trust trustworthiness and information sharing in supply chains bridging china and the united states whether and how trust and trustworthiness differ between a collectivist society e g china and an individualistic one e g the united states generates much ongoing scientific debate and bears significant practical values for managing cross country transactions we experimentally investigate how supply chain members countries of origin china versus the united states affect trust trustworthiness and strategic information sharing behavior in a cross country supply chain we consider a two tier supply chain in which the upstream supplier solicits demand forecast information from the retailer to plan production but the retailer has an incentive to manipulate her forecast to ensure abundant supply the levels of trust and trustworthiness in the supply chain and supplier s capability to determine the optimal production quantity affect the efficacy of forecast sharing and the resulting profits we develop an experimental design to disentangle these three aspects and to allow for real time interactions b

but who will monitor the monitor suppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations what about the monitor s deviations to address this question i propose a contract that makes the monitor responsible for monitoring and thereby provides incentives even when the monitor s observations are not only private but costly too i also characterize exactly when such a contract can provide monitors with the right incentives to perform in doing so i emphasize virtual enforcement and suggest its implications for the theory of repeated games jel c78 d23 d82 d86

learning to trust in indefinitely repeated games abstract although it is well known that trust and trustworthiness i e the fulfillment of trust are important behaviors for the fulfillment of incomplete contracts less is known about how the economic environment influences them in this paper we design an experiment to examine how exogenously determined stochastic past relationship lengths affect trust and trustworthiness in new relationships we find that shorter lasting relationships have an immediate negative impact on both behaviors in the relationships that immediately follow while longer lasting relationships have the opposite effect the effect of stochastic end points declines for trustworthiness but not for trust as subjects gain experience indicating that trust is able to rebound when longer lasting relationships follow shorter lasting ones

infrastructure and aggregate agricultural productivity international evidence a relationship has long been recognized between a country s agricultural development and its investment in infrastructure capital such as transportation and communication facilities that is not directly related to the agricultural production process the relevant literature spans adam smith s proposition that the division of labour is limited by the extent of the market the work of von thtinen numerous studies by historians and economic historians and the work of economists such as schultz kuznets wharton owens and johnston and kilby to mention a few despite the apparently widespread recognition and acceptance that a relationship exists between agricultural development and infrastructural development few if any empirical studies test this as a hypothesis and provide estimates of the magnitude of such a relationship 2 the aim of this paper is to utilize 1965 aggregate agricultural production data and the concept of the aggregate production function to study the effects of transportation and communication infrastructure on aggregate agricultural productivity the aggregate data come from 47 less developed countries ldcs and 19 developed countries dcs the sample countries are listed in the appendix the use of intercountry comparisons for development studies dates to clark and the pioneering work of kuznets and it has been exploited econometrically by chenery 3 an important contribution to the study of international agricultural productivity was made by hayami and ruttan who showed that an aggregate agricultural production function that accounts for intercountry differences in resource endowments technical modern inputs and human capital can explain a large proportion of the variation in aggregate agricultural output across more and less developed agricultures 4 evenson and kislev modified hayami and ruttan s model by including a variable measuring each country s investment in agricultural research 5 essentially the same

do cigarette producers price discriminate by state an empirical analysis of local cigarette pricing and taxation abstract this study analyzes the interactive effects of oligopoly pricing state taxation and anti smoking regulations on retail cigarette prices by state using panel data for the 50 us states between 1960 and 1990 the results indicate that cigarette producers do price discriminate by state though the effect is not large relative to the final retail price there are two further results 1 state taxes are more than passed on a 1 cent state tax increase results in a price increase of 1 11 cents and 2 sellers offset state and local anti smoking laws with lower prices thereby blunting effects of the regulations

quasi experimental price elasticities of cigarette demand and the bootlegging effect this paper updates the lyon and simon quasi experimental price elasticities of cigarette demand and studies their sensitivity to changes in the cigarette market over time as well as their sensitivity to the effects of bootlegging the results indicate a downward trend in these elasticities over time and an upward bias for states where bootlegging exists however once the comparison group is modified to include bootlegging free states only this difference over time and across groups becomes statistically insignificant

do higher tobacco taxes reduce adult smoking new evidence of the effect of recent cigarette tax increases on adult smoking there is a general consensus among policymakers that raising tobacco taxes reduces cigarette consumption however evidence that tobacco taxes reduce adult smoking is relatively sparse in this paper we extend the literature in two ways using data from the current population survey tobacco use supplements we focus on recent large tax changes which provide the best opportunity to empirically observe a response in cigarette consumption and employ a novel paired difference in differences technique to estimate the association between tax increases and cigarette consumption estimates indicate that for adults the association between cigarette taxes and either smoking participation or smoking intensity is negative small and not usually statistically significant our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases on the order of 100 to decrease smoking by as much as 5 jel i18 i12

estimating dynamic demand for cigarettes using panel data the effects of bootlegging taxation and advertising reconsidered abstracct a dynamic demand for cigarette consumption is estimated using pooled data of 46 states over the period 1963 to 1980 a price elasticity of 0 2 and an insignificant income elasticity is found using pooled estimation techniques the bootlegging effect is modeled explicitly using neighboring price the effect is found to be significant two major policy issues are analyzed in light of these new estimates 1 cigarette taxation is found to be an effective tool for generating revenues even though there may be spillover effects to neighboring states where bootlegging is significant 2 the effects of the fairness doctrine act and the advertising ban on cigarette consumption are re examined we find mild support for the effectiveness of subsidized anti smoking messages in reducing cigarette consumption and no support for the thesis that the ban on advertising helps to increase per capita consumption

pitfalls in the measurement of real exchange rate effects on agriculture abstract studies of the effects of real exchange rates on agriculture commonly assume that these effects can be identified as those which pertain to traded goods in the standard australian model of an open economy further it is common to assume that the indirect effects of changes in the real exchange rate have the same impact on the various production activities within agriculture this paper discusses the extent to which these stylized facts reflect reality focusing in particular on the extent of tradibility in agricultural markets the irrelevance of results based on free trade equilibria to policy analyses and the importance of the characteristics of crop production functions in estimating the effects of real exchange rate changes ignoring these considerations can cause errors in the measurement of policy effects on agricultural incentives

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

repeated partnership games with imperfect monitoring and no discounting in a partnership game each player s utility depends on the other players actions through a commonly observed consequence e g output profit price which is itself a function of the players actions and an exogenous stochastic environment if a partnership game is repeated infinitely and each player s payoff in the infinite game supergame is the long run average of his expected one period utilities then efficient combinations of one period actions can be sustained as nash equilibria of the supergame even if the players cannot observe other players actions or information but can only observe the resulting consequences

communication in repeated games with private monitoring abstract the paper considers repeated games where each player can be observed by only a subset of the other players and where players can make public announcements about the behavior of the players they observed we address the following question what is the minimal level of observability that is required to obtain efficient outcomes the main result is that the limit set of sequential equilibrium payoffs when the discount factor tends to one contains the set of individual rational payoffs whenever each player is observed by at leasttwoother players journal of economic literatureclassification number c73

the demand for cigarette smuggling introduction an enduring issue in economic analysis involves accounting for the behavior of agents when illegal or quasi legal activity is rewarded smuggling retrading under regulations or restrictions bribery and bootlegging are all aspects of the general phenomenon common contemporary forms of such activity are the smuggling of prohibited substances such as drugs or medicines prohibited arms or weapons or highly taxed commodities between countries 1 but smuggling or bootlegging of highly taxed or otherwise regulated legal commodities such as alcohol cigarettes or gasoline also takes place within countries in the united states such illegal activity both casual and organized may have significant effects on state tax revenues it may also alter the expected consumption effects of specific tax changes in a competitive environment the existence of different tax structures between states may mean that a given state s tax enactments will not have their desired revenue or consumption effects this paper offers a new econometric methodology for estimating the economic effect of border crossing between u s states our technique in contrast to previous models of cross border effects allows accommodation of the dichotomy between variations in state level sales due to state specific characteristics such as prices tastes incomes and other demographic factors the presence of organized smuggling tourism and so on and demand variations due to casual border crossing beginning with a simple theoretical model of a representative consumer s border crossing decision we develop a nonlinear econometric model which produces estimates of the representative consumer s demand in each state it allows estimation of the degree and direction of sales to border crossing consumers for each state and facilitates explicit testing of the statistical significance of border crossing in explaining variations in cigarette sales between jurisdictions the data set is comprised of state level cigarette sales for the forty eight contiguous states and the district of columbia over the period 1960 to 1986 we obtain strong evidence that border crossing is a significant factor in explaining cigarette sales differentials and we identify states which have important border crossing sales further we note the consequences of border crossing for demand elasticity estimation and tax policy in general the evidence indicates that the ability of states to raise revenue via cigarette taxation is more constrained than conventional analysis suggests the paper is divided into five sections section ii discusses bootlegging and previous literature on cigarette demands and smuggling section iii presents our theoretical and empirical models while section iv discusses the data and our statistical results section v concludes the paper and examines some of the policy implications of our findings ii the economic literature on smuggling smuggling bootlegging or arbitrage takes place when full prices net of all costs differ for legal or illegal goods between specific economic units when net returns to smuggling or bootlegging all production and consumption opportunity costs being considered are positive arbitrage will occur in an organized and or casual fashion a primary though not an exclusive reason for smuggling has been the often significant divergence between full prices in different locales caused by differences in tax treatment a variety of models starting with wales 1968 have been employed to analyze problems related to smuggling and bootlegging jensen thursby and thursby 1988 and bhagwati and hansen 1973 study camouflaging systems the mixture of legal and illegal sales from the firm s perspective with contrasting welfare results smith 1976 integrates illegal markets into the traditional theory of taxation but explicitly ignores casual smuggling earlier studies considering cross border effects have not specified a theoretical foundation and in this respect our approach is fundamentally different

trusting behavior in a repeated investment game we compare a seven period repeated investment game to the one shot investment game on an average in the repeated game player a the trustor sends more and player b the trustee returns a larger percentage than in the one shot game both the amount sent and the percentage returned increase up to period 5 and drop sharply thereafter the reciprocity hypothesis for b players behavior is compatible with the first five periods but in the two end periods most b players behaved strategically by not returning the reciprocity hypothesis for a players behavior is compatible for all periods of the game

monitoring costs in chinese agricultural teams large productivity gains have been observed in chinese agriculture following the transition from collective farming to household contracting using a model of mutual monitoring in an egalitarian production team we estimate that labor supervision absorbed about 10 20 percent of total labor time for a sample of chinese agricultural teams during 1970 76 these agency costs are lower than comparable estimates derived from aggregate data

the potential for using excise taxes to reduce smoking we examine the potential for reducing cigarette smoking through increases in cigarette excise taxes by estimating the price elasticity of demand for cigarettes using information on individual smoking behavior from the 1976 health interview survey we estimate the adult price elasticity of demand for cigarettes to be 0 42 we find that price has its greatest effect on the smoking behavior of young males and that it operates primarily on the decision to smoke rather than via adjustments in the quantity of cigarettes smoked an excise tax increase would discourage smoking by successive cohorts of young adults and those reduced smoking levels would be reflected in aggregate smoking as these cohorts mature

do expenditures on tobacco control decrease smoking prevalence effectiveness of tobacco control programmes in reducing smoking prevalence during 2001 to 2005 is examined tobacco control spending is found to exert no significant effects on smoking prevalence across the 50 states cigarette prices are found to lower prevalence of daily smokers but exert no effect on nondaily smoking prevalence several reasons are suggested for why these results might conflict with previous research these include that most previous studies examined two states california and massachusetts with long standing tobacco control programmes and that most studies examined periods in which many of the states in their samples did not actively fund their programmes another reason may be that unlike most previous studies this study controls for the possibility that tobacco control spending is endogenous when for example states exhibiting relatively low smoking prevalence are also states with relatively high distaste for smoking and accordingly fund tobacco control programmes more generous

is addiction rational theory and evidence this paper makes two contributions to the modeling of addiction first we provide new and convincing evidence that smokers are forward looking in their smoking decisions using state excise tax increases that have been legislatively enacted but are not yet effective and monthly data on consumption second we recognize the strong evidence that preferences with respect to smoking are time inconsistent with individuals both not recognizing the true dife culty of quitting and searching for self control devices to help them quit we develop a new model of addictive behavior that takes as its starting point the standard rational addiction model but incorporates time inconsistent preferences this model also exhibits forward looking behavior but it has strikingly different normative implications in this case optimal government policy should depend not only on the externalities that smokers impose on others but also on the internalities imposed by smokers on themselves we estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case

human capital infrastructure and the productivity of indian rice farmers abstract along with investments in agricultural research extension and education limited investment in transportation and communication infrastructure is often identified as an important constraint on the diffusion and use of new agricultural technology yet there are few systematic studies of the relationship between agricultural infrastructure and agricultural productivity and there do not appear to be any studies which model and measure the productivity effect of infrastructure at the farm level the aim of this paper is to fill this theoretical and empirical hiatus by investigating how human capital and infrastructure constrain the choice of technology and hence productivity the effects of these capital constraints are translated into a variable coefficient production function to measure their productivity effects on indian rice farmers the findings indicate that productivity is a function of the farmer s schooling extension programs transportation and communication infrastructure irrigation availability the utilization of high yielding varieties and climatic factors these findings thus support the hypothesis that agricultural productivity is a function of transportation and communication infrastructure and suggest that infrastructure development is important to both growth and equity concerns in policy planning

costly monitoring financial intermediation and equilibrium credit rationing abstract this paper establishes a link between equilibrium credit rationing and financial intermediation in a model with asymmetrically informed lenders and borrowers costly monitoring and investment project indivisibilities intermediation is shown to dominate borrowing and lending between individuals and these financial intermediaries exhibit several of the important features of intermediaries as we know them equilibrium interest rates and the aggregate quantity of loans respond quite differently to changes in taste and technology parameters depending on whether or not there is rationing in equilibrium

the value of recommendations abstract many markets without repeated seller buyer relations feature third party monitors that sell recommendations we analyze the profit maximizing recommendation policies of such monitors in an infinitely repeated game with seller moral hazard and short lived consumers a monopolistic monitor with superior information about the seller s past effort decisions sells recommendations about the seller to consumers we show that the monitor has an incentive to make its recommendations hard to predict which in general leads to inefficient effort provision by the seller these results hold under perfect and imperfect monitoring and in a variety of informational setting when there are multiple competing sellers the conflict between the monitor s profit maximization objective and efficient effort provision is mitigated

efficiency results in n player games with imperfect private monitoring abstract we demonstrate that efficiency is achievable in a certain class of n player repeated games with private almost perfect monitoring our equilibrium requires only one period memory and can be implemented by two state automata furthermore we show that this efficiency result holds with any degree of accuracy of monitoring if private signals are hemiindependent whereas most existing research focuses on two player cases or only a special example of n player games our results are applicable to a wide range of n player games of economic relevance such as trading goods games and price setting oligopolies

the intercountry agricultural production function another view factor productivity in agriculture is estimated from repeated observations on a sample of fifty eight countries under the assumption that all countries have access to the same technology technology is viewed as a collection of techniques each technique is represented by a production function the choice of the implemented techniques is determined by the state variables which represent the physical and economic environment within which the firms operate the statistical model is that of varying coefficients and it is estimated by a method which utilizes principal components and multiple comparisons

on doctors mechanics and computer specialists the economics of credence goods most of us need the services of an expert when our apartment s heating or our washing machine breaks down or when our car starts to make strange noises and for most of us commissioning an expert to solve the problem causes concern this concern does not disappear even after repair and payment of the bill on the contrary one worries about paying for a service that was not provided or receiving some unnecessary treatment this article studies the economics underlying these worries under which conditions do experts have an incentive to exploit the informational problems associated with markets for diagnosis and treatment what types of fraud exist what are the methods and institutions for dealing with these informational problems under which conditions does the market provide incentives to deter fraudulent behavior and what happens if all or some of those conditions are violated

cigarette tax avoidance and evasion variation in state cigarette taxes provides incentives for tax avoidance through smuggling legal border crossing to low tax jurisdictions or internet purchasing when taxes rise tax paid sales of cigarettes will decline both because consumption will decrease and because tax avoidance will increase the key innovation of this paper is to compare cigarette sales data to cigarette consumption data from the behavioral risk factor surveillance system brfss i show that after subtracting percent changes in consumption residual percent changes in sales are associated with state cigarette tax changes implying the existence of tax avoidance i estimate that the tax avoidance response to tax changes is at least twice the consumption response and that tax avoidance accounted for up to 9 6 of sales between 1985 and 2001 because of the increase in tax avoidance tax paid sales data understate the level of smoking and overstate the drop in smoking i also find that the level of legal border crossing was very low relative to other forms of tax avoidance if states have strong preferences for smoking control they must pair high cigarette taxes with effective policies to curb smuggling and other forms of tax avoidance or employ alternative policies such as counter advertising and smoking restrictions

the folk theorem with imperfect public information the authors study repeated games in which players observe a public outcome that imperfectly signals the actions played they provide conditions guaranteeing that any feasible individually rational payoff vector of the stage game can arise as a perfect equilibrium of the repeated game with sufficiently little discounting the central condition requires that there exist action profiles with the property that for any two players no two deviations one by either player give rise to the same probability distribution over public outcomes the results apply to principal agent partnership oligopoly and mechanism design models and to one shot games with transferable utilities copyright 1994 by the econometric society

robustness of public equilibria in repeated games with private monitoring a repeated game with private monitoring is close to a repeated game with public monitoring or perfect monitoring when i the expected payoff structures are close and ii the informational structures are close in the sense that private signals in the private monitoring game can be aggregated by some public coordination device to generate a public signal whose distribution is close to the distribution of the public signal in the public monitoring game we provide a sufficient condition for the set of uniformly strict perfect public equilibria for a public monitoring game to be robust in nearby private monitoring games in the sense that they remain equilibria with respect to the public signal that is generated by such public coordination devices with truthful reporting our sufficient condition requires that every player is informationally small in a well defined sense

repeated games with voluntary information purchase abstract we consider discounted repeated games in which players can voluntarily purchase information about the opponents actions at past stages information about a stage can be bought at a fixed but arbitrary cost opponents cannot observe the information purchase by a player for our main result we make the usual assumption that the dimension of the set fir of feasible and individually rational payoff vectors is equal to the number of players we show that if there are at least three players and each player has at least four actions then every payoff vector in the interior of the set fir can be achieved by a nash equilibrium of the discounted repeated game if the discount factor is sufficiently close to 1 therefore nearly efficient payoffs can be achieved even if the cost of monitoring is high we show that the same result holds if there are at least four players and at least three actions for each player finally we indicate how the construction can be extended to sequential equilibrium

does supervision matter some hypothesis tests using indian farm level data abstract a model is developed and estimated to test for heterogeneity of family and hired labor in agricultural production and to estimate the impact of employer supervision on the productivity of hired labor plot level data are used from a rice growing village in semi arid tropical india the hypothesis that family and hired labor are homogeneous inputs was rejected results indicate that family member supervision is required to increase hired labor productivity output loss attributable to operating at reduced supervision intensity was greater than 10 on over 40 of the plots

limited records and reputation bubbles abstract this paper offers a tractable and fully rational model to study the economics of reputation in a dynamic market with limited record keeping i e a market in which new entrants observe only the last few periods of play of the long run player instead of the full history of the market we show that trust is gradually granted to the opportunistic long run player despite the fact that his type is perfectly observed by the short run opponents and the perfectly informed short run players ride and drive up reputation bubbles at the expense of their uninformed successors we characterize equilibrium payoffs uniformly over time which is useful for analyzing ongoing repeated relationships where the starting moments have passed

estimating price elasticities when there is smuggling the sensitivity of smoking to price in canada a central parameter for evaluating tax policies is the price elasticity of demand for cigarettes but in many countries this parameter is difficult to estimate reliably due to widespread smuggling which significantly biases estimates using legal sales data an excellent example is canada where widespread smuggling in the early 1990s in response to large tax increases biases upwards the response of legal cigarette sales to price we surmount this problem through two approaches excluding the provinces and years where smuggling was greatest and using household level expenditure data on smoking these two approaches yield a tightly estimated elasticity in the range of 0 45 to 0 47 we also show that the sensitivity of smoking to price is much larger among lower income canadians in the context of recent behavioral models of smoking whereby higher taxes reduce unwanted smoking among price sensitive populations this finding suggests that cigarette taxes may not be as regressive as previously suggested finally we show that price increases on cigarettes do not increase and may actually decrease consumption of alcohol as a result smuggling of cigarettes may have raised consumption of alcohol as well

rising cigarette prices and rising obesity coincidence or unintended consequence economists have begun to debate if the rise in cigarette prices in the u s in recent decades has contributed to the nation s rise in obesity reaching conclusions that are surprisingly sensitive to specification i show that allowing for the effect to occur gradually over several years leads to the conclusion that a rise in cigarette prices is actually associated with a long run reduction in body mass index and obesity this result is robust to the different methodologies used in the literature i also provide evidence that indirect effects on exercise and food consumption may explain the counterintuitive result

communication in repeated games with imperfect private monitoring this paper examines repeated games in which each player observes a private and imperfect signal on the actions played and in which players are allowed to communicate using public messages providing incentives for players to reveal their observations generates revelation constraints that combined with signal imperfections may be a source of inefficiencies however by delaying the revelation of their observations players may economize on the cost of deterring deviations and thereby avoid these inefficiencies because a player would not want to trigger a sanction that would penalize him too revelation constraints also tend to make sanctions difficult to enforce however with at least three players detecting deviations may not require that all the players reveal their observations in that case we obtain a nash threat version of the folk theorem with two players we do not obtain a similar result nevertheless we show that an efficient outcome can almost always be approximated

the philippines roll on roll off policy and its impact on household income abstractour paper captures the immediate impact of the roll on roll off policy that offered an alternative system of inter island transfer within the philippines it provides evidence on the effect

trust in large organizations several authors suggest that trust is an important determinant of cooperation between strangers in a society and therefore of performance of social institutions we argue that trust should be particularly important for the performance of large organizations in a cross section of countries evidence on government performance participation in civic and professional societies importance of large firms and the performance of social institutions more generally supports this hypothesis moreover trust is lower in countries with dominant hierarchical religions which may have deterred networks of cooperation trust hold up remarkably well on a cross section of countries this abstract was borrowed from another version of this item

a robust folk theorem for the prisoner s dilemma we prove the folk theorem for the prisoner s dilemma using strategies that are robust to private monitoring from this follows a limit folk theorem when players are patient and monitoring is sufficiently accurate but private and possibly independent any feasible individually rational payoff can be obtained in sequential equilibrium the strategies used can be implemented by finite randomizing automata journal of economic literature classification numbers c72 c73 d82

how productive is infrastructure a new approach and evidence from rural india there have been competing arguments about the effect of public infrastructure on productivity level based and debate based regressions often lead to different estimates to help reconcile this difference this article applies the gmm method to first test for causality to check for length of lagged relationships and the existence of reverse causality before specifying a final model and deciding the estimation procedure this approach is illustrated using a panel data set for india the results show that infrastructure development in india is productive providing supporting evidence to reverse the trend of declining investment in rural infrastructure

why do people keep their promises an experimental test of two explanations numerous psychological and economic experiments have shown that the exchange of promises greatly enhances cooperative behavior in experimental games this paper seeks to test two theories to explain this effect the first posits that individuals have a preference for keeping their word the second assumes that people dislike letting down others payoff expectations according to the latter account promises affect behavior only indirectly because they lead to changes in the payoff expectations attributed to others i conduct an experiment designed to distinguish between and test these alternative explanations the results demonstrate that the effects of promises cannot be accounted for by changes in payoff expectations this suggests that people have a preference for promise keeping per se

eliciting beliefs proper scoring rules incentives stakes and hedging accurate measurements of probabilistic beliefs have become increasingly important both in practice and in academia introduced by statisticians in the 1950s to promote truthful reports in simple environments proper scoring rules psr are now arguably the most popular incentivized mechanisms to elicit an agent s beliefs this paper generalizes the analysis of psr to richer environments relevant to economists more speci cally we combine theory and experiment to study how beliefs reported with a psr may be biased when i the psr payments are increased ii the agent has a nancial stake in the event she is predicting and iii the agent can hedge her prediction by taking an additional action our results reveal complex distortions of reported beliefs thereby raising concerns about the ability of psr to recover truthful beliefs in general economic environments

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

on the theory of repeated games with private information part ii revelation through communication abstract we consider repeated games with private information discounting and communication similarly to abreu et al 1986 1987 we characterize supergame equilibrium allocations with truthful revelation in the two player case efficiency cannot be attained with supergame equilibria with truthful revelation

modern technology and economic efficiency of philippine rice farmers farmer s recent study and frankel s review of griffin s book suggest that belief in a gap between actual and potential agricultural production in developing countries has regained currency in the development community timmer s concern with measuring technical efficiency and the attempts of shapiro and miiller to relate modernization and information to technical efficiency focus on differences in productivity among farmers as indicators of such a gap 2 among technologists the gap hypothesis has a number of faithful adherents including the former director of the international rice research institute irri who could not understand why the asian farmer who had adopted the new rice varieties was not doing better somehow he felt that the rice scientists who had obtained yields of 5 to 10 metric tons per hectare on the irri farm still could not explain why so many filipino farmers for example obtained on the average less than one metric ton per hectare increase in yield after shifting from the traditional to the high yielding varieties 3 in response to these persistent questions in 1974 scientists at irri began a research project to measure the yield gap and to understand the factors responsible for it the yield gap was defined by biologists as the difference under farmers conditions between the maximum yield possible

perfect communication equilibria in repeated games with imperfect monitoring this paper introduces an equilibrium concept called perfect communication equilibrium for repeated games with imperfect private monitoring this concept is a refinement of myerson s myerson r b 1982 optimal coordination mechanisms in generalized principal agent problems j math econ 10 67 81 communication equilibrium a communication equilibrium is perfect if it induces a communication equilibrium of the continuation game after every history of messages of the mediator we provide a characterization of the set of corresponding equilibrium payoffs and derive a folk theorem for discounted repeated games with imperfect private monitoring

imperfect public monitoring with costly punishment an experimental study this paper experimentally investigates the effects of a costly punishment option on cooperation and social welfare in long finitely repeated public good contribution games in a perfect monitoring environment increasing the severity of the potential punishment monotonically increases average net payoffs in a more realistic imperfect monitoring environment we find a u shaped relationship access to a standard punishment technology in this setting significantly decreases net payoffs even in the long run access to a severe punishment technology leads to roughly the same payoffs as with no punishment option as the benefits of increased cooperation offset the social costs of punishing jel c92 h41 k42

the effects of excise taxes and regulations on cigarette smoking abstract we estimate a generalized linear model to examine adult and teenage cigarette demand our analysis focuses on the extent to which exice taxes and regulations restricting smoking in public places affect cigarette consumption the adult results indicate that the price elasticity of demand is unstable over time ranging from 0 06 in 1970 to 0 23 in 1985 these estimates are lower than most found in previous studies the teenage price elasticity does not differ statistically from the estimates for adults additionally regulations restricting smoking in public places have a significant effect on both adult and teenage cigarette demand

optimal cartel equilibria with imperfect monitoring abstract there exist optimal symmetric equilibria in the green porter model 4 8 having an elementary intertemporal structure such an equilibrium is described entirely by two subsets of price space and two quantities the only production levels used by firms in any contingency the central technique employed in the analysis is the reduction of the repeated game to a family of static games

trust but verify monitoring inspection costs and opportunism under limited observability abstract is feedback on trustworthiness necessary for the functioning of economic relationships in many real world economic environments such feedback can at best be acquired through costly monitoring raising questions of how trust and efficiency can be maintained in the lab we conduct a modified finite horizon binary trust game in which we vary the observability of the trustee s actions in the baseline condition trustors can perfectly observe their trustee s actions we compare this to a condition in which that actions are unobservable and three conditions in which they must be actively monitored at zero low or high cost respectively counter intuitively differences in observability do not lead to significant differences in trust and efficiency but the levels are supported by very different information structures while trustors monitored every action under zero observation costs most of trusting actions were blind trustors did not learn whether their trust was honored or not under costly monitoring even under complete unobservability almost half of the available surplus was realized there are distributive impacts however the gains from trust favor trustees under the more adverse informational conditions the behavioral patterns are consistent with the fact that trustors beliefs about their trustee s conduct are almost invariant across conditions

peer discipline and incentives within groups abstract we investigate how a collusive group can sustain non nash actions by enforcing internal discipline through costly peer punishment we give a simple and tractable characterization of schemes that minimize discipline costs while preserving incentive compatibility we apply the model to a public goods contribution problem we find that if the per capita benefit from the public good is low then regardless of whether peer discipline is feasible or not only small groups will contribute to the good if the public good benefit is significant but peer discipline is infeasible it remains the case that only small groups contribute on the other hand if the public good benefit is significant but peer discipline is feasible then full contribution takes place regardless of group size we reconcile this result with olson s idea that small groups are more effective by considering the case where the per capita benefit of the public good varies with group size

taxation smuggling and demand for cigarettes in canada evidence from time series data abstract this study analyzes canadian cigarette consumption and taxation between 1980 and 1994 a period in which there have been large price rises and declines and a dramatic increase in the consumption of contraband tobacco products we examine elasticities of legal cigarette sales and total sales including contraband with respect to the price of legal cigarettes and various other factors the growth of the contraband market since 1987 appears to have created two classes of cigarette taxed and untaxed with responses to changes in the legal price that are respectively higher and lower than was previously the case the sensitivity of total cigarette sales to the taxation instrument is much lower than it would appear from sales of taxed cigarettes alone

economic efficiency in polish peasant farming an international perspective one decade following the market transition in poland the agricultural sector still exhibits low productivity policy makers often describe the sector as fragmented and inefficient to understand why small scale farming in poland is inefficient despite longstanding secure property rights a survey of economic efficiency in southern agriculture was conducted and compared with limited studies of efficiency in poland the most important issues particularly related to farm size and efficiency are price risk uncertainty and low rural development comparative studies across regions with varying institutional arrangements and economic organization are powerful but must be made carefully and critically

peer monitoring and credit markets a major problem for institutional lenders is ensuring that borrowers exercise prudence in the use of the funds so that the likelihood of repayment is enhanced one partial solution is peer monitoring having neighbors who are in a good position to monitor the borrower be required to pay a penalty if the borrower goes bankrupt peer monitoring is largely responsible for the successful financial performance of the grameen bank of bangladesh and of similar group lending programs elsewhere but peer monitoring has a cost it transfers risk from the bank which is in a better position to bear risk to the cosigner in a simple model of peer monitoring in a competitive credit market this article demonstrates that the transfer of risk leads to an improvement in borrowers welfare

community enforcement with observation costs abstract takahashi 2010 12 proves a folk theorem in an environment where a continuum of players are randomly matched in each period to play the prisoner s dilemma with a different partner a key assumption there is that a player can observe her partner s past play without any cost while she cannot observe the past play of her partner s past partners the partners of her partner s past partners and so on however takahashi s 12 result is not robust to the introduction of an infinitesimal cost to acquire information about partners past play in this note with the help of cheap talk communication i prove a folk theorem by constructing an equilibrium strategy that is robust to an infinitesimal cost

endogenous monitoring in a partnership game i consider a repeated game in which due to imperfect monitoring no collusion can be sustained i add a self interested monitor who commits to obtain private signals of firms actions and sends a public message the monitor makes an offer specifying the precision of the signals obtained and the amount to be paid in return first with a low monitoring cost collusive equilibria exist second collusive equilibria are monitor preferred third in monitor preferred equilibria firms payoffs are decreasing in the discount factor my model helps explain cartel agreements between self interested parties and firms in legal industries in the united states and europe

cigarette taxes and illicit trade in europe cigarettes are highly taxed in europe but at higher prices some consumers substitute more toward illicit cigarettes the illicit retail trade in cigarettes irtc includes counterfeit untaxed and smuggled cigarettes some existing literature includes claims that taxes are not an important determinant of irtc using data from the european union we find the opposite raising prices leads to substantial increases in irtc a 1 increase in tax pack is expected to increase illicit market share by 5 to 12 percentage points and increase illicit cigarette sales by 29 to 95 the results are robust to alternative specifications and data jel i18 h26 k42

repeated games with private monitoring two players we investigate two player infinitely repeated games where the discount factor is less than but close to unity monitoring is private and players cannot communicate we require no condition concerning the accuracy of players monitoring technology we show the folk theorem for the prisoners dilemma with conditional independence we also investigate more general games where players private signals are correlated only through an unobservable macro shock we show that efficiency is sustainable for generic private signal structures when the size of the set of private signals is sufficiently large finally we show that cartel collusion is sustainable in price setting duopoly

demand for cigarettes in the united states effects of prices in bordering states and contiguity with mexico and canada based on a cross section of us states for 2004 this article estimates a demand function for cigarettes after including a proxy for prices in the bordering states and simple proxies for contiguity with mexico and canada and for being a major tobacco producer one major point seems to be that the negative elasticity for within state price is similar in magnitude to the positive elasticity for the lowest price in bordering states several additional points also seem noteworthy first having a border with mexico lowers sales in the state sizably second the share of hispanic latino population in the state also lowers sales significantly third contiguity with canada appears to have no significant effect fourth partial impact of the state being a major tobacco producer appears minor even though consumption in these states is considerably higher fifth education shows the expected negative association with cigarette consumption but its statistical significance is low last income carries a weak negat

an example of a repeated partnership game with discounting and with uniformly inefficient equilibria in this note we present an example of a repeated partnership game with imperfect monitoring in which all supergame equilibria with positive discount rates are bounded away from full efficiency uniformly in the discount rate provided the latter is strictly positive on the other hand if the players do not discount the future then every efficient one period payoff vector that dominates the one period equilibrium payoff vector can be attained by an equilibrium of the repeated game thus the correspondence that maps the players discount rate into the corresponding set of repeated game equilibrium payoff vectors is discontinuous at the point at which the discount rate is zero

oligopoly structure and the incidence of cigarette excise taxes abstract a model of oligopoly price behavior and tax incidence for the u s cigarette industry for the period 1955 1990 is presented a cost function is estimated and shows manufacture to be subject to increasing returns to scale the mean price elasticity of demand is 0 71 the model indicates that competition among manufacturers has been decreasing since 1980 a simulation shows that an increase in the federal excise tax causes a greater increase in price and a greater decrease in consumption than does the same increase in the average of state and local tax rates

collusion in dynamic bertrand oligopoly with correlated private signals and communication abstract this paper studies collusion in repeated bertrand oligopoly when stochastic demand levels for the product of each firm are their private information and are positively correlated it derives general sufficient conditions for efficient collusion through communication and a simple grim trigger strategy this analysis is then applied to a model where the demand signal has multiple random components which respond differently to price deviations in this model it is shown that the above sufficient conditions hold if idiosyncratic noise terms are sufficiently small journal of economic literature classification numbers c72 d82

an experimental study of the repeated trust game with incomplete information in the trust game first player 1 decides between non cooperation or trust in reciprocity only in the latter case player 2 chooses between exploiting or rewarding player 1 in our computerized experiment player 2 can be always rewarding implemented as a robot strategy or decide opportunistically to allow for reputation formation this base game is played repeatedly learning can be analyzed since participants play successively several repeated games with changing partners participants can explicitly rely on mixed strategies which allows testing the qualitative and quantitative aspects of reputation equilibria also at an individual level

the repeated prisoner s dilemma with imperfect private monitoring abstract in this paper i study a repeated prisoner s dilemma game in which monitoring is private and imperfect a partial folk theorem is proved for the case of almost perfect monitoring

belief based equilibria in the repeated prisoners dilemma with private monitoring abstract we analyze repeated prisoners dilemma games with imperfect private monitoring and construct mixed trigger strategy equilibria such strategies have a simple representation where a player s action only depends upon her belief that her opponent s are continuing to cooperate when monitoring is almost perfect the symmetric efficient outcome can be approximated in any prisoners dilemma game while every individually rational feasible payoff can be approximated in a class of such games the efficiency result extends when there are more than two players it requires that monitoring be sufficiently accurate but does not require very low discounting when a public randomization device is available journal of economic literature classification numbers c73 d82

how robust is the folk theorem the folk theorem of repeated games has established that cooperative behavior can be sustained as an equilibrium in repeated settings early papers on private monitoring and a recent paper of cole and kocherlakota games and economic behavior 53 2005 59 72 challenge the robustness of this result by providing examples in which cooperation breaks down when players observe only imperfect private signals about other players actions or when attention is restricted to strategies with finite memory this paper shows that cole and kocherlakota s result is an artefact of a further restriction that they impose we prove that the folk theorem with imperfect public monitoring holds with strategies with finite memory as a corollary we establish that the folk theorem extends to environments in which monitoring is close to public yet private

communication in repeated games with costly monitoring abstract we study repeated games with discounting where perfect monitoring is possible but costly it is shown that if players can make public announcements then every payoff vector which is an interior point in the set of feasible and individually rational payoffs can be implemented in a sequential equilibrium of the repeated game when the discount factor is high enough thus efficiency can be approximated even when the cost of monitoring is high provided that the discount factor is high enough

the folk theorem for repeated games with observation costs abstract the folk theorem literature has been relaxing the assumption on how much players know about each other s past action here we consider a general model where players can buy precise information every period each player decides whether to pay a cost to accurately observe the actions chosen by other players in the previous period when a player does not pay the cost he obtains only imperfect private signals observational decisions are unobservable to others known strategies such as trigger strategies do not work since they fail to motivate players to pay for information this paper shows that the folk theorem holds for any level of observation costs unlike existing folk theorems with private monitoring ours imposes virtually no restriction on the nature of costless imperfect signals the theorem does not use explicit or costless communication thereby having implications on antitrust laws that rely on evidence of explicit communication the main message is that accurate observation alone however costly enables efficient cooperation in general repeated games

efficiency in repeated prisoner s dilemma with private monitoring abstract this paper analyzes repeated games with private monitoring where in each period each player receives a signal of the other player s action in the previous period and that signal is private information previous literature on discounted repeated games with private monitoring has not shown whether or not nearly efficient equilibria exist for a repeated prisoner s dilemma satisfying a certain assumption regarding stage game payoffs we show that there exists a nearly efficient sequential equilibrium provided that imperfectness of signals is small and players are patient journal of economic literature classification number c73

efficiency and observability with long run and short run players we present a general algorithm for computing the limit as 1 of the set of payoffs of perfect public equilibria of repeated games with long run and short run players allowing for the possibility that the players actions are not observable by their opponents we illustrate the algorithm with two economic examples in a simple partnership we show how to compute the equilibrium payoffs when the folk theorem fails in an investment game we show that two competing capitalists subject to moral hazard may both become worse off if their firms are merged and they split the profits from the merger finally we show that with short run players each long run player s highest equilibrium payoff is generally greater when their realized actions are observed journal of economic literature classification numbers c72 c73 d21 d82 d92 e22