This paper presents a theoretically consistent and tractable two-stage decision-making model that does not rely on the restrictive assumption that group aggregator functions are homothetic. By assuming that within-group cost functions satisfy the almost ideal demand system form, the model incorporates flexible expenditure effects, yet allows within-group prices to be aggregated into two indices that fully capture movements in those prices that are relevant for determining group demands. Thus, the model provides a more flexible alternative to the standard two-stage budgeting models. An empirical application to U.S. manufacturing demands, including an energy aggregate, is provided.

This paper presents a methodology for predicting the effect of quota-type regulatory constraints on capacity utilization for a multiproduct profit-maximizing firm. The approach builds on recent advances in the use of virtual prices to model the effects of rationing. This allows the effects of regulatory constraints to be examined ex ante. The methodology is illustrated through a case stud y of the imposition of output quotas in an open-access marine fishing industry on the Pacific Coast of the United States. The results sugg est that, for certain species, output quotas can cause strong disinvestm ent incentives.