Demand has also been hit by a massive increase in the price of cod in recent years, with the fish approaching the so-called choke price
, whereby demand plummets as prices become too high.
First we provide interval estimates of the choke price of cigarettes by state.
Using our estimates of the parameters of this model presented in the first column of Table I we can obtain estimates of the long run choke price [Mathematical Expression Omitted].
Table II presents our choke price estimates computed according to this procedure.
The bounds on our interval estimates form a 95% asymptotic confidence interval on the true choke price for the representative consumer in each state.
This analysis highlights the fundamental question of the limits of taxing sin: It is not a question of choke price per se, but rather it is a question of how federal tax revenue will change as cigarette tax rates are increased, given that it is possible to price individuals out of the market.
Specifically, both the choke price estimates and the tax revenue estimates are likely to understate their true magnitudes for the same reason.
2] - [Beta] P(r), q([Beta]) = 0, where P(r) is the delivered price and [Beta] is a parameter equal to the choke price.
Thus the general pattern of spatial pricing is a function of P(0) and e, which vary independently of R except when the choke price is binding--i.
A single-plant spatial monopolist under transportation cost absorption regulation will charge the choke price at r = R if regulated e [Epsilon] [1/2, 1]; otherwise it will charge a price less than the choke price at r = R if regulated e [Epsilon] [0, 1/2).
In such cases, P(r) is below the choke price and q(P(r)) > 0 for r < R, and P(r) becomes infinite and q(P(r)) = 0 for r > R.
Because regulated e is below 1/2, the market will end with P(R) < [Beta], the choke price, and consumers living near [R.