Albert L. Nichols

Stockpiling Strategies and Cartel Prices

Consuming nations can stockpile cartelized commodities to suppress prices in future periods. This analysis employs a multiperiod framework and simple concepts of game theory to asses stockpiling strategies by the government(s) of consuming nation(s) and pricing strategies by a cartel. Ultimate consumers are active, though nonstrategic, players in the game. The paper examines outcomes when discount rates, time horizons, resource constraints, and storage and production costs vary; when consuming nations do not cooperate fully; and when a consuming nation or a cartel can issue threats and promises. Both producers and consumers realize economic benefits from stockpiling in most of the cases that we investigate. Depletable resources are not considered except in an appendix. The net benefits of stockpiling constrained resources are problematical.

Environmental adders in the real world

Abstract This paper evaluates the use of environmental ‘adders’ as a regulatory instrument. It evaluates their likely performance in meeting the policy objective of social costing given the changes in the electric utility industrys structure and in environmental policy since the efforts to estimate these costs were initiated. The prognosis is largely negative — suggesting that environmental adders are inconsistent with the increased competition already underway in the utility industry, as well as with the trend toward greater use of true market-based approaches to environmental policy that are not subject to detailed economic regulation.

U.S. v. Microsoft: Did Consumers Win?

U.S. v. Microsoft and the related state suit filed in 1998 appear finally to have concluded. In a unanimous en banc decision issued in late June 2004, the D.C. Circuit Court of Appeals rejected challenges to the remedies approved by the District Court in November 2002. The wave of follow-on private antitrust suits filed against Microsoft also appears to be subsiding. In this paper we review the remedies imposed in the United States, in terms of both their relationship to the violations found and their impact on consumer welfare. We conclude that the remedies addressed the violations ultimately found by the Court of Appeals (which were a subset of those found by the original district court and an even smaller subset of the violations alleged, both in court and in public discourse) and went beyond them in important ways. Thus, for those who believe that the courts were right in finding that some of Microsofts actions harmed competition, the constraints placed on its behavior and the active, ongoing oversight by the Court and the plaintiffs provide useful protection against a recurrence of such harm. For those who believe that Microsoft should not have been found liable because of insufficient evidence of harm to consumers, the remedies may be unnecessary, but they avoided the serious potential damage to consumer welfare that was likely to accompany the main alternative proposals. The remedies actually imposed appear to have struck a reasonable balance between protecting consumers against the types of actions found illegal and harming consumers by unnecessarily restricting Microsofts ability to compete.