Vishavdeep Sharma

This paper studies the link between cost and demand pass-through in oligopoly. When market size and the cost shifter both enter additively, market-size and marginal-cost shifts act as equivalent perturbations to the equilibrium markup, and the two pass-through rates sum to one. The identity holds in any symmetric oligopoly nested in the standard conduct-parameter framework, extends to asymmetric oligopoly in aggregated form, and is independent of conduct. I characterize the demand and cost specifications under which the identity holds and fails, and discuss when it can be invoked as a working restriction or used as a diagnostic in applied work.

Many studies have evaluated climate adaptation as a major strategy to reduce the potential negative economic impacts of climate change induced disasters, focusing primarily on property damage. However, averting stock losses is not the only measure of benefits of adaptation; it is also important to consider reducing the loss of the flow of goods and services stemming from property damage, typically measured in terms of loss of net revenues or GDP. These losses begin when the disaster strikes and continue until damaged property is restored. This paper presents a formal model of optimal economic recovery from disasters for the individual firm as a lower bound estimate of flow losses, blending aspects of climate change economics and the economics of disasters. The paper combines important objectives, background considerations and functional relationships in an optimal control theory approach to analyze how investment in repair and reconstruction (R&R) reduces disaster flow losses in the assessment of the benefits of adaptation measures such as the construction of seawalls, installation of storm shutters, or enhanced vegetation management practices. R&R can be facilitated and enhanced by tactics referred to as dynamic economic resilience, which promotes the efficient allocation of resources over time. We distinguish two classes of tactics: those that hasten the implementation of the investment and those that lower its cost and thereby accelerate recovery. Tactics to accomplish the former include speeding up the removal of debris, insurance payments, and applying for public assistance. Tactics to accomplish the latter include shortening the gestation period for reconstruction activity and improving the efficiency of the repair/reconstruction effort. The results yield insights into optimizing behavior, trade-offs, and recovery time-paths with and without dynamic economic resilience.

The vast majority of disaster literature does not adequately distinguish resilience from recovery. Quantifying resilience is often confounded by the challenge of identifying clear conceptual and empirical reference paths, or baselines, by which to trace system recovery in general or economic activity in particular. The baselines reflect recovery over time in the absence and presence of resilience actions, or tactics, individually or in groups. This paper addresses these challenges by providing working definitions, conceptual distinctions, and alternative baselines for differentiating and quantifying these two key concepts from an economic perspective. The paper first refines the conceptual distinction between static economic resilience and dynamic economic resilience. It then provides a justification for distinguishing resilience from recovery, and it provides a rationale for evaluating resilience as efficient recovery. To facilitate empirical research, the paper provides a framework for establishing both upper-bound and lower-bound recovery baselines. These baselines help identify important counterfactuals by which resilience can be distinguished from ordinary recovery, and through which resilience metrics at the microeconomic level can be quantified. Finally, the paper provides an empirical example using data from businesses impacted by the 2011 Great East Japan Earthquake. The example utilizes stochastic frontier analysis to quantify efficiency using the empirical baselines approach that the paper introduces. The conceptual and empirical concepts provided here have societal and public policy implications for improving public and private-sector decision making, resilience planning, business and other institutional continuity, insurance assessment, and recovery benchmarking.