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Gun Buybacks and Firm Behavior: Do Buyback Programs Really Reduce the Number of Guns?

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  • Gregory E. Goering

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    (Department of Economics, University of Alaska, USA)

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    Abstract

    We suppose that guns or firearms are subject to an anticipated future buyback program undertaken by the government. A simple linear demand durable-goods monopoly model is then analyzed where the durable-good manufactured is a firearm that lasts for two-periods. The model is calibrated so that buyers are indifferent between selling (participating in the buyback program) or holding the gun in the future period. This allows us to focus solely on the firm¡¯s behavior. We find, among other things, that if the firm can credibly commit to its current buyers the anticipated buyback has no impact on the future stock of guns. In this case, the firm simply increases its production of new firearms after the buyback, and offsets all the units collected and destroyed by the government. However, in contrast, we show that if the seller cannot commit to these buyers, the future stock is indeed reduced (but by only one-half of the buyback program level). Thus, any anticipated (repeated) buyback¡¯s impact on future stock levels of firearms depends critically on the commit ability of the durable-goods manufacturer, independent of the buyers¡¯ reselling and arbitrage activities. Moreover, regardless of commitment ability, the model suggests the imperfectly competitive firms may, at least partially, counteract the buyback program, making any governmental buyback less effective at reducing future firearm stocks than expected.

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    Bibliographic Info

    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 1 (2011)
    Issue (Month): (February)
    Pages: 31-42

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    Handle: RePEc:bap:journl:110103

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    Related research

    Keywords: Monopoly; Durable goods; Gun buybacks;

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    References

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    1. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-76, December.
    2. Wang-Sheng Lee & Sandy Suardi, 2010. "The Australian Firearms Buyback And Its Effect On Gun Deaths," Contemporary Economic Policy, Western Economic Association International, vol. 28(1), pages 65-79, 01.
    3. Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November.
    4. Leigh, Andrew & Neill, Christine, 2010. "Do Gun Buybacks Save Lives? Evidence from Panel Data," IZA Discussion Papers 4995, Institute for the Study of Labor (IZA).
    5. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
    6. Goering, Gregory E., 1992. "Oligopolies and product durability," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 55-63, March.
    7. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
    8. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
    9. Gregory Goering & Michael Pippenger, 2002. "Durable Goods Monopoly and Forward Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(2), pages 271-282.
    10. Mullin, Wallace P., 2001. "Will gun buyback programs increase the quantity of guns?," International Review of Law and Economics, Elsevier, vol. 21(1), pages 87-102, March.
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