Rasmusen's Unpublished Papers (September 1, 2010)

1. Working Papers
2. Forthcoming
3. Useful Notes, Not for Publication
4. Topics I Am Working On Without Circulating Papers
I have a separate page for papers that I don't think I will ever publish.

1. Working Papers

1. ``Isoperfect Price Discrimination: Bargaining and Market Power,'' with David Myatt. Standard discussions of perfect price discrimination rest on a hidden assumption: that the monopolist can make take-it-or-leave-it offers. If a monopoly charges different prices to each of a large number of buyers, the correct paradigm is not the ultimatum game, but bilateral monopoly. The monopolist's profit will not be the entire surplus, but something less. Under ``balanced isoperfect price discrimination''-- a constant split $\lambda=.5$ of the bargaining surplus with each buyer--- and constant marginal cost, the monopolist has the same profit as monopoly pricing if the demand curve is linear, less if demand is concave, and more if demand is convex. Increasing marginal cost tends to make the monopolist prefer price discrimination. Isoperfect price discrimination is complemented by an idiosyncratic product design and informative advertising, whereas simple monopoly pricing is facilitated by plain-vanilla designs promoted via pure hype. Competition pushes suppliers away from isoperfect price discrimination and towards simple posted pricing. http://www.rasmusen.org/papers/pdisc-myatt-rasmusen.pdf or in http://www.rasmusen.org/papers/pdisc-myatt- rasmusen.tex.

2. ``Monopoly versus Competitive Leveraging of Reputation through Umbrella Pricing.'' A firm with a reputation for high quality in one product may usefully extend that reputation to other products. We look at how that works in a moral hazard model of product quality. http://www.rasmusen.org/papers/umbrella.pdf or http://www.rasmusen.org/papers/umbrella.tex.

3. ``Coarse Grades,'' with Rick Harbaugh. Certifiers of quality often report only coarse grades to the public despite having measured quality more finely, e.g., "A" instead of "98". Why? We show that using coarse grades can actually result in more information reaching the public, because it encourages low-quality individuals or firms to become certified. In our model the certifier aims to minimize public uncertainty over quality subject to the feasibility constraint of voluntary certification at a fixed cost. Moving from the best exact grading scheme to the best coarse one (a) induces more participation and (b) reduces public uncertainty. http://www.rasmusen.org/papers/coarse-harbaugh-rasmusen.pdf or in http://www.rasmusen.org/papers/coarse-harbaugh-rasmusen.tex.

4. ``The Concealment Argument: Why No Conclusive Evidence or Proof for God's Existence Will Be Found.'' Logic and Biblical evidence suggest that God wishes that some but not all humans become convinced of His existence and desires. If so, this suggests that attempts to either prove or disprove such things as God's existence, past miracles, or present supernatural intervention are doomed to failure, because God could and would take care to evade any such efforts. In tex and pdf. (http://rasmusen.org/papers/conceal-rasmusen.pdf).

5. ``Quasi-Concavity versus Concavity,'' with Christopher Connell. We show that if and only if a real valued function $f$ is {\it strictly} quasi-concave except possibly for a flat interval at its maximum and belongs to a precise regularity class, there exists a strictly monotonically increasing function $g$ such that $g\smallcircle f$ is concave. Moreover, if and only if the function $f$ is either weakly or strongly quasi-concave there exists a ``slanting function'' $h$ and a monotonically increasing function $g$ such that $g\smallcircle h\smallcircle f$ is concave. We prove this sharp sharp characterization of quasi-concavity for any Euclidean space or even any arbitrary geodesic metric space. We also establish a simpler sufficient condition suitable for most applications for concavifiability on Euclidean spaces or any other Riemannian manifolds. http://rasmusen.org/papers/quasi-connell-rasmusen.pdf or in http://rasmusen.org/papers/quasi-connell-rasmusen.tex.

6. "Internalities and Paternalism: Applying the Compensation Criterion to Multiple Selves across Time " One reason to call an activity a vice and suppress it is that it reduces a person's future happiness more than it increases his present happiness. Gruber \& Koszegi (2001) show how a vice tax can increase a person's welfare in a model of multiple selves with hyperbolic preferences across time. An interself analogy of the compensation criterion can justify a vice ban whether preferences are hyperbolic or exponential, but subject to the caveat that the person has a binding constraint on borrowing. In tex and pdf ( http://www.rasmusen.org/papers/internality-rasmusen.pdf).

7. "Executive Compensation in Japan: Estimating Levels and Determinants from Tax Records" (with Minoru Nakazato and J. Mark Ramseyer). Most studies of executive compensation have data on pay but not total income. Studies of executives in Japan lack even good data on pay. We have tax data on total executive incomes, enabling us to estimate salaries and an executive’s exposure to firm risk from a new angle. We confirm the conventional wisdom that Japanese executives earn far less than American ones--- about one-fifth the pay, adjusting for firm size. Tobit regressions show that pay in Japan depends heavily on firm size (with an elasticity of .22). Paper, data, and programs are at http://www.rasmusen.org/papers/exec/exec.htm.

8. "A Model of Trust in Quality and North-South Trade." Countries have different comparative advantages in quality. These might be due to technological differences, or to reputation differences of the sort described in Klein & Leffler (1981). Reputation differences are particularly interesting, since good reputations are a form of ``social capital'' that is amenable to modelling. They can explain why firms in these industries like to export even if the foreign price is no higher than the domestic one, and why governments would like to have large ``high-value'' sectors. In tex and pdf ( http://www.rasmusen.org/papers/trade-rasmusen.pdf).

9. "Price Discrimination between Retailers with and without Market Power " (with Barick Chung). Suppose a monopolist manufacturer sells at two prices to retailers in small towns and large cities. To prevent retailers’ arbitrage, the manufacturer needs to set the wholesale price difference smaller than the transportation cost. As a result, with linear pricing the retail price for towns will be even higher than that in double marginalization; and with a two-part tariff, the wholesale price for towns will be higher than the marginal cost. In this context, double marginalization cannot be totally eliminated by two-part tariff pricing. tex and pdf ( http://www.rasmusen.org/papers/retailers-chung-rasmusen.pdf).

10. "Some Common Confusions about Hyperbolic Discounting." There is a lot of confusion over what ``hyperbolic discounting'' means. I try to clear up that confusion. In tex and pdf ( http://www.rasmusen.org/special/hyperbolic-rasmusen.pdf).

11. "The Parking Lot Problem." (with Maria Arbatskaya and Kaushik Mukhopadhaya).If there is queueing for an underpriced good, the queueing can eat up the entire surplus, eliminating the social value of the good. An implication is that there is a discontinuity in social welfare between ``enough'' and ``not enough'' for certain goods such as parking spaces. This implies that if there is uncertainty in the number of demanders, the amount of the good should be set well in excess of the mean demand. http://www.rasmusen.org/papers/parking-rasmusen.pdf or in tex.

12. "Economic Regulation and Social Regulation." A long- standing book project, in the style of my JLS Desecration paper. ``Health, safety, morals, and the general welfare,'' are the traditional subjects of the police power of the state. When we think of government regulation, we usually think of economic regulation. This is generally efficient only for a narrow range of activities and is subject to abuse by private parties who can profit from it. Social regulation is another area of government regulation, however, and one where the presumptive efficiency of laissez faire disappears, because market imperfections are more common and capture by special interests is less profitable. This does not immediately imply that the government should engage in social engineering, because our current knowledge of social processes is primitive. It does imply that courts should be reluctant to strike down social regulation on the grounds that it is irrational. My working files are at Http://www.rasmusen.org/social/social.htm. The old draft is available at tex and pdf ( Http://www.rasmusen.org/papers/social.pdf).

13. Book Publishing Ideas.
    1. Fischer Black papers.
       
    2. Paley's Evidences of Christianity, http://www.rasmusen.org/papers/paley.pdf or in tex.
       
    3. The Elizabethean Homilies of the Church of England. http://www.rasmusen.org/papers/homilies1.pdf or in tex.

2. Forthcoming

1. "The Industrial Organization of the Japanese Bar: Levels and Determinants of Attorney Income," (with Minoru Nakazato and J. Mark Ramseyer). Forthcoming, Journal of Empirical Legal Studies. Using micro-level data on attorney incomes in 2004, we reconstruct the industrial organization of the Japanese legal services industry. These data suggest a somewhat bifurcated bar, with two sources of unusually high income: talent in Tokyo, and scarcityelsewhere. The most talented would-be lawyers (those with the highest opportunity costs) pass the bar-exam equivalent on one of their first tries or abandon the effort. If they pass, they tend to opt for careers in Tokyo that involve complex litigation and business transactions. This work places a premium on their talent, and from it they earn appropriately high incomes. The less talented face lower opportunity costs, and willingly spend many years studying for the exam. If they eventually pass, they disproportionately forego the many amenities available to professional families in Tokyo and opt instead for careers in the under-lawyered provinces. There, they earn scarcity and monopoly rents not available in the far more competitive Tokyo market. In MS Word ( http://www.rasmusen.org/papers/jpnbar.nakazato.ramseyer.rasmusen.doc).

2. "Career Concerns and Ambiguity Aversion." Forthcoming, Economics Letters.. Why do people have ambiguity aversion, preferring, a gamble with a 50\% chance of success to one whose expected probability of success is 50\% but where that 50\% is an unbiased estimate? The answer modelled here, in the spirit of the career concerns literature, is learning: a risk-averse person does not wish observers to learn whether he is good or bad at estimating probabilities. He therefore prefers a gamble with objective probabilities. In tex and pdf ( http://www.rasmusen.org/papers/ambiguity-rasmusen.pdf).

3. "First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets," (with Young-Ro Yoon). Forthcoming, Journal of Industrial Economics. Is it better to move first, or second--- to innovate, or to imitate? Suppose one player has superior information about which of two new markets is better. If he enters first, he might be able to secure a natural monopoly. (The less-informed player also has this motive.) If he enters second, he can prevent the other player from imitating him. We find, predictably, that the more accurate the informed player's information the more he wants to delay in order to prevent the spillover of his information. Also, the less accurate the informed player's information the more he wants to move first in order to foreclose a market. In addition, the bigger the difference in markets, the more likely the two players will make the same choice. More surprisingly, if the informed player's information becomes more accurate that can hurt both industry profits and consumer welfare by inducing both players to choose what they hope is the bigger market, leaving the other market not served. tex and pdf ( http://www.rasmusen.org/papers/entry-rasmusen-yoon.pdf).

3. Useful Notes, Not for Publication

1. "Principles of Graphs and Tables." Tips for undergraduate writing ( http://www.rasmusen.org/g492/14_graphs.htm).

4. Miscellaneous, without Circulating Papers,

1. Notes on "Belief in God: A Game Theory Approach " Notes in tex

2. ``Isoperfect Price Discrimination in a Hotelling Duopoly,'' with David Myatt. When duopolists compete by haggling with consumers, the form of the bargaining model is very important, whether in a Bertrand model or a Hotelling model. http://www.rasmusen.org/papers/duopoly-myatt-rasmusen.pdf or in http://www.rasmusen.org/papers/duopoly-myatt-rasmusen.tex .

3. Notes on ``Bargaining under Complete Information,'' with David Myatt. Outside options are tricky. http://www.rasmusen.org/papers/bargaining.tex.

4. Notes on ``The Rubinstein (1982) Model with Both Discounting and Per-Period Costs'' Combining those two things results in a model like the standard one with just discounting. http://rasmusen.org/papers/fixedcost.tex.

5. "Hold-Up as a Social Cost of Monopoly with Perfectly Competitive Retailers or with Consumers." It is well known that when there is one seller and one or a few buyers, buyers may refrain from undertaking value- increasing investments for fear that the seller will raise the price once the investment is a sunk cost. Long-term contracts are the solution. What does not seem to have been explored is what happens when the market has many buyers--- too many for contracting, or for tailoring the price to whether or not the buyer has made the investment. This is interesting both when the buyers are consumers and when they are intermediate firms.

6. ``What Asset Sale Price Is Fair? – The Chrysler Bankruptcy Section 363 Sale.'' When there is only one potential buyer of an asset, the bankruptcy judge should require the sale price to split the surplus rather than giving it all the buyer, as in the Chrysler case.

7. ``Litigation Costs in the United States and Elsewhere," with J. Mark Ramseyer.

8. "A Simple Model of Keynesian Fiscal Policy." A one-input, one-period, two-good, extremely simple structural model with rigid prices and labor markets can generate Keynesian effects.

9. Notes on ``Biased Experts in a Sender-Receiver Model.'' If someone biased is using an intermediary to collect and convey information, he does best by not being able to secretly convey his bias to the intermediary. He may do just as badly if there is a chance he might be caught imposing the bias, and he does best if he is caught with probability one. http://www.rasmusen.org/papers/bias-rasmusen.tex.

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