An investment model is suggested as an improvement over intuition in setting government policies aimed at providing an optimal social infrastructure for boom towns. Using the decision environment and economic characteristics of a Rocky Mountain state boom town, the model shows that low interest rates and early front-end investment produce the greatest stability, while delayed investment contributes to instability. Policy implications derive from the fact that ad valorem property taxes for investment are generally collectible only after construction is completed. Of equal importance to the timing and amount of investment funds is the source of repayment funds. These could be broadened to include wage or use taxes during the construction period.

An economic model is developed for petroleum reservoir management; this model includes interaction among current production rates, the role of investment, and the possible dependence of recoverable stocks on the time-path of production. The model depicts production relations in a manner consistent with current methods used by petroleum engineers to predict reservoir performance. Section I provides a physical description of a petroleum reservoir. The management model is presented in Section II. Section III interprets economically the resulting decision rules for production and investment, while Section IV expands discussion of the implications of such rules for policy and compares results from previous works. The concluding section suggests extending this management model to determine optimal expenditures for exploration. (30 references) (BYB)

Vernon Smith, in his recent article in this Review [7], attempts to provide . . . a unified theory of production from natural resources encompassing production from exhaustible, as well as replenishable, resources. There is some question, however, as to the general applicability of Smith's model with reference to the optimum rate of production from exhaustible' resources, and therefore to his description of the optimum rate of investment in these industries. The purpose of this paper then is twofold: first, to discuss the rather limited nature of Smith's results concerning production and investment within the context of exhaustible resources; and secondly, to present a model that retains Smith's emphasis on the interrelationship of capital and resource extraction, but one that conforms to the established theory concerning the economics of exhaustible resources. The model presented in this paper, however, focuses on the individual firm as opposed to the industry model presented by Smith.

Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method by Ronald G. Cummings and Laura O. Taylor. Published in volume 89, issue 3, pages 649-665 of American Economic Review, June 1999

The use of dichotomous choice (DC) methods has become increasingly common in applications of the contingent-valuation method (CVM)1 to elicit the that an individual might have for nonmarket environmental goods.2 This hypothetical DC method involves a subject responding yes or no to a hypothetical question that asks whether or not he would be willing to make a commitment to pay some stated amount contingent upon the provision of an environmental good. The growing use of this method is primarily based on the assumption that the method yields incentive-compatible results. This implies that subjects will answer the CVM's hypothetical question in the same way as they would answer an identical question asking for a real economic commitment and that, therefore, the hypothetical DC method will result in accurate estimates of true willingness to pay. Explicit or implicit acceptance of this assumption is seen in a number of recent studies. For example, the use of the DC method in CVM studies is strongly recommended by a panel3 convened by the National Oceanic and Atmospheric Administration (NOAA) of the United States Department of Commerce to examine the use of hypothetical CVM survey questions (see NOAA, 1993 pp. 4608, 4608, 4612). The hypothetical DC method has been used by the Attorney General of the State of Alaska in a major application of the CVM to assess damages caused by the Exxon Valdez oil spill of 1989 (see Richard T. Carson et al., 1992). A major CVM study of potential environmental damages due to proposed mining activity in the Kakadu Conservation Zone of Australia employed the DC method with a similar rationale (see David Imber et al., 1991 p. vi). It is clear that if a subject perceives that his expected utility is affected by the possibility of the good actually being provided he has no incentive to misrepresent. We can presume that in an application of a real DC method, where payment and provision of * Cummings: Policy Research Center, College of Business Administration, Georgia State University, Atlanta, GA 30303-3083; Harrison and Rutstr6m: Department of Economics, College of Business Administration, University of South Carolina, Columbia, SC 29208. We are grateful to Peter Bohm, Bengt Kristr6m, and three referees for helpful comments. Ashley Abbott, Lloyd Brown, Colin Day, Tanga McDaniel, Helen Neill, and Melonie Williams provided excellent research assistance. We acknowledge financial support provided by the State of New Mexico's Waste Management Education and Research Consortium and Resources for the Future. We retain responsibility for all errors. 'For a critical review of the debate over the CVM, see Cummings and Harrison (1994) 2Homegrown is a term primarily used in experimental economics. It refers to a subject's value that is independent of the value which an experimenter might induce for the good (see Vernon L. Smith, 1976). The idea is that homegrown values are those that the subject brings to an experiment. 3Consisting of Kenneth Arrow (Co-chair), Robert Solow (Co-chair), Paul R. Portney, Edward E. Leamer, Roy Radner, and Howard Schuman.

Hypothetical referenda have been proposed as an incentive‐compatible mechanism that can be used to obtain social valuations of environmental resources. We employ experimental methods to test the hypothesis that such referenda are indeed incentive compatible. Our results lead us to reject that hypothesis.