Private Prices Research Articles

Policy on Private Water Sales in Rural Ghana

This paper examines strategies for forming public‐private sector partnerships in order to improve the distribution of water in rural areas in Ghana. The options explored include: (1) An outright sale of the existing government‐controlled water corporation; (2) setting up decentralized regional water utilities; (3) maintaining the existing central authority but contracting out services to the private sector; (4) charging user fees for water services based on the cost of producing and distributing the water; and (5) encouraging private and community‐level institutions to participate in the water market. Based on a limited case study, the paper finds a wide disparity between public and private prices of water, which points to a need for more‐rigorous pilot programs and studies to further explore alternatives for public‐private partnerships in the Ghana water sector.

The Effects of Market Concentration and Excess Demand on the Price of Nursing Home Care

Certificate-of-need laws and construction moratoria are policies designed to control government expenditures by limiting the number of nursing home beds in an area. These policies also represent barriers to entry and can result in excess demand. This study investigates the effect of market concentration and excess demand on private prices for nursing home care. The author finds evidence that both factors are associated with higher prices. Because higher prices may cause private patients to exhaust their financial resources and become Medicaid patients sooner than they otherwise would, these policies may have had indirect cost-increasing consequences. Copyright 1994 by Blackwell Publishing Ltd.

Private Consumption Expenditure and Price Index Numbers for the Netherlands, 1921–1939 and 1948–1988

In 1982 the Netherlands Central Bureau of Statistics published time-series of private consumption expenditure and price index numbers for 106 consumer goods and services for the Netherlands over the period 1951-1977. Recently, new series have become available, with a slightly different classification of 99 consumer goods and services. These series range over the years 1948-1988. Additionally, they have been linked to the series which were published by Barten for 98 consumer goods and services over the period 1921-1939 on an aggregation level of 25 groups of goods and services.

On the Privatization of Excludable Public Goods

There is a growing interest among state and local government officials in the possibility of privatization of the provision of public goods. In the face of increasing opposition to tax increases and government growth, the transfer of responsibility for the delivery and pricing of services from the public sector to the private sector becomes an attractive option. Assessment of the impact of the transfer from public to private institutional arrangements upon provision of public goods requires that properties of the private and public equilibria be established. In a series of provocative papers the possibility of private market provision of public goods has been explored. Building upon early contributions by Thompson [10] and Demsetz [5], both competitive [7] and monopoly [3; 2; 4] models have been developed in an attempt to characterize private market solutions to the public goods allocation problem under conditions of costless exclusion. A common conclusion of these recent papers is that private provision of excludable public goods is inefficient. The private pricing mechanism results in underallocation of resources to the production of public goods capacity and in the underutilization of the capacity which is produced. The implication is that, relative to the first-best Lindahl-type public equilibrium, the private equilibrium represents an inferior alternative. Although the Lindahl solution provides an appropriate benchmark for pure theoretical inquiry, the actual process of privatization develops from a majority voting status quo in the public sector. In this paper we wish to extend the scope of comparative analysis to the case of private market versus majority voting public sector provision of excludable public goods. The concept of public sector equilibrium employed is that of median voter equilibrium. This concept has become a standard within the theoretical public goods literature [1] and has enjoyed some recent empirical support as well [6]. The particular research issue we will address is the identification of conditions under which a majority of the consumer/voters would prefer the private monopoly outcome to the public monopoly outcome. Given the increasing interest in the privatization of public service delivery, the framework of analysis contained in this paper would seem to be of significant potential public policy import. A nonexhaustive list of potential candidate services for monopoly privatization would include roads, waterways, parks, museums, zoos, and airports. We employ consumer surplus analysis to determine the percentage of voters who prefer the private monopoly solution to the public outcome. Successful privatization requires majority support from an interesting coalition of low and high demanders of the public good. Low demanders

The Macromarketing Effects of Beverage Container Legislation

This article tests two major theories of consumer preference relevant to mandatory beverage container deposit legislation (MBCDL). It examines these theories in the context of market performance of the beverage industry as well as socioeconomic and environment issues. In an area where used beverage containers may be conceptualized as negative externalities or market failures, control of such containers can become the focus of public policy both to adjust private prices and to achieve the social goal of a litter-free environment. Six hypotheses were formulated to test these theories, and empirical data on per capita beer consumption in twenty-two states were used to test the effects of MBCDL on one of the hypotheses. The findings indicate that MBCDL appears to have an enduring negative effect on beer consumption (sales) in the United States.

Interactions Between Government and Private Outlays: Education in Australia, 1949-50 to 1981-82

This paper recognizes that government and private final expenditures cannot be modelled in isolation from each other when the expenditure relates to a good such as education which is supplied by both sectors. The inter-relationships in education expenditure are particularly direct in Australia where the private price of private schooling has been lowered substantially by government grants. Annual data are used to quantify the inter-relationships.

The role of government in emergency transportation planning

Government planning is required when private pricing cannot represent the benefits involved. This often occurs in planning for emergencies because private persons know they are unlikely to realize the benefits of their preparations. Government transportation planning has characteristics, such as reliance on investment in new equipment instead of the use of existing equipment through pricing, a tendency to solidify existing technology and retard phasing-out activity, and a poor record of innovation, that do not lead one to optimism concerning planning for emergencies. The Defense Department has relied mainly on motor transport, operating through a Traffic Command analogous to the traffic department of a private firm. A limited war can be supplied with ships and planes hired from the private sector. A full-scale war would almost certainly be nuclear, of short duration, and fought with the resources at hand. The subsidy to the merchant marine should be ended; shipping for military and naval purposes should be acquired in competitive markets.

Should policymaking account for market expectations? An estimate of their impact on commodity policy

Costs and effects of commodity price stabilization will depend on private price expectations, and these price expectations do respond to changes in public policy. Past empirical studies assumed that price expectations did not incorporate policy constraints on price. The following article examines the implications of correcting this weakness in earlier studies. Substantial differences in estimates of stabilization con result from this improvement in methodology.

Discrimination and Efficiency in the Pricing of Public Goods

IT is widely accepted that public goods will generally be inadequately supplied and/or consumed if left to a private-pricing scheme (one in which the seller receives what the buyer pays). There are two cases to consider: one where exclusion is impossible or prohibitively expensive and the other where it is commercially feasible to practice selective exclusion. In the case of nonexclusion, the compelling argument against a private-pricing scheme is that no supply will be forthcoming, especially in large-number settings. Since each consumer can benefit from the public good that someone else pays for, the prevailing sentiment is to pretend no desire for the good and hope for a free ride. The problem is aggravated in the large-number case by the fact that each individual's share of the total benefit is small relative to cost. Therefore, the private supplier of the good will find little demand for his product at positive prices. While it is possible that these problems can be overcome through voluntary action, if the number of relevant decision makers is small, optimism on this score is undoubtedly misplaced in the vast majority of cases. When exclusion is commercially feasible-the case we will be concerned with throughout this paper-we can generally depend on private pricing to motivate a positive output of a public good.' When a person can be denied the benefit of a public good unless he pays a predetermined price, he ceases to realize any advantage from obscuring his demand for the good. In this

Conservation: Is It Justified in the Public Interest

One of the criticisms of the conservation program is that conservation does not promote public welfare but is a private price maintenance scheme. This article analyzes the achievements of the conservation program and concludes that although the effect of conservation is to stabilize existing prices, information available with respect to the rate of return on investment of oil companies would indicate that prices of crude oil and petroleum products are not inordinately high. This article also discusses the sources of economic inefficiency in the oil industry and suggests that efforts be taken to make conservation more efficient.

Resale Price Maintenance

T- I LEGAL SYSTEM of vertical private price controls, by which a manufacturer seeks to control the price of his product after he has sold it, is embodied in the so-called Fair-Trade Laws which were enacted in the nineteen-thirties by forty-five states. As everyone knows, these statutes apply to commodities sold under a trade-mark, trade-name or brand which are in fair and open competition with commodities of the same general class; the statutes authorize contracts for sale or resale of such commodities, pursuant to which the purchaser undertakes that he will not resell except at the price stipulated by the vendor and that the purchaser, in turn, will require any dealer to whom he may resell to agree that such dealer will not resell except at the price stipulated by the original vendor. Manufacturers of the commodities described are thus enabled to determine not only their own selling prices, but the wholesale and retail prices as well. All of the statutes contain the famous nonsigner clause which creates a cause of action for unfair competition against anyone who willfully and knowingly sells the commodity below the prices established by such a contract, whether or rAot a party thereto. Thus, one contract would be sufficient to bind all distributors of the commodity, provided the terms of that one contract have been made known to them. Finally, all the statutes explicity state that they do not apply to horizontal agreements between manufacturers, or between wholesalers, or between retailers.'

Sales below Cost Prohibitions: Private Price Fixing under State Law

Sales below Cost Prohibitions: Private Price Fixing under State Law