John Tschirhart

A Test of the Expected Utility Model : Evidence from Earthquake Risks

The purposes of this paper are twofold. The first is to demonstrate that the expected utility hypothesis is a reasonable description of behavior for consumers who face a low-probability, high-loss natural hazard event, given that they have adequate information. The second is to demonstrate that in California information on earthquake hazards was generated by a 1974 state law that created a market for safe housing that previously did not exist.

Club theory: Thirty years later

This paper presents a self-contained survey of club theory with an emphasis on the contributions of the last fifteen years. Club goods are contrasted with pure public goods, and equilibrium and optimality notions are contrasted. After presenting three basic representations of club theory, we focus on recent advances and generalizations that include heterogeneous memberships, transaction costs, uncertain utilization, asymmetric information, and noncompetitive influences. An agenda for research is indicated that includes further analysis of asymmetric information, institutional structure, and applications.

Terrorism in a Bargaining Framework

A LTHOUGH hostage seizures are a small percentage of terrorist incidents, they represent some of the most spectacular and influential events.2 The takeover of the American embassy in Tehran on November 14, 1979, the seizure of eleven dPEC oil ministers on December 21, 1975, and the capture and killing of nine Israeli athletes on September 5, 1972, are incidents not easily forgotten. From 1968 through 1982, of the approximately 8,000 reported terrorist events, 540 (7 percent) were transna-

Revenue Sharing as an Incentive in an Agency Problem: An example from the National Football League

We consider a professional sports leagues use of a well-defined incentive mechanism, revenue sharing, to encourage the desired behavior of teams in the league. The incentive mechanism works by internalizing externalities that arise across agents (the team owners). We find revenue sharing to be a potentially powerful incentive scheme because in this setting it encourages an optimal distribution of resources among agents. Its effectiveness is mitigated, however, by agents who enjoy private, nonmonetary benefits that are not shared. Using data from the National Football League, we examine how well the propositions explain observed behavior in this relationship.

Ecosystem Services for 2020

The Convention on Biological Diversitys 2020 targets are an improvement over the 2010 target, but they could be strengthened. The vast majority of nations have fallen far short of the Convention on Biological Diversitys (CBDs) 2010 target: to reduce the rate of loss of biodiversity (1, 2). This prompted the CBD to develop a new plan of action, supported by 20 “SMART” (specific, measurable, ambitious, realistic, and time-bound) targets for 2020 (3, 4). As the 10th Conference of the Parties (COP) of the CBD meets in Nagoya, Japan, to negotiate both plan and targets, it is critical that targets also be grounded in the real interests that people have in benefits provided by biodiversity. To evaluate targets on this basis, we use the ecosystem services framework developed by the Millennium Ecosystem Assessment (MA) (5). This framework balances resource conservation and use according to how societies value consumptive (e.g., food and fuel) and nonconsumptive (e.g., health and aesthetics) services provided by ecosystems.

Hedonic Prices for a Nondurable Good : The Case of Breakfast Cereals

Numerous studies have estimated hedonic price functions for durable goods. In this paper, the authors apply the methodology to breakfast cereals, a nondurable good. They employ maximum likelihood to estimate the hedonic price functions using data from three large supermarkets. The price function depends on characteristics that provide taste, nutrition, and convenience to consumers, and the estimates yield insights into pricing policies, consumer preferences, and consumer use of information. Copyright 1991 by MIT Press.

Ecosystem services, targets, and indicators for the conservation and sustainable use of biodiversity

After the collective failure to achieve the Convention on Biological Diversitys (CBDs) 2010 target to substantially reduce biodiversity losses, the CBD adopted a plan composed of five strategic goals and 20 “SMART” (Specific, Measurable, Ambitious, Realistic, and Time-bound) targets, to be achieved by 2020. Here, an interdisciplinary group of scientists from DIVERSITAS – an international program that focuses on biodiversity science – evaluates these targets and considers the implications of an ecosystem-services-based approach for their implementation. We describe the functional differences between the targets corresponding to distinct strategic goals and identify the interdependency between targets. We then discuss the implications for supporting research and target indicators, and make several specific suggestions for target implementation.

Protecting an Endangered Species While Harvesting Its Prey in a General Equilibrium Ecosystem Model

Because endangered species are in predator/prey, competitive, and other relationships with many species who share their habitat, efficient conservation requires simultaneously considering the needs of many species. Understanding ecological relationships and understanding how human activity affects these other species and indirectly affects endangered species are important to know when forming endangered species policies. We offer an integrated ecological/economic model that tracks both ecological relationships and human activities. The model is applied to an Alaskan marine ecosystem in which fish are harvested and Steller sea lions are endangered. Results illustrate the tradeoff between harvested fish and endangered sea lions. (JEL Q22)

Ranking Economics Departments in Areas of Expertise

This is another and updated ranking of economics departments, extended in scope and subject area coverage.

Behavior of a monopoly offering interruptible service

A monopoly offering service to its customers on an interruptible basis has the option of curtailing delivery of this service when available supply falls short of demand. Shortages occur because of the stochastic nature of demand. To do this the monopolist divides the customers into classes based on some observable characteristics, and then determines the order in which service to these classes is interrupted. The order is a decision variable that influences profits and is relevant only in the stochastic framework. In addition, the monopolist discriminates among the classes on the basis of price and reliability of service. These decision variables, in turn, influence demands. An optimum policy for any ordering is one where prices, capacity, and quoted reliabilities of service maximize expected profit, and at the same time are compatible with the actual reliabilities of service. We derive some conditions for which an ordering yields the greatest profit.