Rasmusen's Unpublished Papers (December 2, 2011)

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 Useful Notes, Not for Publication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. "Three Years or Six to Audit? The Ill-Considered Intermountain Decision," The IRS wishes to interpret “omits from gross income” to mean “reports but understates gross income” to extend the period for audit from three years to six. It took that position without notice-and-comment, in the context of the hot pursuit of a particular tax shelter, and after losing in court, with all 13 Tax Court judges concurring, it made the motions of going through notice-and-comment so as to get Chevron deference on appeal. This paper discusses what should be considered in choosing a statute of limitations and points out how these considerations were completely ignored in IRS decisionmaking. This provides a good example for showing how the various theories of Chevron deference work.

2. The Economics of Regulation. I am writing an undergraduate textbook on regulation. I start with 4 chapters of theory (supply-and-demand, market failure, government failure, discounting and life valuation) and have just 2 chapters of antitrust, with 6 more chapters on other topics. My aim is to write a relatively short book (350 pages) with lots of photos and stories, skipping many topics and being interesting enough for someone to read for recreation.I also want to charge a low price, and I might well self-publish. http://www.rasmusen.org/g406/chapters/

3. ``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.

4. ``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.

5. ``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.

6. ``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).

7. ``Concavifying the Quasi-Concave,'' with Christopher Connell. We show that if and only if a real valued function f is 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 of 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.

8. Book Publishing Ideas: I've put these on a separate page, at http://www.rasmusen.org/abros.htm.

2. Forthcoming

1. "Internalities and Paternalism: Applying the Compensation Criterion to Multiple Selves across Time," forthcoming, Social Choice and Welfare. 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).

2. "Are Americans More Litigious? Some Quantitative Evidence (with J. Mark Ramseyer). Forthcoming in An American Illness , edited by Frank Buckley, http://buckleysmix.com/american-illness-4/. Many observers suggest that American citizens sue more readily than citizens elsewhere, and that American judges shape society more powerfully than judges elsewhere. We examine the problems involved in exploring these questions quantitatively. The data themselves indicate that American law’s notoriety does not result from how we handle routine disputes. Instead, it results from the peculiar and dysfunctional way American courts handle particular legal doctrines like class actions. In MS Word (http://www.rasmusen.org/papers/litigation-ramseyer-rasmusen.doc). and pdf (http://www.rasmusen.org/papers/litigation-ramseyer-rasmusen.pdf).

3. "Can the Treasury Exempt Companies It Owns from Taxes? The $45 Billion General Motors Loss Carryforward Rule" (with J. Mark Ramseyer), forthcoming, The Cato Papers on Public Policy, edited by Jeffrey Miron, http://www.amazon.com/Cato-Papers-Public-Policy/dp/1935308483. . A corporation that buys property does not thereby acquire the right to reduce its corporate income tax by deducting the seller’s past years’ losses against its own future income. The tax code contains express provisions to rule out various complex ways of doing that, so as to prevent assets from being purchased for the sake of the net operating loss carryovers. After the government joined private parties in purchasing most of General Motors’s property, the Secretary of the Treasury issued “the EESA Notices” which said that the usual tax rules would not apply and the purchasers could deduct $45 billion from their future corporate income, a tax asset worth an estimated $16 billion. The notice gave no justification for the exception, except that the TARP act gives the Secretary authority to do what is “necessary or appropriate to carry out the purposes of EESA.” This paper argues that there is no legal or economic justification for the EESA Notices, even aside from the issue of whether the government should have bought the GM property. The scant notice paid to the large wealth transfer of the EESA Notices shows the danger of allowing this kind of tax ruling, especially in comparison to the widespread criticism of the government purchase itself, an action which may well have a much smaller cost given that the government’s previous loans to GM were already sunk. http://rasmusen.org/papers/gm-ramseyer-rasmusen.doc .

4. "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. "Belief in God: A Game Theory Approach. "

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.

3. ``Bargaining with Outside Options under Complete Information.'' http://www.rasmusen.org/papers/bargaining.tex.

4. Notes on ``The Rubinstein (1982) Model with Both Discounting and Per-Period Costs.'' http://rasmusen.org/papers/fixedcost.tex.

5. "Hold-Up as a Social Cost of Monopoly with Perfectly Competitive Retailers or with Consumers."

6. ``What Asset Sale Price Is Fair? – The Chrysler Bankruptcy Section 363 Sale'' (with J. Mark Ramseyer).

7. "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.

8. Notes on ``Biased Experts in a Sender-Receiver Model.'' http://www.rasmusen.org/papers/bias-rasmusen.tex.

9. ``Odd, Enter; Even, Out: A Peculiarity of Buyout, Blackmail, Extortion, and Nuisance Suit Games.''

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