Weak Complementarity Research Articles

Does State-Dependent Pricing Imply Coordination Failure?

The analysis in Ball and Romer [1991] suggests that models with fixed costs of changing price may be rife with multiple equilibria; in their static model price adjustment is always characterized by strategic complementarity, a necessary condition for multiplicity. We extend Ball and Romer's analysis to a dynamic setting. In steady states of the dynamic model, we find only weak complementarity and no evidence of multiplicity, although nonexistence of symmetric steady state with pure strategies does arise in a small number of cases.

Valuing the Effects of Water Quality on Recreational Resources: Discussion

some sites are desired, a broader array of resource issues require knowledge of how these values change when the quality of recreation sites changes. The latter task is more complicated because, in addition to estimating the demand for water-based recreation, analysts must relate demand to water quality variables. Through weak complementarity, shifts in demand that are associated with changes in water quality are used to value changes in quality. Each article addresses some aspect of how recreational fishing demand is related to water quality. Jakus, Dadakas, and Fly explore how variable definition and awareness of water

A method for valuing global ecosystem services

The goal of this paper is to provide an investigation of several approaches to valuing ecosystem services and to contribute additional techniques which may be used in evaluating ‘green’ GDP accounts. Our estimates focus on the ecosystem as a productive economic input, not a stock which is depreciated or depleted over time; as such, it differs with other concepts more frequently employed in green GDP accounting. Most of our results are derived from the analytical fiction that a single owner of the biosphere establishes a market for all ecological resources. This monopolist then appropriates all rents from the human population. The maximum amount the monopolist charges is first assumed to be world gross product less the global human subsistence level. In addition, we examine the excess rents available in factor markets using the assumption of weak complementarity between factor inputs and ecosystem services. We also provide more conservative estimates of the value of ecosystem services by investigating the sustainable price the monopolist could charge the global population and by exploring the effects of compensating wage differentials and a non-monopolist owner of the ecosystem.

Weak complementarity and production

This paper describes how weak complementarity, a common assumption to characterize consumer preferences for recovering measures of willingness to pay for nonmarketed environmental resources, can be used to evaluate the effects of pollution that may affect profits or costs. In such cases, pollution serves as an externality imposed by third parties on production activities.

Capital operating time and economic fluctuations

SummaryAcknowledging that changes in factor utilization rates explain variations in factor productive services flows, this paper investigates a dynamic general equilibrium model incorporating quasi-fixed inputs, weak complementarity between capital and labour, and displaying variations in the following three margins: (i) individual hours, (ii) aggregate employment and (iii) the workweek of capital. Both instantaneous amplification of shocks and mid-term persistence are substantially magnified, witnessing much richer propagation mechanisms. This high persistence does not entirely rely on assumptions regarding adjustment of employment, but, on the contrary, on faster capital accumulation enabled by large increases in output due to periods of high factor utilization.

Reconsidering the Use of Hicks Neutrality to Recover Total Value

In this paper, I reconsider the use of Hicks neutrality for recovering total value for a change in an environmental good. I clarify the need to adjust expenditures and explain how numerical techniques can be used in approximating these adjustments. I show that the circumstance believed to support Hicks neutrality, weak neutrality at the choke price vector, is a case of weak complementarity. I mathematically demonstrate that the necessary degree of Hicks neutrality is unlikely to be satisfied. I derive the ensuing relative bias and show its usefulness in selecting goods which may approach Hicks neutrality.

The Demand for Financial Assets in Pakistan

In recent years Pakistan has moved to liberalise its financial and capital markets. Consequently the reforms will place heavy demand on the instruments of monetary policy to regulate the working of financial markets. Interest rate policy as a component of monetary policy not only determines the allocation of resources between assets but also within each class of assets. Given the scant research on intra-asset response to intertemporal interest rate movements, the present paper fills the gap by studying the determinants of financial assets and quantifies intra-asset substitutability within a system-wide portfolio framework. Using a simplified version of Brainard and Tobin (1968) model, we explain the asset holdings in terms of wealth and interest rates. We test the model on quarterly holdings of five assets, i.e., saving and fixed deposits, khas deposits, national deposit certificates and defence saving certificates. Asset substitutability is ascertained by single equation OLS, FIML (Iterative 3SLS) and restricted FIML estimation techniques. The system-wide restricted model performs according to a priori expectations. Own interest rate effect is positive and significant in three of the four equations. Five of the six off-diagonals are negative, and three are statistically significant. Saving and fixed deposits exhibit weak complementarity. Khas deposit and national deposit certificates are strong substitutes. The model is also used to decompose the change in portfolio share due to wealth, interest rate and residual components.

Exact Aggregation and the Demand for Public Goods

Extends Mäler′s notion of weak complementarity between a private good and a public good to non‐homothetic demand functions which can be exactly aggregated. Aggregate demand functions depending on private prices, public good quantities and income distribution statistics can then be used to recover the private individual demand functions which reveal an individual′s willingness to pay for public goods.

Recovering weakly complementary preferences

This paper demonstrates a method for recovering weakly complementary expenditure and indirect utility functions while integrating back from Marshallian demand specifications that do not intrinsically embody weak complementarity. Weak complementarity, of a good with quality provides information about how the constant of integration over price must behave with respect to quality, and this information can be incorporated into the process of recovering preferences. The weakly complementary expenditure and indirect utility functions are recovered for the linear demand specification and for the Stone-Geary utility function with any value of the subsistence parameter.

Willingness to Pay for ozone control: Inferences from the demand for medical care

The paper applies a discrete choice version of the household production approach to the valuation of nonmarket goods. Willingness to pay for tropospheric ozone control is estimated using medical care demand under assumptions of input necessity and weak complementarity. In example calculations, individuals living in high ozone areas are willing to pay over $170 annually for an environment in which ozone concentrations never exceed 12 pphm. Willingness to pay figures are two to four times larger than medical expense savings caused by the same ozone reductions. Estimates obtained are compared with results of previous studies, and proposed ozone control measures are discussed.

Indirect methods for valuing changes in environmental risks with nonexpected utility preferences

Theoretical models for estimating individuals' values for sure improvements in environmental quality are well developed. These models can be classified as being based on averting behavior, hedonic prices, or weak complementarity. Some of these models have also been applied to the task of valuing changes in risk based on expected utility theory. This article provides a systematic development of these models for changes in either the probability or the magnitude of an uncertain event and shows that the derived expressions for individual marginal willingness to pay can be generalized to nonexpected utility preferences as long as the index of preferences is continuous, convex, and twice differentiable.

On Welfare Analysis under Temporal Uncertainty

The implications of uncertainty for costbenefit analysis remain controversial. One issue raised in the evaluation of welfare compensation tests has been the appropriate use of observable economic behavior in the measurement of agents' willingnessto-pay (or willingness-to-receive). In the context of measure, this question has received considerable attention in the analysis of the welfare impact of price changes under certainty (e.g., Willig 1976; Chipman and Moore 1980; Hausman 1981; McKenzie and Pearce 1982). Moreover, the introduction of uncertainty has raised a number of questions about the appropriateness of alternative welfare measures (e.g., Schmalensee 1972, 1975; Graham 1981). For example, Graham (1981) has argued that there is little basis to recommend either option price or expected for a role of prominence in welfare analysis. The issue rather is whether or not there exists a distribution of individual payments (or receipts) that maximizes aggregate willingness-to-pay and passes the Pareto improvement test, i.e., that leaves no individual worse off and makes at least one individual better off (Graham 1981). But, in the implementation of the Pareto improvement test, how is the aggregate willingness-topay supposed to be measured empirically? More specifically, what is the influence of uncertainty and its temporal resolution on the validity of agent surplus (the welfare triangle given by the area between a compensated choice function and its corresponding price) as a welfare measure? Some progress has been made in this direction by Chavas, Bishop, and Segerson (1986) in the context of option price. However, as shown by Graham (1981), while option price is the appropriate measure of benefits in situations involving similar individuals and collective risk, it may not be the appropriate welfare measure in more general situations. Therefore, there is a need to refine our understanding of how agent surplus can be used as a welfare measure in the general context of a potential Pareto improvement test under temporal uncertainty. The objective of this paper is to investigate how temporal uncertainty can affect the measurement of willingness-to-pay in general welfare compensation tests. Temporal uncertainty corresponds to the situation where new information becomes available over time, which resolves at least part of current uncertainty facing economic agents. This new information can influence future individual decisions as well as individual willingness-to-pay. Particular attention will be given here to the case where income compensation is conditional on the new information that will become available in the future and results in a more efficient allocation of risk among individuals. This paper focuses on competitive agents (e.g., households or firms) for which welfare changes can be expressed in terms of price changes. This includes the analysis of the welfare effects of various government pricing policies. This also includes the evaluation of public projects based on the travel cost method which, under a weak complementarity condition, consists in using price changes of related private goods as an indirect means of measuring the value of a public project (Maler 1974). The analysis is presented in the context of a general two-period model where the agents are uncertain about the state of the world. As suggested by Graham (1981), it is shown that the option price provides a lower bound on

Quality adjusted prices and weak complementarity: A new method for estimating the demand for environmental services

Valuation of site-specific environmental services by the weak complementarity approach is often precluded by insufficient price variation. To circumvent this problem, demand and price are respecified in terms of quality adjusted prices. The resulting framework demonstrates that variation in environmental quality alone enables demand estimation. An application to a recreation site in Chicago demonstrates the feasibility of the new method. Price elasticities estimated on quality adjusted prices are not significantly different from those obtained in an ordinary demand analysis.

Valuing Environmental Quality: Weak Complementarity with Sets of Goods

AbstractIn practice, it is frequently impossible to identify a single good which is a weak complement to an environmental amenity for which welfare measures are desired. However, a set of goods exhibiting this property sometimes exists, e.g., water‐related recreational activities when the nonmarket good to be valued is water quality. A set of weak complements is defined and implications for welfare measurement presented. The proper welfare measure now involves evaluation of a line integral and simple additions of areas under demand curves will not always be correct. However, under certain econometric circumstances, approximate welfare measures can be obtained from estimated functions.

Translation framing code and frame-monitoring mechanism as suggested by the analysis of mRNA and 16 S rRNA nucleotide sequences

Protein coding sequences carry an additional message in the form of a universal three-base periodical pattern (G-non-G-N) n , which is expressed as a strong preference for guanines in the first positions of the codons in mRNA and lack of guanines in the second positions. This periodicity appears immediately after the initiation codon and is maintained along the mRNA as far as the termination triplet, where it disappears abruptly. Known cases of ribosome slippage during translation (leaky frameshifts, out-of-frame gene fusion) are analyzed. At the sites of the slippage the G-periodical pattern is found to be interrupted. It reappears downstream from the slippage sites, in a new frame that corresponds to the new translation frame. This suggests that the (G-non-G-N) n pattern in the mRNA may be responsible for monitoring the correct reading frame during translation. Several sites with complementary C-periodical structure are found in the Escherichia coli 16 S rRNA sequence. Only three of them are exposed to various interactions at the surface of the small ribosomal subunit: (517)gcCagCagCcgC, (1395)caCacCgcC and (1531)auCacCucC. A model of a frame-monitoring mechanism is suggested based on the weak complementarity of G-periodical mRNA to the C-periodical sites in the ribosomal RNA. The model is strongly supported by the fact that the hypothetical frame-monitoring sites in the 16 S rRNA that are derived from the nucleotide sequence analysis are also the only sites known to be actually involved or implicated in rRNA-mRNA interactions.

Generalized inversion and weak bi-complementarity∗

In the literature, complementary matrices have been studied because of their importance in statistics. The present paper shows how this notion can be extended to the concept of weak (hi-) complementarity. We will make transparent especially the connections between these new concepts and the concept of generalized inversion. The applications include a method which in certain circumstances allows to determine particular generalized inverses solely by means of regular inversions.

Some Conceptual and Empirical Issues in Estimating the Demand for Water Quality

Some Conceptual and Empirical Issues in Estimating the Demand for Water Quality

Observing Preferences for Educational Quality: The Weak Complementarity Approach

Observing Preferences for Educational Quality: The Weak Complementarity Approach