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Policy Briefs:METHODS LAB 2: MARKET FAILURE AND EVIDENCE EVALUATION
The purpose of this assignment is to give you an opportunity to demonstrate the basic analytic methods and the evaluation processes for public policy analysis. This assignment will also test your grasp of spreadsheet-based applications. Please format the final document as a policy brief (e.g. a narrative format opposed to simply writing the answer)
Policy Brief #1 – Market Composition:
You are a policy analyst hired by the Federal Communications Commission to conduct a policy analysis of the tele-communications industry. Your job is to advise the members of the committee pursuant to the committee’s decision-making process.
(2 points) The committee is considering regulating cable-television providers in in the U.S. out of concerns a relatively small number of firms are exerting undue control over the market. The committee has asked you to conduct a market share analysis to quantify the degree of market concentration in this industry among the United States’ top pay-television providers.
Using Business Insights Global data, which is a Research Database readily available to all students on the Ohio State University Library website, find the market share report on market share for the pay television providers industry from 2014 (the most recent report). Conduct an HHI assessment and in your policy brief, report the current market concentration in this industry. Based upon your calculation, what is the level of market concentration in this industry and are the concerns regarding industry concentration justified?
(2 points) A key firm hired by Comcast Chief Brian L. Roberts has lobbied both Republican and Democrat members of the FCC throughout the past year in support of a proposed merger between Time Warner Cable and Comcast. Conduct an HHI assessment of the proposed merger. Should the committee support or oppose the proposal on the grounds of market failure? Why?
(1 point) Consider the nature of television provision in a given location. Why might a merger of Time Warner Cable and Comcast provide additional causes for concern in some locations above and beyond overall market concentration? Use your knowledge of market failures in your answer.
Policy Brief #2 – Externalities:
A congressional sub-committee on energy and works has also asked you to advise them on S.2745, a proposed national tax (Pigouvian tax) on the discharge of hydraulic fracturing fluids into rivers and streams.
(3 points) Currently, the demand and supply functions for hydraulic fracturing (in barrels per day) are given by:
Demand: Q = 20,000-100P (alternatively P=200-.01Q)
Supply: Q = -500+50P (alternatively P=10+.02Q)
How many barrels of oil (in barrels per day) would be produced from fracking in an efficient market, and at what price per barrel?
(2 points) Provide the committee with the consumer and producer surplus associated with this equilibrium (in dollars per day).
(2 points) Smart researchers at the Ohio State University Safe Hydraulic Fracturing Institute (SHFI) conducted a study and found that the externality cost associated with water pollution from hydraulic fracturing is $50 per barrel. Explain to the committee what impact this inefficiency has on the quantity of oil consumed.
(4 points) S.2754 is a proposal to utilize a Pigouvian tax to “internalize” this externality. The committee would like to know what the efficient Pigouvian tax level would be. What price should the tax be? At that new tax level, what will the new socially-efficient quantity of oil be, and what will the socially- efficient price be?
Policy Brief #3 – Data Analysis:
Senators on the same committee from three large hydraulic fracturing states, (Ohio, California and Texas) have argued publicly about where the new fracking tax money should go. That is, they each believe that their own state produces the greatest quantity of oil from hydraulic fracturing and thus, they argue that the tax money should go mostly to the states that generate the most fracking revenue. They have asked you to sample days of production from 50 randomly sampled days in the recent past. The data are collected and held on Carmen in the Methods lab 2 spreadsheet.
(3 points) Produce a table of Descriptive Statistics for your sample from each state. Note that it is good form to round to one or two decimal places in tables of descriptive statistics. In your table, provide the mean, median, minimum value, and maximum value. In your own words, what do these values tell you about the states?
(3 points) Produce a table of Measures of Dispersion from your sample from each state. In your table, provide the range, standard deviation, sample variance, and standard error of each sample. In your own words, what do these values tell you about the states?
(3 points) You are asked to inform the committee of the state that has produced the most oil from hydraulic fracturing from among these three states. Bear in mind, though you have the actual numbers from these states, you only have a sample of days on which you collected data. So, you’re going to have to use your your statistics knowledge to take your best guess. Construct 95% confidence intervals around the mean figures (which are in thousand barrels of oil per day) for each of the three states. According to your calculations, which state produces the most oil? Are you certain which state it is? Why or why not? In your own words, how do these confidence intervals inform your recommendation of which state produces the largest quantity of oil from hydraulic fracturing?
1 The equilibria in a given question does not necessarily have to be a whole number.