Allocation Of Incentives Research Articles

The Allocation of Consumer Incentives to Meet Simultaneous Sales Quotas: An Application to U.S. Army Recruiting

Consumer incentives often have a dual role: to expand the market and to redistribute the market so as to meet sales targets for a range of products. The proper allocation of incentives must recognize and deal with the competitive and “cannibalizing” effects operating among product classes. The presence of environmental factors, scale economies, and cost per unit for each of the candidate incentive types also must be accounted for. This paper develops and illustrates an analytical approach designed to improve the allocation of consumer incentives where sales targets are exogenously set. The model generates a system of simultaneous behavioral equations, a portion of which is included to reflect attempted cost minimizing behavior. The model is applied to FY81-FY86 data from the U.S. Army Recruiting Command, which allocated over $1 billion for special incentives to selected recruits. The incentives consist of enlistment bonuses and educational benefits offered to quality recruits who select critical occupational specialties. The sales targets are enlistment quotas for each of the occupational specialties that must be simultaneously satisfied. The Army's goal is to meet these quotas, in a postulated recruiting environment, at minimum total incentive expenditure. Results suggest that the Army could improve the cost-effectiveness of its recruiting effort through a reallocation of the incentives it offers to recruits. Misallocation during the FY81-FY86 period is estimated to have cost the Army approximately 3.5% of its total incentives expended in infantry recruiting recruiting.

Impactos de los incentivos fiscales en la desconcentración industrial metropolitana: el caso de Jalisco

El propósito de este artículo es evaluar si la política de incentivos fiscales ha tenido algún impacto en la desconcentración de la actividad industrial dela Zona Metropolitanadela Ciudadde Guadalajara. Se plantea que en la realización de los decretos de estímulos fiscales (el de 1979 y el de 1986 que deroga el primero) se ignora el proceso que origina la concentración en las principales ciudades del país así como los factores que determinan la localización de empresarios e individuos (en su calidad de inmigrantes); entre los principales factores se resalta la importancia de las economías de aglomeración.Del análisis de la información (1965-1985) se concluye que la tendencia a la concentración industrial en la Zona Metropolitana de Guadalajara continúa, incluso se expande, el ámbito territorial de la concentración a los municipios circunvecinos. Asimismo, se destaca el nulo impacto de los incentivos fiscales y otra serie de medidas, por lo que se recomienda una mayor selectividad en su asignación entre zonas, ramas industriales y tamaños de empresa con el objeto de promover la especialización industrial en ciertas localidades, impulsar la localización industrial en zonas donde se puedan aprovechar las economías de aglomeración de la ZMG sin aumentar la congestión urbana, y disminuir el costo social resultante de los incentivos fiscales y la ineficiencia del aparato industrial.

Dissipation of contestable rents by small numbers of contenders

The theory of rent seeking with its origins in the observations of Gordon Tullock (1967) - or to use Jagdish Bhagwati's (1982) proposed term, the theory of directly unproductive profit-seeking activities - is concerned with the potentially adverse effects on resource allocation of incentives to cap- ture and defend artificially-contrived rents and transfers. The scope for so- cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con- test to determine the beneficiary of the prize. Underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended. It has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking. Then, if some further condi- tions are satisfied, l the total value of the resources expended precisely equals the value of the prize sought, so dissipation is complete. 2 Conse- quently, the social cost associated with contestability of a rent can be in- ferred from the value of the rent itself, and the detailed and hard-to-come- by information on individual outlays made in the course of the contest be- comes unnecessary. By basing their analyses on competitive dissipation, contributors to the rent seeking literature (see the review by Robert Tollison, 1982) have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu- lation. Similarly, in the trade-theoretic literature where the rights contested are to quota premia or revenues from trade taxes (Krueger, 1974; Bhagwati

The Natural Gas Industry

The move to deregulate natural gas field markets is likely to stimulate changes in the way the downstream segments of the industry are regulated. In particular, because the uncertainty endemic to freer upstream markets will emerge for the first time in the contemporary gas industry, the relative merits of having pipelines perform different economic functions will be altered. Producers and distributors will also, in varying degrees, face greater price uncertainty than before. This will lead to changes in the desired allocation of risk and incentives associated with activities traditionally carried out by transmission companies.

Field Price Deregulation and the Carrier Status of Natural Gas Pipelines

The move to deregulate natural gas field markets is likely to stimulate changes in the way the downstream segments of the industry are regulated. In particular, because the uncertainty endemic to freer upstream markets will emerge for the first time in the contemporary gas industry, the relative merits of having pipelines perform different economic functions will be altered. Producers and distributors will also, in varying degrees, face greater price uncertainty than before. This will lead to changes in the desired allocation of risk and incentives associated with activities traditionally carried out by transmission companies.