1 = $5/hour) are expected to benefit from the CBCP policy. Tolling at twice the difference between marginal social cost and average travel cost (on each subset of congested links) appears to benefit more people, although tolling high on various links adds to congestion elsewhere. For example: tolling Austin’s highest-delay-producing or “top 500” links is estimated to benefit 98.5% of the zones’ highest VOTT (VOTT5 = $45/hour) travelers, while raising vehicle-miles traveled by just 0.8% (as a result of more circuitous, congestion- and toll-avoiding travel).

scholarly journals Not So Sweet: Economic Implications of Restricting U.S. Sugar Imports from Mexico

2019 ◽  
Vol 51 (3) ◽  
pp. 368-384
Author(s):  
Wilson Sinclair ◽  
Amanda M. Countryman
Keyword(s):  
Free Trade Agreement ◽  
Consumer Surplus ◽  
Trade Agreement ◽  
The United States ◽  
Partial Equilibrium ◽  
Free Access ◽  
Economic Implications ◽  
Welfare Impacts ◽  
Partial Equilibrium Model ◽  
The U.S

AbstractAfter Mexican sugar producers gained unlimited, tariff-free access to the U.S. market in 2008, U.S. and Mexican governments bilaterally agreed to constrain Mexico’s sugar exports to the United States because of dumping allegations by U.S. producers in December 2014. This analysis employs a dynamic partial equilibrium model to estimate the price and welfare impacts of the U.S.-Mexico agreement by simulating the reimplementation of North American Free Trade Agreement sugar policies. Estimates suggest liberalizing the market would decrease U.S. sugar prices, translating to an average annual decrease in producer surplus of approximately $660 million and increase in consumer surplus of $1.67 billion across the simulation.

scholarly journals Tax efficiency in a model of endogenous markups

SERIEs ◽  
2019 ◽  
Vol 10 (3-4) ◽  
pp. 401-418
Author(s):  
Esra Durceylan
Keyword(s):  
Firm Heterogeneity ◽  
Consumer Preferences ◽  
Consumer Surplus ◽  
Consumer Welfare ◽  
Tax Revenue ◽  
Aggregate Productivity ◽  
Ad Valorem Tax ◽  
Unit Taxes ◽  
Efficiency Comparison ◽  
Ad Valorem

Abstract Efficiency comparison of ad valorem and unit taxes has been traditionally based on consumer welfare. However, if the tax instrument also affects the distribution of firms over their productivities, the policy maker may be concerned about the implications on aggregate productivity as well. This paper makes an efficiency comparison of ad valorem and unit taxes by allowing the distribution of firms to respond to changes in policy. First, I make an efficiency comparison in a model with monopolistically competitive firms that are homogenous with respect to their productivity levels. Consumer preferences exhibit love for variety and allow firms to adjust their markups. I find that ad valorem tax is more efficient. Allowing for firm heterogeneity overturns this result at high revenue requirements. As the tax rate increases, ad valorem tax causes excessive exit of firms which makes the market more competitive. Hence, few surviving firms price lower by decreasing their markups. Lower prices decrease the tax revenue collected. As a result under ad valorem tax regime, higher consumer surplus is dominated by lower tax revenue. On the other hand, production is concentrated among relatively more productive firms. Thus, aggregate productivity is higher under ad valorem tax regime.

Customer Preference and Station Network in the London Bike-Share System

2020 ◽  
Author(s):  
Pu He ◽  
Fanyin Zheng ◽  
Elena Belavina ◽  
Karan Girotra
Keyword(s):  
Network Effects ◽  
Demand Model ◽  
Station Network ◽  
Customer Preference ◽  
On Demand ◽  
Structural Demand ◽  
City Of London ◽  
The City ◽  
Station Density ◽  
Bike Share

We study customer preference for the bike-share system in the city of London. We estimate a structural demand model on the station network to learn the preference parameters and use the estimated model to provide insights on the design and expansion of the bike-share system. We highlight the importance of network effects in understanding customer demand and evaluating expansion strategies of transportation networks. In the particular example of the London bike-share system, we find that allocating resources to some areas of the station network can be 10 times more beneficial than others in terms of system usage and that the currently implemented station density rule is far from optimal. We develop a new method to deal with the endogeneity problem of the choice set in estimating demand for network products. Our method can be applied to other settings in which the available set of products or services depends on demand. This paper was accepted by Gabriel Weintraub, revenue management and market analytics.

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