Daniel H. Karney | Searcharxiv

arXiv2026

New Compensating and Equivalent Variation Closed-form Solutions for Non-Separable Public Goods

This study finds exact closed-form solutions for compensating variation (CV) and equivalent variation (EV) for both marginal and non-marginal changes in public goods given homothetic, but non-separable, utility where a single sufficient statistic summarizes consumer preferences. The closed-form CV and EV expressions identify three economic mechanisms that determine magnitudes. One of these mechanisms, the relative preference effect, helps explain the disparity between willingness to pay (WTP) and willingness to accept (WTA) for public goods. We also show how our closed-form solutions can be employed to calculate WTP and WTA across income groups using estimates from existing empirical studies.

econ.GN↗

arXiv2025

Environmental Policy in General Equilibrium under Market Power and Price Discrimination

This study constructs a novel analytical general equilibrium model to compare environmental policies in a setting where oligopolistic energy firms engage in third-degree price discrimination across residential consumers and industrial firms. Closed-form solutions demonstrate the impact on prices and quantities. The resulting welfare change is decomposed across three distortions: output, price discrimination, and externality. This study finds that the output distortion and price discrimination welfare effects generally move in opposite directions under policies such as an emission tax or a two-part instrument. Numerical analysis compares policies and finds scenarios where the output distortion and price discrimination welfare changes fully offset and thus leaves the net welfare gain of the externality correction. In this way, environmental policy can be designed to mitigate output distortion welfare concerns when firms have market power.

econ.GN↗