Rather than explicitly revealing information about the quality of their products and services, many firms prefer to signal quality through the prices they charge, typically working on the assumption that a high price indicates high quality. New research by Maarten Janssen and Santanu Roy provides a new explanation for why firms choose not to disclose quality directly – and explains how prices that are set to signal quality can distort actual buying decisions.
Their study has an important policy implication for regulators: there may be a case for imposing mandatory disclosure. Continue reading
Imposing trade restrictions on parallel imports has the surprising effect of motivating a firm to export, according to a new study using game theory economic analysis, says co-author Santanu Roy, SMU. The study found that diverse parallel importing policies make it possible to analyze for the first time how competition between firms and allowing or banning parallel imports can influence competition. Continue reading
Biological alien invaders often travel via international trade, prompting trade regulations to stop them. Pesky invaders like Zebra mussels, Asian Longhorned Beetles, Kudzu, Triffid weed and others have wreaked billions of dollars in economic damage, destroying agriculture, harming human health and threatening biodiversity.
Policymakers must balance concerns about the damage and cost of controlling invaders against the economic necessity of free trade, say economists Santanu Roy, Southern Methodist University, and Lars J. Olson, University of Maryland.
In their research, Roy and Olson examine the various conditions policymakers must evaluate to determine the best policies governing invasive species based on sound economics.
Once hunted to near-extermination, the Northern Rocky Mountain gray wolf reached an important milestone recently. With a population estimated at 1,500, the wolf re-established itself in the Yellowstone National Park area, and in March 2008 the U.S. Fish and Wildlife Service removed it from protection under the Endangered Species Act.
Almost immediately, hunters began petitioning the state offices of Idaho, Montana and Wyoming for permits to hunt the wolves, perhaps down to as little as 20 percent of their current numbers in some areas. Such a weighty issue begs the questions: How much hunting is safe for a given species? How many gray wolves can die before the species loses its chance at recovery?