Gain In Surplus Research Articles

The Limits of Multiproduct Price Discrimination

We consider a multiproduct seller who has access to information about consumer preferences that he can use for second- and third-degree price discrimination. We characterize markets for which such information can lead to the efficient allocation with consumers obtaining the entire surplus gain relative to the profit-maximizing allocation without the additional information. This benchmark is achievable for all markets with a given set of consumer types if and only if it is optimal for the seller to offer only the best product in each market. Analogous results characterize when the “surplus triangle” of Bergemann, Brooks, and Morris (2015) is achievable. (JEL D11, D21, D42, D83)

A downtown on-street parking model with urban truck delivery behavior

In this study we present an on-street parking model for downtowns in urban centers that incorporates the often-neglected delivery demand of delivery trucks. The behavior of truck deliveries is distinctly different from commuter parking: trucks do not cruise for parking spaces, and demand for goods delivery is driven by customers and is practically inelastic to the delivery costs. We generalize the downtown on-street parking model from Arnott and Inci (2006) to study the relationship between passenger vehicles’ parking and truck delivery behaviors, and provide tools for policy makers to optimize the trade-offs in parking space allocation, pricing, and aggregate network congestion. The social optimum can be obtained by solving a nonlinear optimization problem. The parking model is able to replicate the commuter-only scenario as a special case. It is shown that ignoring truck delivery behavior can significantly overestimate travel speeds and cruising stock. We applied the model to a case study of downtown Toronto and found that compared to a baseline scenario representative of Toronto in 2015, increasing parking fees from CAD $4/h to nearly CAD $7.85/h and assigning 4.1% of parking spaces to truck deliveries would eliminate cruising and truck double-parking, resulting in a social surplus gain of over CAD $14,304/h/mile2. In a first-best allocation scenario where total parking spaces can also change, we found that increasing total parking spaces by 18%, having 3.5% truck delivery allocation, and reducing parking fees to CAD $2.47/h would eliminate cruising and double-parking while increasing social surplus by CAD $24,883/h/mile2. These model findings are along the same level of effect as demonstrated in the literature.

The impact of price discrimination on consumer surplus at popular music concerts

We estimate consumer surplus gains and losses from concert ticket price discrimination. Fans purchasing low-priced tickets enjoy a surplus gain of about $9.26 per ticket while high-priced ticket buyers suffer a loss of about $17.63 per ticket.

Household demand for improved water supply services in Mekelle City, Northern Ethiopia

With population growth and urbanization, demand for improved water services has been growing. It is imperative therefore to examine different factors that influence demand for improved water services and the resultant welfare changes. Using cross-sectional household survey data collected through structured questionnaire from ten administrative units in Mekelle City, we estimate household willingness to pay models and identify major determinant factors of demand for improved water service. In order to help us do this, we considered selection issues and estimated models using the Heckman Two-Step Estimator. Our results show that the amount of bid (amount of money households would be willing to pay) that households (already connected to private taps) would be willing to pay is positively associated with household income, ownership of the house, price of vended water and the practice of water purification. For households who are not connected to private taps, the amount they would be willing to pay for (improved) private tap connection is positively associated with formal education, housing status and gender. We also investigate the welfare gains and losses as a result of improved water service. Analytical results show that, as the number of households who subscribe to improved water service increases, there is a gain in surplus for households and revenue (producer surplus) for the municipality.

Urban Expansion or Clustered Deconcentration? An Applied Welfare Economic Analysis of Growth Controls and the Foundation of Satellites

How should urban containment and the diversion of households to nearby residential areas be evaluated from a welfare economic perspective? Assuming the existence of a negative externality of city size, we develop a concise general equilibrium model for a mother city and a satellite. This satellite should be founded if the gain in surplus exceeds the fixed costs of intercity infrastructure provision, and a Pigouvian tax on the conversion of land to urban use in both cities would then attain the first-best allocation. Rising incomes and falling transport costs enhance the surplus gain from clustered deconcentration, or the accommodation of growth in planned satellites, relative to expansion of the mother city. Nevertheless, plans by the Dutch government to uphold strict growth controls around Amsterdam, while fostering large-scale residential construction projects in the nearby satellite of Almere, are difficult to reconcile with the optimal policy in a calibrated version of our model.

Kyoto, Optimal Tariffs and the $50 Trillion Free Lunch

The major argument against climate change treaties (like the Kyoto Agreement) is that they would reduce economic activity. On the contrary, in this paper we show that a revenue neutral tax on crude (returned as a lump sum payment to consumers) would achieve a reduction in consumption of oil (to the benefit of the climate) and provide a huge stimulus to the US economy. For the tax to have the desired impact (wealth transfer and consumption reduction) the oil importing countries need to act together. This paper analyzes a situation where all oil importing countries (grouped together and referred to as countries) impose a common tariff. The would result in improved terms of trade which would transfer wealth from the crude exporting (foreign) countries to the domestic countries. The optimal tariff is found to be 354% to 826%, and this results in a capitalized surplus transfer in the range of $41.40 trillion to $54.35 trillion. This transfer is a free lunch, the importing countries do not have to expend any resources to obtain surplus (beyond imposing the tariff). The surplus gain for the United States is in the range of $87.54 billion to $114.66 billion a year (depending upon the demand and supply elasticities), and the capitalized value of the surplus from $10.79 trillion to $14.16 trillion. The new tax revenues to the US government from tax on imported oil is $156.16 billion to $422.79 billion a year, which can be returned to the US consumers as a lump sum so as not to increase the tax burden. The reduction in crude oil consumption worldwide ranges from 4.51% to 8.75%.

The Implicit Dynamics of the von Neumann Growth Model

Von Neumann proved the theoretical existence of economic equilibrium. His assumptions explain also how and why cycles are generated. Two features of the model, reflecting the operation of the market, trigger these. The first feature is a non-focal equilibrium that takes place at a saddle-point, maximizing production while minimizing the rate of interest or monetary gain. The second is the inevitability of cross-regulation. Surplus gain boosts production while excess supply curbs prices.

The $10 Billion Benefit of Unbundling: Consumer Surplus Gains from Competitive Pricing Innovations

This Policy Bulletin measures the gains to consumer welfare of the new all distance/all you can eat competition produced by the market-opening provisions of the Telecommunications Act of 1996. Analysis reveals that the consumer welfare gain amounts to approximately $10 billion per year, and those American households that have switched to these all-distance plans are, on average, saving approximately $429 every year - more than a dollar a day. As such, great care must be taken to ensure that policymakers stand by the pro-competitive bargain codified by the 1996 Act (i.e., Bell company long distance entry in exchange for unbundling the last mile).

The Effect of Public Social Housing on Households' Consumption in France

The French public social housing sector offers rents which are more than 60% below market levels. The “loss” of the public sector landlords, estimated from the rent they could get for their apartments at market prices, amounts to 37 billion Francs per year for the 3 million public social apartments in France. This allows the social sector tenants to consume 10% more housing services and 11% more of other goods. The corresponding surplus gain is around 34 billion Francs. The surplus loss for the collectivity due to these transfers is thus 3 billion Francs, 8% of the transferred sums. As compared to personal housing subsidies, which represent half this amount for the same tenants, the surplus gains are much less concentrated on the poorest part of the population.

Input Substitution and the Distribution of Surplus Gains from Lower U.S. Beef‐Processing Costs

AbstractAnalysis of a switch from boxed beef to tray‐ready beef processing demonstrates that limited substitution between farm and nonfarm inputs has a significant impact on the distribution of surplus gains. A two‐input, two‐output (beef and by‐products) industry model was specified. Technical change was modeled as a shift in marketing input supply. This approach yields equivalent results to a demand increase from biased technical change. Using an estimated elasticity of substitution of 0.1 and parameter values from previous studies, the results indicate cattle producers would receive either 57% or 72% of surplus gains depending upon whether input substitution occurs.

Brand Information and Price

While it is generally agreed that markets perform better when information is more complete, little has been said about how the added benefits are dist ributed. This essay explores this question in a model of brand select ion. Buyers select from among that subset of available brands of whic h they are aware. When this subset grows, there are social surplus ga ins, but the distribution of these gains between firms and consumers is shown to be sensitive to the structure of the market. It is possib le for either the sellers or the buyers to be worse off in the better -informed environment. Copyright 1988 by Blackwell Publishing Ltd.

The Surplus Gains of Labor

The Surplus Gains of Labor