The efficient allocation of resources to the provision of water quality requires, in part, a measurement of the benefits which result. Due to the public goods nature of water quality, benefit estimation requires the use of special techniques. One of these techniques is the probabilistic rating method described by Findlater and Sinden (1982) which can be used to derive estimates of individual willingness-to-pay for improved water quality.

Probabilistic rating has its theoretical foundation in the indifference mapping procedure outlined by Sinden (1974). Indifference mapping uses utility curves derived from a Ramsey survey technique to obtain individual demand curves for a good. This survey instrument consists of two prospects, each of which contains a two-element probability combination. Each outcome is given a probability rating of 0.5. By systematically varying the contents of the prospects until the respondent is indifferent between the two, a series of utility curves can be estimated. A transposition of the utility curves results in an individual indifference map. With the use of a budget line, a compensated demand curve for the good can be derived. The area between the demand curve and the price line is the individual's consumer surplus from consuming the good.

Sinden applied this method to the estimation of demand for a recreation site. The survey instrument. was found to have two major drawbacks. Each interview took a long period of time, resulting in a loss of interest on the part of the respondent. Individuals also had difficulty determining a position of indifference when confronted with the Ramsey technique.

In response to these problems, the probabilistic rating method was developed. It also uses a Ramsey technique to elicit utility information. However, instead of altering the contents of the prospect table to achieve indifference, the two prospects are simply rated by the interviewee as presented. Findlater and Sinden used this method to derive individual demand curves for a recreation site. The prospect table for the survey is shown in Table 1. Each prospect consists of days at the subject site (A) and days at a site (B) which is a close substitute. Prospect I is assigned an arbitrary utility rating of 1 util. The subject is then asked to assign a value to prospect II relative to prospect I. This is equivalent to comparing two points on an indifference map. By altering prospect II and comparing it to prospect I a set of points on the indifference map can be evaluated. Indifference curves can then be fitted. A compensated demand curve for days at A can then be derived using budget and price information.

If one assumes that weak complementarity exists between water quality and recreation, then probabilistic rating can be used as a contingent valuation technique. Suppose that opportunity A of Table 1 is defined as some water recreation site which is degraded, and B is defined as the same site but with a higher level of water quality. If the probability rating game is played successfully, the results would be an indifference map which reflects an individual's preference for the provision of water quality at the subject site. With the use of a budget line two compensated demand curves for the site can be derived from the same indifference curve; one for each level of quality. The difference in area between the two curves is a measure of willingnes-to-pay for the provision of water quality. The issue is whether this method can be applied empirically.

The probabilistic rating method can be used to estimate the willingness-to-pay for water quality if there exists a population of individuals who have experienced both the polluted site and some other site characterized by a higher level of water quality. Most contingent valuation procedures have asked individuals to express their willingness-to-pay for an improvement in water quality regardless of whether they have actually experienced that quality. It cannot be expected that recreationists can assess their preferences for a good unless they have actually experienced it. Asking them to do so is source of bias (Schulze et al., 1981). The probabilistic rating game would be played only with those who have experienced the choices presented.

Three situations are seen to be possible, each dictating the way in which the alternative site B is defined. If there exists an alternative to A which is similar in all physical characteristics except quality, B can be defined as this other site. The indifference map should reflect preferences for clean water at the subject site.

If the physical characteristics of the two sites differ significantly, then B can be defined as the subject site but with the water quality experienced at the alternative site. This relies on the individual's ability to separate water quality from one location and imagine it at another. Since the respondents are familiar with both sites, this should not pose too great a problem.

If no local alternative to the polluted site exists, a sample of those who have experienced higher water quality elsewher may be found. They will be asked to separate water quality from the clean site and imagine it at the subject site. This situation is the least desirable since there is no way to identify accurately the level of water quality the individual respondents select. However, it is believed this is still better than asking those who have never experienced improved water quality to assess their preferences.

Once an indifference map is estimated, a budget line is used to derive the two compensated demand curves. The recreation budget for the site can be obtained by questioning the respondent as to his or her recreation behavior. Travel cost can be used as a proxy for price.

There are several theoretical advantages to the probabilistic rating approach. It leads to a monetary measure of benefits so comparisons can be made with costs. The technique is firmly based on economic theory and the concepts of willingness-to-pay. Information bias is minimized. Individual willingness-to-pay can be estimated independently of the characteristics and behavior of other recreationists.

This paper presents estimates of technical efficiency in milk production based on Farrell's non-parametric frontier production function methodology. Data from a sample of Maine and Vermont dairy farms, included in the ELFAC business analysis for 1979, were used to derive Efficient Unit Isoquants for capital-labor and concentrate feed-roughage combinations. The analysis indicates that milk production in Maine and Vermont farms was characterized by significant technical inefficiencies during 1979.

Pest control efforts for tree fruits, as well as other agricultural crops, have intensified in the U.S. during the past few decades. This increase is the result of the increase in pest population, the Food and Drug Administration's reduction in tolerance levels of insect parts permitted in foods, and the raising of cosmetic standards by food wholesalers and retailers (Hough and Gallahan).

A theory-based participation model is developed using the assumptions of perfect capital markets and perfect information. Given this specification it is shown that participation in a PDR program is always equivalent in present value terms to selling the land, and is always at least as good as not participating and remaining in farming.

In order to investigate participation rates in the Maryland PDR program a less restrictive model is developed which relaxes the perfect capital markets assumption. It is found that a PDR program is most likely to be successful in regions characterized by relatively low levels of development pressure, and least likely to be successful in areas experiencing high rates of growth or areas that are not undergoing development pressure.

The Delmarva Peninsula includes some rich farmland which is suitable for both vegetable and field crop production. Almost 80 percent of the acreage on the Delmarva Peninsula today is planted in field corn and soybeans. In the past fifteen years, the acreage of vegetables contracted to processing companies in the area has declined by about 50 percent (Smith, 1975 and 1981). This is due to four major factors: Delmarva's yield disadvantage relative to other regions; the disappearance of numerous, antiquated small canneries in the region; an unstable labor supply at existing wages; and growers’ perceived higher yield risk for vegetables.

Data on 268 farm sales in 10 counties throughout Pennsylvania in 1977 were analyzed using a hedonic price model. Problems associated with the influence of parcel size and buildings on per acre land values appear to have been overcome. Proximity of farms to metropolitan centers and the quantities of different types of land on a farm were important explanatory variables. Values per acre were computed showing the effects of those variables on price. Values for non-tillable land, high productivity tillable land, and land suitable for on-site sewage disposal tended to cluster within a $650-$700 price range per acre at 85 miles from the nearest SMSA.

Accurate forecasts of energy demand are required for public policy formation, but estimation of the residential demand for electricity presents a number of conceptual and statistical problems. This paper focuses on two interrelated issues in electricity demand analysis: model specification with respect to the price variable and the level of data aggregation. From an empirical study of demand in New England, our principal conclusions are: (a) price elasticities, estimated using state level data, differ from those at the utility level; (b) at the state level of aggregation, alternative model specifications of demand give markedly different results; (c) there appears to be significant differences between the New England states in the demand for electricity; and (d) it was not possible to discern whether consumers respond to average price or marginal price.

Cooperative statutory provisions that provide for democratic membership control provide limitations affecting the management of cooperatives. Management provisions concerning membership requirements for directors and officers, amendments to articles of incorporation, and removal of officers may unduly restrict the management of cooperatives and contribute to the poor economic performance of Northeastern cooperatives. Minor statutory changes, or changes of a cooperative's articles or by laws, may help improve the performance of these business operations.

Research activities of academic agricultural economists in the Northeast Region are examined. Selected categories of research output are presented. Interregional comparisons in research productivity are made between: 1) faculty employed in the Northeast and those employed elsewhere and 2) faculty educated in the Northeast and those educated elsewhere. Intraregional comparisons of faculty employed in the Northeast by region of education are also presented. Regional differences in research resources and concentration are examined and offered as factors contributing to research productivity differences. Results indicate few significant long-run differences in research productivity and concentration in the Northeast relative to that in other regions.

Input-output analysis has been used extensively to identify the interrelationships in local, state, regional and national economies. One type of economic activity that is prevalent in several states in the Northeast has not typically been included in regional input-output models: that carried on at administrative offices and auxiliary establishments.

This paper appraises the need for a sector representing administration and auxiliary activities in regional I-O models in the Northeast and provides a method for estimating a direct requirements column for such a sector from secondary data. The method proposed is used to estimate the direct requirements column for this sector in an input-output model for Delaware. The importance of including administration and auxiliary activities in an input-output model used for impact analysis is demonstrated.

The use of historical-cost depreciation in periods of persistent inflation decreases the present value of depreciation deductions, thus understating the true economic cost of capital and increasing the real after-tax rate of return required by potential investors. Efforts to correct these problems by adopting depreciation methods that allow for artificially short recovery periods or accelerated rates do not provide an adequate solution. Distortions imposed by inflation on historical-cost depreciation can be adequately corrected by indexing the historical-cost basis.

The Economic Recovery Tax Act of 1981 (ERTA) provides a gradual increase in the unified credit which by 1987 will exempt estates of up to $600,000 from estate taxation. The unlimited marital deduction and the increase of tax-free gifts to an amount of $10,000 per year per donee has freed many farm families from the gift and estate tax burdens that arguably had been causing the break-up of small farms (U.S. Congressional Record, vol. 122; Begleiter). At the same time, however, the estate tax relief resulting from the provisions incorporated in ERTA has not completely remedied the tax problems of farmers. Farm estates greater than $600,000 are still subject to taxation. Expensive technology together with inflation and the appreciation of the value of farm real estate will undoubtedly continue to cause the value of many farm holdings to increase in size beyond the amount exempted by the uniform tax credit. The resultant estate tax liability could require the sale of farm assets in order to raise cash to pay these taxes. Thus, estate planning techniques which diminish estate taxation are still important to farmers.

This paper illustrates differences in estimated returns to public agricultural research investments for the U.S. and the Northeast when value-added (VA) as opposed to gross production (GP) functions are estimated. Commodity groups considered are dairy, poultry, other livestock, and cash grains. Sizable differences are evident in returns estimated with VA as opposed to GP functions, with the VA estimates generally being larger. Cash grains research yields the largest returns at the margin. Dairy research is more productive in the Northeast than the rest of the country.

At this time minimum size limit regulations are the primary tool used to manage Rhode Island's American lobster (Homarus americanus) resource. One shortcoming of this policy is its lack of foundation in bioeconomic analysis. To encourage the incorporation of bioeconomic considerations into the management strategy used on this valuable resource, a fishery simulator (Gates 1974) was modified and employed to analyze the effects of changing the size at first capture in Rhode Island's inshore lobster fishery.

A cost and earnings survey of Rhode Island's commercial lobster license holders was conducted to provide the economic data required to simulate the fishery. This survey uncovered information characterizing the exploitation of the resource. For example, the survey estimated inshore catch of 2.1 million pounds indicates that three quarters of the inshore catch may go unrecorded. The survey also revealed that full-time commercial harvesters are outnumbered by part-time personnel by a factor of seven, but still land over 90% of Rhode Island's lobster catch.

The simulation results also proved quite informative. They suggest that an increase in Rhode Island's minimum size at first capture, if promulgated alone, will not confer increased benefits to society or fishermen. In fact, if a reasonable rate of discount is employed, the analysis indicates the measure will decrease the present value of social surplus generated by Rhode Island's inshore lobster fishery. Averaging over the range of results obtained, an 0.8 mm carapace length increase will reduce annualized benefits by 7%. Alternative larger increases of 1.6 mm and 9.5 mm (3.5 inch minimum) are estimated to bring about 10% and 38% reductions in the annualized value of social surplus that the inshore fishery can be expected to generate. These results are due in part to the substantial short run decreases in catch that the increased minimum sizes generate, and in part because it is assumed that the increased minimum size will govern Rhode Island's landings only.

The immediate short run decreases in benefits that accompany the minimum size increases were found to fall primarily on the harvesters of the resource. Averaging over the discount rates employed, 87% of the short run reductions in social surplus subtracted from producer revenues. All results assume that stock recruitment is independent of stock size, that stock reproductive security is not at issue, and that lobster prices are determined in a regional market for live lobsters.

Additional simulations were performed to compare the social surplus in the open access fishery with that which might be obtained should access to the fishery be restricted. Also, social surpluses were obtained for the fishery under the assumption that an increased size at first capture results in increased recruitment. These simulations point to the general result that increased harvest selectivity will maximize the sustainable fleet size while concurrently reducing the annual social surplus generated by the fishery.

Forecasting models were developed for annual and monthly average price of Maine potatoes, using Crop Reporting Board data. Several approaches to the forecasting problem were explored, as were a number of statistical aids to model development and evaluation. Attention was focused on providing timely forecasts as data became available.

Specifically, three models were developed. The first provided forecasts of the season average price. Attention here was placed on the selection of a subset of influential variables from a set of potentially important ones, as well as the detection of outliers and colinearities. These problems were especially significant given the small number of observations in the annual price series. Production data for five regions were deemed most influential.

The other two models were developed to provide forecasts of the monthly average price from November through May. A modified ARIMA (0,1,0) (2,1,0) model was estimated and used to provide forecasts based on the price data series alone. An alternate model, using production levels from four regions, current stocks levels and a monthly trend variable (and, implicitly, lagged price), was also developed.

Both monthly models provided current forecasts for each month remaining in the marketing season which were updated as new information became available. The second model, which incorporated more information, was deemed to provide somewhat more accurate forecasts, at all forecast distances, than the simpler ARIMA model, when compared over the 1977–1981 period.