Richard F. Kosobud

Oil Market Share Dynamics: A Markov Chain Analysis of Consumer and Producer Adjustments

We develop an “optimal market share rule” model of cartel behavior which when applied to the OPEC cartel appears capable of explaining its stability and responses to changed market events. In particular, by attaching importance to market shares based approximately on costs, OPEC members can by maintaining optimal shares deter deviant member attempts to break cartel rules. After a thorough discussion of the theory, the model is tested empirically using a Markov probability model.The estimated Markov transition matrix is further decomposed into what Theil has called the exchange matrix and the mean passage matrix. Dynamic adjustment processes in the market are revealed by the latter while an emerging pattern of OPEC member surveillance of consumers is revealed by the former which facilitates cartel stability. Inspection of these matrixes further suggests that after the formation of OPEC there is evidence of less potential for producer conflict while there appears more evidence for consumer conflict. While these results must be tentative in view of the fact that they have been estimated using a simplified two consumer — two producer model and limited data, it is argued that the results are highly suggestive and the approach in this study can be extended to cover all producer and consumers, and can be integrated into a complete model of the world oil market.

Regulatory conflict in the Chicago VOC control program

The study analyzes the performance of an innovative cap-and-trade program designed to make cost-effective reductions of an ozone precursor in Chicago and finds that decentralized market incentives were undermined by the continuance of centralized traditional emission point or command-and-control regulation. The study makes two contributions for urban areas considering this regulatory measure: it shows that using two regulatory measures to achieve one emissions reduction goal can undercut cost-effective emissions trading, and it provides a redesign of the market system that coordinates both regulatory measures for cost-effective control and avoidance of trading problems, such as hot spots and inter-temporal spikes.

The role of international transfer of technology in Japan's economic growth

Abstract The study has two objectives. The first is to review the current state of knowledge about the quantitative role of technological progress in Japans economic growth. While a few studies have challenged its preeminent role as a source of growth, attributing such growth to a more highly educated labor force or to a rapid growth of capital, etc., a main finding of recent research has been to reaffirm technological change as the most important source of growth. The second objective of the study is to suggest how this rapid technological progress was achieved. A process is described in which, in Japan, a national policy on growth was established, policy tools developed, cooperation of involved groups secured, and new commodities marketed. In this process, the importation of foreign technology apparently played a key role and the study calls for detailed research on this key factor.

Does emissions trading lead to air pollution hot spots? Evidence from an urban ozone control programme

This study is an empirical investigation into the contentious issue of possible sub-area hot spots caused by emissions trading in a pioneering application of a cap-and-trade market approach to reducing aggregate stationary-source volatile organic compound emissions in the Chicago severe ozone non-attainment region. When sub-areas are defined as populated zip codes, 89 out of 95 affected codes revealed a decrease and six an increase in emissions over pre-trading levels. If these six sub-areas are increased slightly in size by adding adjacent zip codes, emissions will be reduced in all sub-areas. Those sub-areas with the largest initial emissions revealed the most significant reductions after trading. The study also finds that trading has significantly reduced both aggregate market-wide levels and the variation in sub-area emissions from pre-trading patterns. Spatially constraining the present region-wide market to pre-empt possible future hot spots could reduce savings in pollution control costs by over 40%.