The fact that a consumer is frequently uncertain about the quality of a product that he purchases, and is therefore also unsure of the extent to which it will render him the services he might expect of it, is one that is gaining increasing recognition. In an earlier paper [5] I examined in a simple framework the effects of changes in the uncertainty about a product's quality on the consumer's demand, and also touched briefly on the effect of a guarantee. In this paper I want to examine in more detail some of the economic issues posed by the existence of guarantees. There are several useful distinctions that can be drawn as a preliminary to more detailed study. One is a distinction between situations where buyers and sellers have equal access to information, and a situation where sellers have superior access. The first situation is exemplified by a market where trade is in a product whose quality is genuinely random, with the distribution known to both buyers and sellers. Thus if a certain fraction p of the cars from a given factory are generally known to be faulty, then a transaction in which a retailer sells a car to a buyer comes into this category: each knows that the chance of the car being faulty is p, but, because the car is unused, neither knows whether it is actually faulty. Contrast this with a situation where the first owner of the car is reselling it: now there is an important asymmetry, in that the seller is much better informed about the quality of the product than the buyer. This is the case with which Akerlof's very interesting analysis [1] is largely concerned, and which I have also discussed in [4]. My main concern here, however, is with a situation of equal information. Thinking casually about such a situation, it is clear that one can distinguish between the incentive effects and the risk-sharing effects of a guarantee. Incentive effects arise because the existence of a guarantee provides the producer with an incentive to improve the quality of his product, at least to the extent of reducing the chances of its falling below the guaranteed level. If the compensation in the event of failure is less than complete, then the consumer also has an incentive to maintain the product. For example, a used car guarantee, under which the buyer and seller will each pay half of any repair bills, provides both parties with incentives to minimize these bills. Of course, if the guarantee is valid for only a limited period of time, then there is the further effect of providing the buyer with an incentive to ensure that if there is to be a failure, it occurs early in the product's life. This may act in opposition to the other effect, and reduce his eagerness to maintain the product. In addition to creating the incentive effects mentioned, a guarantee also acts as a way of sharing the risk associated with uncertainty about the quality of a product: to be efficient in this sense, it will apportion this risk in accordance with the risk-aversion of the participants. My main concern here is with the risk-sharing aspects of guarantees. This is partly because these seem to be the most tractable aspects of the problem, but also stems from a belief that these are the most important aspects. Casual empiricism suggests that except in rather unique cases, a product is usually designed and produced before any attention is given to the choice of guarantee terms: these are then chosen as part of a marketing package. In such situations, the reliability of the product will clearly be independent of the

I. Introduction, 499.—IL Akerlof's problem and the prisoner's dilemma, 499.

Partha Dasgupta, Geoffrey Heal; The Optimal Depletion of Exhaustible Resources12, The Review of Economic Studies, Volume 41, Issue 5, 1 December 1974, Page

Harl E. Ryder, Jr, Geoffrey M. Heal; Optimal Growth with Intertemporally Dependent Preferences12, The Review of Economic Studies, Volume 40, Issue 1, 1 Jan

I. Introduction, 297.—II. The model, 298.—III. Variable return on foreign investment, 303.—IV. Uncertain future demand, 303.—V. Conclusions, 305.

Geoffrey Heal, Michael Barrow; The Relationship between Interest Rates and Metal Price Movements, The Review of Economic Studies, Volume 47, Issue 1, 1 January

Journal Article Equity, Efficiency and Increasing Returns Get access Donald J. Brown, Donald J. Brown Cowles Foundation for Research in Economics at Yale University Search for other works by this author on: Oxford Academic Google Scholar Geoffrey Heal Geoffrey Heal University of Sussex Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 46, Issue 4, October 1979, Pages 571–585, https://doi.org/10.2307/2297028 Published: 01 October 1979 Article history Received: 01 July 1978 Accepted: 01 January 1979 Published: 01 October 1979

We study biodiversity finance—the use of private capital to finance biodiversity conservation and restoration—which is a new practice in sustainable finance. First, we provide a conceptual framework that lays out how biodiversity can be financed by pure private capital and blended financing structures. In the latter, private capital is blended with public or philanthropic capital, whose aim is to de-risk private capital investments. The main element underlying both types of financing is the “monetization” of biodiversity, that is, using investments in biodiversity to generate a financial return for private investors. Second, we provide empirical evidence using deal-level data from a leading biodiversity finance institution. Our findings are consistent with a three-dimensional efficient frontier (return, risk, and biodiversity impact)—deals with a favorable risk-return profile tend to be financed by pure private capital, whereas for other deals the biodiversity impact needs to be sufficiently large for blended finance to be used. Overall, our results suggest that blended finance is an important tool for improving the risk-return profile of these projects, thereby increasing their appeal to private investors and crowding in private capital. Finally, our results suggest that private capital is unlikely to substitute for effective public policies in addressing the biodiversity crisis.

The Arrow-Debreu analysis of decentralized resource allocation in a Walrasian economy assumes constant or decreasing returns to scale in production. Recently, several authors have extended this analysis to economies with a public monopoly, that is, a firm with increasing returns to scale. In this literature, the salient feature is the characterization of increasing returns to scale technologies as nonconvex production sets, so that under this definition both single and multiproduct firms may exhibit increasing returns. Here, our intended model is an economy with a competitive sector consisting of households and firms with convex technologies, and a public sector consisting of firms with nonconvex technologies. A special case is a single multiproduct firm which produces products for regulated markets (with a nonconvex technology) and produces products for unregulated markets (with a convex technology), for example, ATT firms with constant or decreasing returns are maximizing profits; the public monopoly is pricing at marginal cost, where potential losses are covered by the lump sum taxes; and all markets clear. An average cost-pricing equilibrium is a family of consumption plans, production plans and prices such that households are maximizing utility subject to their budget constraint; firms with constant or decreasing returns are maximizing profits; the public monopoly is pricing at average cost, that is, breaking even or making zero profits; and all markets clear. Unfortunately, all of the extant proofs of existence of a MCP or an ACP equilibrium are somewhat technical in nature and lack the transparency of counting equations and unknowns which many economists accept as an intuitive, if not formally correct, proof of existence. In view of this, one of the purposes of this paper is to demonstrate the existence of a MCP and an A CP equilibrium in a simple economy with increasing returns, where the equilibrium notions are characterized by systems of behavioral equations and market-clearing conditions. We give both an intuitive proof of existence by counting equations and unknowns, and a formal argument that these systems of equations have a solution by use of a simple fixed-point argument. In addition, we review several of the standard partial equilibrium prescriptions for the regulation of a public monopoly and show that in a general equilibrium model they can be interpreted as MCP or A CP equilibria.