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Article
Welfare maximization, pricing, and allocation with a product performance or environmental quality standard: Illustration for the gasoline and additives market
International Journal of Production Economics
  • Paul W. Gallagher, Iowa State University
  • Hosein Shapouri, United States Department of Agriculture
  • Jeffrey Price, Department of Transportation, State of Virginia
Document Type
Article
Publication Version
Published Version
Publication Date
6-1-2006
DOI
10.1016/j.ijpe.2004.11.016
Abstract
Programming models approximate market prices and quantities when regulations constrain firm choices, because market outcomes result when welfare is appropriately defined and includes performance and environmental constraints. This study discusses market operation in quality-constrained sectors, like gasoline and additives; processors expand output until marginal processing cost equals the processing margin between product revenues and raw material costs; retailers who buy gasoline and additives from processors and sell blended retail gasoline price sales at a marginal cost that includes the blended input value plus adjustments for values of constrained attributes; and market supplies and demands of measurable attributes like octane are balanced. This method can enhance predictions about the effects of new policies that regulate product quality. Analysis can now include price and output adjustment in factor and product markets, and the competitiveness of new processes and products.
Comments

This is an article from International Journal of Production Economics 101 (2006): 230, doi: 10.1016/j.ijpe.2004.11.016.

Rights
Works produced by employees of the U.S. Government as part of their official duties are not copyrighted within the U.S. The content of this document is not copyrighted.
Language
en
File Format
application/pdf
Citation Information
Paul W. Gallagher, Hosein Shapouri and Jeffrey Price. "Welfare maximization, pricing, and allocation with a product performance or environmental quality standard: Illustration for the gasoline and additives market" International Journal of Production Economics Vol. 101 Iss. 2 (2006) p. 230 - 245
Available at: http://works.bepress.com/paul-gallagher/19/