Dale E. Lehman

A behavioral model of timber supply

Abstract A dynamic behavioral model of timber supply is developed. The diverse motivation of forest owners is recognized and the implications for optimal harvest patterns is explored. This model is particularly relevant for the non-industrial private forest (NIPF) sector, and has possible uses for public forest management. Properties of the optimal NIPF timber supply curve are established, and the effects of various taxes are examined. To explore a more structured model, simulations are conducted based upon data from a typical redwood region. The projections provide indicative results for tax and other timber land policies. These results are seen to depend crucially on the forms of the landowners utility function and upon the function relating standing timber to non-income outputs of the forest. Directions for needed empirical research are then indicated.

Option value, telecommunications demand, and policy

Abstract Demand estimation and welfare analysis for telecommunications services have often been plagued by apparent inconsistencies between actual consumer behavior and standard economic theory. The latter posits that consumers will subscribe to services when their consumers surplus exceeds the subscription price. This paper presents an alternative model of subscription behavior under uncertainty. Drawing on the option value literature, we show that expected consumers surplus is generally not an adequate basis for subscription decisions. We present an empirical example in which option value significantly improves demand estimation. We discuss policy implications, including possible ‘market failures’ in which socially beneficial new technology is not deployed.

The Telecommunications Act of 1996 : the "costs" of managed competition

Acknowledgements. 1. Introduction and Overview. 2. Industry Trends and Market Structure. 3. The Stock Market Reacts. 4. A Jurisdictional Model. 5. The FCCs Efficient - Firm Standard - Telric. 6. Back to the Future. 7. Explaining State Regulatory Actions. 8. Conclusions. References. Name Index. Subject Index.

Competition and investment in telecommunications

This study examines the relationship between competition and investment by Incumbert Local Exchange Carriers (ILECs) in US telecommunications markets. A panel data model and a dynamic panel data model that have not been used in previous studies are applied in this analysis. Results of the panel data model suggest that investment by ILECs is positively related to the market share of Competitive Local Exchange Carriers (CLECs), and negatively to the absolute number of CLECs. However, once the persistence in ILECs’ investment behaviour is controlled for using the dynamic model, our measures of the existing competition from CLECs, at best, have a weak effect on ILECs’ investment. Therefore, while strengthening competition in the telecom sector may be key to restoring telecom investment, it is uncertain that competition spurred by the mandatory sharing policy in this sector stimulates ILECs’ incentives to invest in new infrastructure.

The Political Economy of Price Cap Regulation

The last decade has witnessed a dramatic substitutionof price cap regulation for rate-of-return regulationin the telecommunications industry. The 1996Telecommunications Act empowers state regulators toset the terms of competitive entry in local telephonemarkets. We investigate whether the form of regulationendogenously affects the regulators behavior withrespect to competitive entry. The evidence revealsthat regulators in price cap jurisdictions tend to setmore liberal terms of entry in comparison withregulators in rate-of-return jurisdictions. Thissuggests that price cap regulation suffers fromincomplete contracting, undermining the potentiallysuperior incentive properties of this importantregulatory reform.

Essentiality, Efficiency, and the Efficient Component-Pricing Rule

The determination of interconnection charges to essential facilities is an important problem in regulated telecommunications markets in the wake of the Telecommunications Act of 1996. This paper defines mathematical conditions for the essentiality of upstream productive inputs and examines their implications for efficient interconnection pricing. The paper shows conditions under which the efficient component-pricing rule (ECPR) can be derived as a special case of a Ramsey pricing rule. The paper also shows how efficient pricing differs from the ECPR for a number of interesting cases.

Comparative equilibrium versus comparative statics

Two approaches are often used to analyse the effects of uncertainty upon individual decision making. The comparative equilibrium approach compares an uncertain model with a certainty model, usually with the random variable replaced by its mean. The comparative statics approach introduces more uncertainty into an already uncertain model and considers the effects upon optimal decisions. This paper demonstrates that these two approaches are qualitatively equivalent for the class of models where uncertainty is completely exogenous to the decision maker. When individual decisions affect this uncertainty, the two analyses are generally qualitatively different. An example of each type of model is presented followed by a general analysis.

Telephone pools and economic incentives

We identify the incentive structure for a firm that participates in a pooling arrangement. These pooling arrangements have been common in the telecommunications industry, both in the United States and in Canada. We identify alternative mechanisms, including cost caps, yardstick competition, transfer prices, and fixed revenue allocators. A pooling firm has inferior incentives for cost reducing innovation, truthful reporting of costs, and avoidance of abuse relative to alternative mechanisms. These incentive problems are similar to those that arise under rate-of-return regulation. Notably, transfer/access pricing, does not rectify the poor incentives embodied in pools. However, pooling does facilitate demand enhancement, due to its ability to internalize potential network effects.

Instrument effects and stochastic dominance

This paper investigates how individual choice is affected by increases in risk when the choice variable (instrument) affects the distribution of the random variable as well as the objective function. The effect of increased risk on optimal choice is shown to depend on attitudes towards risk and the interaction between exogenous uncertainty and the instrument. The latter is described in terms of an extension of the notion of stochastic dominance to a comparison of changes in probability distributions (signed measures) rather than the direct comparison of distributions (probability measures). Sufficiency conditions for signing comparative statistics exercises are presented and applied to an insurance example involving moral hazard.

How) do regulated prices affect competitive entry

Explores how in the USA the Telecommunications Act of 1996 was designed to usher in an era of competition in all telecommunications markets. In practice, the initial explosion of competitive local exchange carriers (CLECs) and an