reputation with equal discounting in repeated games with strictly conflicting interests we analyze reputation effects in two player repeated games of strictly conflicting interests in such games player 1 has a commitment action such that a best reply to it gives player 1 the highest individually rational payoff and player 2 the minmax payoff players have equal discount factors with positive probability player 1 is a type who chooses the commitment action after every history we show that player 1 s payoff converges to the maximally feasible payoff when the discount factor converges to one this contrasts with failures of reputation effects for equal discount factors that have been demonstrated in the literature journal of economic literature classification number c71

almost common values auctions revisited in almost common value auctions one bidder the advantaged bidder has a valuation advantage over all other regular bidders it is well known that in second price auctions with two bidders even a slight private value advantage can have an explosive effect on auction outcomes as the advantaged bidder wins all the time and auction revenue is substantially lower than in a pure second price common value auction we explore the robustness of these results to the addition of more regular bidders in second price auctions and the extent to which these results generalize to ascending price english auctions in an effort to provide insight into when and why one ought to be concerned about such slight asymmetries

estimating the effect of hierarchies on information use theory suggests that greater hierarchical distance between a subordinate and his boss makes it more di cult to share abstract and subjective information in decision making a novel data set put together from credit dossiers of large corporate loan applicants enables us to observe the information collected by loan o cers and also how it is used by the ultimate loan approving o cer we flnd that greater hierarchical geographical distance between the information collecting agent and the loan approving o cer leads to less reliance on subjective information and more on objective information by exploiting non linearities in the assignment rules that determine an applicant s hierarchical distance and using information collecting agent flxed efiects we show that our result cannot be driven by endogenous assignment of applicants we also flnd that higher frequency of interactions between the information collecting agent and loan approving o cer both over time and through geographical proximity helps mitigate the efiects of hierarchical distance on information use our results show that hierarchical distance in uences information use and highlights the importance of human touch in communication

buyer collusion and efficiency of government intervention in wheat markets in northern india an asymmetric structural auctions analysis this paper uses auction theory to analyze wholesale markets for wheat in northern india this approach enables us not only to characterize the market in terms of buyer asymmetries but also to detect the existence of collusion and to quantify its impact on market prices we show that buyer asymmetries exacerbate the downward impact of collusion on prices the paper also demonstrates the use of auction theory to analyze questions of government efficiency it considers whether the government paid too much for the wheat it procured at the minimum support price and shows that for our sample it did not the paper is based on a primary survey of two wholesale markets in north india

relationship banking fragility and the asset liability matching problem we address a fundamental question in relationship banking why do banks that make relationship loans finance themselves primarily with core deposits and when would it be optimal to finance such loans with purchased money we show that not only are relationship loans informationally opaque and illiquid but they also require the relationship between the bank and the borrower to endure in order for the bank to add value however the informational opacity of relationship loans gives rise to endogenous withdrawal risk that makes the bank fragile core deposits are an attractive funding source for such loans because the bank provides liquidity services to core depositors and this diminishes the likelihood of premature deposit withdrawal thereby facilitating the continuity of relationship loans that is we show that banks will wish to match the highest value added liabilities with the highest value added loans and that doing so simultaneously minimizes the bank s fragility owing to withdrawal risk and maximizes the value the bank adds in relationship lending we also examine the impact of interbank competition on the bank s asset liability matching and extract numerous testable predictions

re framing the urban blight problem with trans disciplinary insights from ecological economics abstract similar to circumstances in the field of economics market fundamentalism dominates urban blight policy spaces in the u s despite criticisms of the paradigm unlike the unified alternative that ecological economics ee provides to conventional economic theory however disagreement over the meaning of blight has prevented a commonly held pre analytic vision and policy agenda from forming in critical blight scholarship this paper asserts that applied ee offers a framework in which to develop such a vision and to strengthen the inchoate critical blight policy stream we draw on the ee theory and concepts to argue that blight can be understood as a stock that accumulates in an urban system as a result of underinvestment into real property our conceptualization of the problem has several important implications for public policy a brief illustration compares the relative efficacy of one city s characteristically neoliberal blight policies with more ee consistent policies in a second city to show that the latter might in fact outperform the former

bargaining and reputation an experiment on bargaining in the presence of behavioural types we conduct a series of laboratory experiments to understand what role commitment and reputation play in bargaining the experiments implement the abreu and gul 2000 bargaining model that demonstrates how introducing behavioral types which are obstinate in their demands creates incentives for all players to build reputations for being hard bargainers the data are qualitatively consistent with the theory as subjects mimic induced types furthermore we find evidence for the presence of complementary types whose initial demands acquiesce to induced behavioural demands however there are quantitative deviations from the theory subjects make aggressive demands too often and participate in longer conflicts before reaching agreements overall the results suggest that the abreu and gul 2000 model can be used to gain insights to bargaining behavior particularly in environments where the process underlying obstinate play is well established

reputation and cooperation in the repeated second price auctions this paper shows that there are strong reputational effects in a general class of second price auctions if reputation is one sided and bidders are patient then the bidder without reputation does not challenge the other bidder often consequently the bidder with reputation obtains most of the surplus the other bidder and the seller get very little if reputation is two sided then the bidders engage in a game akin to war of attrition the resulting payoff is very low for the bidders and very high for the seller in any case the folk theorem fails collusion in the second price auctions is impossible the predictions of the model are that prices in early auctions should reach levels that are higher than the value of the object then declining towards the reserve price a set of strong bidders emerges a recent series of auctions of spectrum for umts services in europe seems to be consistent with the predictions of the model

second price common value auctions under multidimensional uncertainty the literature has demonstrated that second price common value auctions are sensitive to the presence of asymmetries among bidders in a two bidder model bikhchandani 1988 reputation in repeated second price auctions j econ theory 46 97 119 has shown that if it is common knowledge that one bidder has a disadvantage compared to her opponent that bidder almost surely never wins the auction employing a similar two bidder model this paper shows that this result does not carry over when one allows for two sided uncertainty in such case in every equilibrium the disadvantaged type bidder needs to win the auction with strictly positive probability we then solve for the equilibria in two cases one with two types and another with a continuum of types and we show that they converge to the symmetric equilibria of the corresponding symmetric auctions we thus reestablish a lost linkage in the analysis of common value and almost common value auctions

a decision model for financial assurance instruments in the upstream petroleum sector the main objective of this paper is to deepen the discussion regarding the application of financial assurance instruments bonds in the upstream oil sector this paper will also attempt to explain the current choice of instruments within the sector the concepts of environmental damages and internalization of environmental and regulatory costs will be briefly explored bonding mechanisms are presently being adopted by several governments with the objective of guaranteeing the availability of funds for end of leasing operations regulators are mainly concerned with the prospect of inheriting liabilities from lessees several forms of bonding instruments currently available were identified and a new instrument classification was proposed ten commonly used instruments were selected and analyzed under the perspective of both regulators and industry surety paid in and periodic payment collateral accounts letters of credit self guarantees investment grade securities real estate collaterals insurance policies pools and special funds a multiattribute value function model was then proposed to examine current instrument preferences preliminary simulations confirm the current scenario where regulators are likely to require surety bonds letters of credit and periodic payment collateral account tools

european environmental taxes and charges recent experience issues and trends abstract the use of environmental taxes and charges in oecd countries increased by over 50 between 1987 and 1994 while revenues raised by environmental taxes and charges remain small relative to overall taxation they comprise a rising proportion in most european countries several european countries have either undertaken or are considering systematic shifts in taxes away from labour and onto the use of environmental resources potential negative effects on competitiveness and regressive distributional effects are the major cause of concern with regard to the introduction of environmental taxes a number of ways of mitigating such effects exist and have been implemented

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

envisioning shared goals for humanity a detailed shared vision of a sustainable and desirable usa in 2100 economics has been defined as the science of allocation of scarce resources towards alternative ends this definition implies that the first step in economic analysis is to determine what ends are desirable for society most sectors of the society would agree that sustainability is a desirable end but there is little agreement as to what a sustainable future would look like the university of maryland institute for ecological economics sponsored a democratic future search process designed to create a relatively detailed shared vision of a sustainable and desirable usa in the year 2100 this paper presents the vision developed at that conference examines the resources required to achieve the vision and assesses the suitability of market mechanisms for allocating the required resources towards the desired ends we find that markets are not efficient mechanisms for allocation in this case and propose the institutions of a strong democracy as a promising alternative 2002 elsevier science b v all rights reserved

srisk a conditional capital shortfall measure of systemic risk we introduce srisk to measure the systemic risk contribution of a financial firm srisk measures the capital shortfall of a firm conditional on a severe market decline and is a function of its size leverage and risk we use the measure to study top financial institutions in the recent financial crisis srisk delivers useful rankings of systemic institutions at various stages of the crisis and identifies fannie mae freddie mac morgan stanley bear stearns and lehman brothers as top contributors as early as 2005 q1 moreover aggregate srisk provides early warning signals of distress in indicators of real activity received june 7 2011 accepted april 18 2016 by editor geert bekaert

opening the policy window for ecological economics katrina as a focusing event abstract ecological economics and its allied trans disciplinary fields are well established in academia but so far have failed to have significant influence on policy makers public policy research and theory suggest that three process streams must converge in order to shape the political agenda and change policy kingdon j 1984 agenda alternatives and public policies boston little brown first the problem stream emerges when an existing condition is defined as a problem a discrepancy between current reality and a desired goal and critical policy makers accept the definition of the problem the policy stream emerges as consensus grows around policy instruments to solve the problem the politics stream emerges as the national mood and leading politicians accept the gravity of the problem and are willing to implement the policies required to address it when these three streams converge a policy window is created that can move issues onto the political agenda and into formal policy a focusing event like katrina can bring these three process streams together however different strategic representations of the situation may allow entirely different problem definitions and policies to dominate the political agenda this paper analyzes the extent to which katrina has opened a policy window for ecological economics we find that katrina has strengthened the three streams necessary to create a policy window for ecological economics but that the dominant economic paradigm currently on the political agenda market fundamentalism is strategically presenting katrina as supporting its own problem stream and policy stream key elements of the ecological economic agenda such as investing in natural capital are making it on to the political agenda but overall market fundamentalist policies appear likely to dominate we argue that ecological economists have failed to galvanize public acceptance for the policy goals of sustainable scale and just distribution thus failing to effectively communicate their perspectives on problem definition and or policy solutions to policy makers and the voting public we conclude with suggestions for how ecological economists can still take advantage of the katrina window and better prepare for future windows opening

bargaining and reputation the paper develops a reputation based theory of bargaining the idea is to investigate and highlight the influence of bargaining postures on bargaining outcomes a complete information bargaining model a la rubinstein is amended to accommodate irrational types who are obstinate and indeed for tractability assumed to be completely inflexible in their offers and demands a strong independence of procedures result is derived after initial postures have been adopted the bargaining outcome is independent of the fine details of the bargaining protocol so long as both players have the opportunity to make offers frequently the latter analysis yields a unique continuous time limit with a war of attrition structure in the continuous time game equilibrium is unique and entails delay consequently inefficiency the equilibrium outcome reflects the combined influence of the rates of time preference of the players and the ex ante probabilities of different irrational types as the probability of irrationality goes to zero delay and inefficiency disappear furthermore if there is a rich set of types for both agents the limit equilibrium payoffs are inversely proportional to their rates of time preference

a learning approach to auctions we analyze a repeated first price auction in which the types of the players are determined before the first round it is proved that if every player is using either a belief based learning scheme with bounded recall or a generalized fictitious play learning scheme then for sufficiently large time the players bids are in equilibrium in the one shot auction in which the types are commonly known

auction designs for allocating wind energy leases on the u s outer continentalshelf abstract the anticipated expansion of offshore wind energy in the u s has been the subject of considerable legislative effort the energy policy act epact of 2005 and the outer continental shelf lands act oscla detail the criteria the federal government must follow when allocating leases for offshore wind farms the bureau of ocean energy management boem provides primary federal oversight to offshore wind in federal waters and in 2009 they released their formal management guidelines going forward this research examines lease allocation methods boem may use as well as several promising alternatives through the lens of the mandated criteria set forth by oscla and the epact of 2005 we find significant variation between allocation methods in terms of how well they meet each of the criteria price based allocations will have difficulty in meeting criteria while also accounting for the immature status of the offshore wind energy industry instead a multiple factor approach which includes non monetary considerations may be a more appropriate way to balance federal mandates and industryneeds

reputation and discretion in financial contracting the authors explain the use of legally unenforceable discretionary financial contracts in circumstances where legally enforceable contracts are feasible a discretionary contract allows a contracting party to choose whether or not to honor the contract it is shown that such a contract liquefies reputational capital by permitting it to be depreciated in exchange for the preservation of financial capital and information reusability in financially impaired states in addition discretionary contracts foster the development of reputation this explains discretion among highly confident letters holding company relationships mutual fund contracts bank loan commitments and other financial and nonfinancial contracts copyright 1993 by american economic association

is the growth of small firms constrained by internal finance this paper examines the long standing theory that the growth of small firms is often constrained by the quantity of internal finance under plausible assumptions when financing constraints are binding an additional dollar of internal finance should generate slightly more than an additional dollar of growth in assets this quantitative prediction should not hold for the relatively small number of firms which access external equity we test these predictions with a panel of more than 1 600 small firms and find that the growth of most firms is constrained by internal finance our results have implications for several different research literatures including models of firm growth

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

is relationship lending special evidence from credit file data in germany the german financial market is often characterized as a bank based system with strong bank customer relationships the corresponding notion of a housebank is closely related to the theoretical idea of relationship lending it is the objective of this paper to provide a direct comparison between housebanks and normal banks as to their credit policy therefore we analyze a new data set representing a random sample of borrowers drawn from the credit portfolios of five leading german banks over a period of five years we use credit file data rather than industry survey data and thus focus the analysis on information that is directly related to actual credit decisions in particular we use bank internal borrower rating data to evaluate borrower quality and the bank s own assessment of its housebank status to control for information intensive relationships the major results of our study support the view that housebanks are able to establish a distinct behavioral pattern consistent with the idea of long term commitment we find that housebanks do provide liquidity insurance in situations of unexpected deterioration of borrower ratings with respect to loan pricing we find no evidence for intra or intertemporal price differentiation related to housebanking

cross border banking credit access and the financial crisis abstract we study the sensitivity of credit supply to bank financial conditions in 16 emerging european countries before and during the financial crisis we use survey data on 10 701 applicant and non applicant firms that enable us to disentangle effects driven by positive and negative shocks to the banking system from demand shocks that may vary across lenders we find strong evidence that firms access to credit was affected by changes in the financial conditions of their banks during the crisis firms were more credit constrained if they were dealing with banks that experienced a decline in equity and tier 1 capital as well as losses on financial assets we also find that access to credit reflects the balance sheet conditions of foreign parent banks the effect of positive and negative shocks to a bank is greater for riskier firms and firms with fewer tangible assets

ecological economics of coastal disasters introduction to the special issue abstract coastal disasters are increasing in frequency and magnitude measured in terms of human lives lost destroyed infrastructure ecological damage and disrupted social networks hurricane katrina and the indian ocean tsunami illustrate the severe and widespread impacts of such disasters on human well being the proximate cause of most of these disasters is forces of nature however human decisions driven largely by economic forces do much to aggravate these natural disasters for example coastal mangroves and wetlands protect coastal communities from wave surges and winds but are rapidly being converted for the production of market goods and anthropogenic climate change driven by the energy use of our economy may exacerbate coastal disasters in several ways the goal of economics should be to improve the sustainable well being of humans our well being is generated in part by the production of market goods and services but also by the goods and services provided by nature by social networks and norms by knowledge and health in short built natural social and human capital respectively in seeking to increase human well being solely by maximizing the monetary value of market goods built capital our current economic system may be doing more to undermine our sustainable well being than to improve it a point made clear by the growing negative impacts of coastal disasters an economic system should allocate available resources in a way that equitably and efficiently provides for the sustainable well being of people by protecting and investing in all four types of capital this is what ecological economics seeks to do this article introduces ten papers that apply the four capital framework to the analysis of coastal disasters seeking to understand their impacts and how to mitigate them how to predict and plan for them and how to use this information to redesign coastal areas in a more sustainable and desirable way

the capital crunch neither a borrower nor a lender be the dramatic reduction in the growth rate of bank lending associated with the 1990 91 recession particularly in new england has evoked claims by many observers of a credit crunch however because of the difficulty in determining whether the observed slow credit growth is a demand or supply phenomenon convincing evidence of the practical importance of credit crunches for economic activity remains elusive we overcome this obstacle by examining a cross section of banks in new england that have experienced the same economic downturn effectively controlling for changes in demand we find empirical support for a capital crunch whereby poorly capitalized institutions shrink to satisfy capital requirements this alone is not a sufficient condition for a credit crunch however we find s6me additional evidence that the ca ital crunch may have limited credit availability in new england

small bank comparative advantages in alleviating financial constraints and providing liquidity insurance over time we use novel monthly survey data from 1993 to 2012 on small business managerial perceptions of financial constraints and other conditions matched with information on banks in their local markets the data suggest that small banks have comparative advantages in alleviating these constraints these advantages tend to be greater during adverse economic conditions and do not appear to decrease or increase secularly small banks also appear to have comparative advantages in providing liquidity insurance to small business customers of large banks experiencing liquidity shocks during financial crises our findings suggest a source of social costs from ongoing consolidation of the banking industry received december 28 2015 editorial decision january 13 2017 by editor philip strahan

an experimental test of design alternatives for the british 3g umts auction in spring 2000 the british government auctioned off licences for third generation mobile telecommunications services in the preparation of the auction two designs involving each a hybrid of an english and a sealed bid auction were suggested by the government a discriminatory and a uniform price variant we report an experiment on these two designs and also compare the results to those with a pure english auction both hybrids are similar in efficiency revenue differences disappear as bidders get experienced compared to the discriminatory format the pure english auction gives new entrants better chances

do large banks have lower costs new estimates of returns to scale for u s banks this paper presents new fully nonparametric estimates of ray scale and expansion path scale economies for u s banks based on a model of bank costs unlike prior studies that use models with restrictive parametric assumptions or limited samples our methodology uses local polynomial estimators and data on all u s banks over the period 1984 2006 our estimates indicate that as recently as 2006 most u s banks faced increasing returns to scale suggesting that scale economies are a plausible but not necessarily only reason for the growth in average bank size and that the tendency toward increasing scale is likely to continue unless checked by government intervention

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

an experimental investigation of the explosive effect in almost common value auctions abstract with only two bidders a slight private value advantage in a common value auction is predicted to have an explosive effect on the allocation and revenue of the auction when using a second price and or english clock mechanism this paper uses the wallet game in an english clock mechanism with two players to test these predictions the results show that the effect is proportional not explosive confirming the results of past experiments a behavioral model with two types of players naive and sophisticated is developed and tested against the experimental data in the model naive players use a rule of thumb bidding function while the sophisticated players are fully rational and when forming their strategy choosing the best response correctly account for the probability that a rival is naive or sophisticated we use cluster analysis to classify the players in the symmetric auctions as naive or sophisticated and a strict win lose criteria to classify players in the asymmetric auctions we find that those players classified as sophisticated are more aggressive in responding to high signals or advantaged status than their naive counterparts but do not lower their bids relative to the naive players when receiving low signals or when regular

the case for methodological pluralism abstract ecology and economics share the same greek root both address complex systems ecology consists of numerous approaches to understanding natural systems energetics population biology food web models hierarchy theory to mention just a few within ecology field knowledge and the reporting of new observations are well respected economics on the other hand is dominated by one pattern of thinking and standard of proof the market model and econometrics within economics field knowledge and observations per se are little valued agreement on a correct method is frequently taken as an indication of the maturity of a science the argument is developed in this paper that all the aspects of complex systems can only be understood through multiple methodologies the agreement on method within economics however seems to reflect stronger pressures within the discipline for conformity than for truth relative to ecology since ecological economics seeks to understand a larger system than either economics or ecology seeks to understand a diversity of methodologies is appropriate and pressures to eliminate methodologies for the sake of conformity should be avoided

the limited political influence of ecological economics a case study on dutch environmental policies abstract although the ecological economics ee discourse attempts to influence environmental policy empirical studies have concluded that its success in this endeavour has been limited thus far in the netherlands however two ee related policy concepts environmental utilisation space and ecological footprint were strongly present in environmental policy during certain periods in time but subsequently disappeared from the environmental agenda the central question of this article is how these ups and downs of the ee concepts can be understood which factors determine their rise on and fall from the policy agenda over time to answer this question this article offers a conceptual model informed by the approaches in political science on framing agenda setting and knowledge utilisation we conclude that the interplay of concept specific characteristics the formation of coalitions around the concept and contextual variables explain the rise and fall of the aforementioned concepts a match between the dominant policy frame and the core elements of the concept provides the opportunity for the two concepts to be pushed on the agenda we observe the alternation of constraining frames which allows for ee concepts to survive and reconciling frames which block agenda entrance for ee concepts furthermore the alternation of these frames seems to correlate with economic and public environmental attention cycles in the netherlands

choices without prices without apologies valuing is usually regarded as a process of compressing information about attributes into a single metric armed with this reduced form of compact information the consumer can consider a particular object with a particular price attached or implied and make an informed decision but the process of valuing is less straightforward than we ordinarily suppose when environmental goods and services become the object of information compaction it is possible that important information is lost we comment on the choice problem germane to environmental goods and services and challenge the presumption that environmental choices made without explicit pricing are inferior to those in which hypothetical valuation studies are undertaken

the effect of prison population size on crime rates evidence from prison overcrowding litigation simultaneity between prisoner populations and crime rates makes it difficult to isolate the causal effect of changes in prison populations on crime to break that simultaneity this paper uses prison overcrowding litigation in a state as an instrument for changes in the prison population the resulting elasticities are two to three times greater than those of previous studies a one prisoner reduction is associated with an increase of fifteen index i crimes per year while calculations of the costs of crime are inherently uncertain it appears that the social benefits associated with crime reduction equal or exceed the social costs of incarceration for the marginal prisoner

a more complete conceptual framework for sme finance abstract we propose a more complete conceptual framework for analysis of sme credit availability issues in this framework lending technologies are the key conduit through which government policies and national financial structures affect credit availability we emphasize a causal chain from policy to financial structures which affect the feasibility and profitability of different lending technologies these technologies in turn have important effects on sme credit availability financial structures include the presence of different financial institution types and the conditions under which they operate lending technologies include several transactions technologies plus relationship lending we argue that the framework implicit in most of the literature is oversimplified neglects key elements of the chain and often yields misleading conclusions a common oversimplification is the treatment of transactions technologies as a homogeneous group unsuitable for serving informationally opaque smes and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque smes

the value of biodiversity markets society and ecosystems the value of biodiversity is discussed at different levels including market value non market values to humans and the value of biodi versity to ecosystems the main conclusion is that although market exchange values of environmental services may be used to justify biodiversity protec tion measures it must be stressed that exchange value constitutes a small portion of total biodiver sity value the total value of existing biodiversity is largely unknown but indications are that it is essen tial to human existence the various levels of biodi versity value point to the need for a hierarchical and pluralistic methodology to determine appropri ate policies for its preservation jel q21 i introduction among ecologists there is a general con sensus that biodiversity1 is of critical impor tance to the health of ecosystems and even for the long term survival of the human species there is also a consensus that bio diversity is being lost at a rate which is a cause for concern 2 economists on the other hand generally view biodiversity as just an other good which is to be placed in the basket of market choices just as any other the discussion of the specifics of biodiver sity policy has been unsatisfactory partly because of the different meanings of the word value used by economists and ecolo gists many ecologists fail to understand the logic of market allocation and why biologi cal resources are used in seemingly irra tional ways many economists fail to ap preciate the narrowness of the concept of economic value as indicated by relative prices determined by market exchange fol lowing anderson 1966 and brown 1984 the discussion below considers economic measures of value to be species of the genus assigned value which belongs to the family value many biologists and paleontologists be lieve that we are at a critical point in the history of the human species and perhaps even in the 600 million year history of com plex multicelled life on earth if the paleon tologists and biologists who study the phe nomenon of mass extinction are correct the current human induced mass extinction may be of the same order of magnitude as the five other major extinction episodes which destroyed between 20 and 96 percent of existing species on the planet ehrlich and ehrlich 1992 ward 1994 wilson 1992 we are living in a truly remarkable period in earth s 41 billion year history the valua tion decisions our species has made in the recent past and will make during the next few decades will determine the fate of life on earth for the next tens of millions of years it is critical to clarify the language and concepts we use to estimate the value of biodiversity and thus policies leading to its destruction or preservation the importance attached to the issue of biodiversity preservation necessarily in volves ethical judgments about duty to fu ture generations and responsibility toward the nonhuman natural world although in dividuals hold a variety of conflicting beliefs about human responsibility to the natural world this does not mean that policy choices

rational expectations information acquisition and competitive bidding most rational expectations market equilibrium models are not models of price formation and naive mechanisms leading to such equilibria can be severely manipulable in this paper a bidding model is developed which has the market like features that bidders act as price takers and that prices convey information higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices bidders can benefit from trading only if they have a transactions motive or if they have access to inside information apart from exceptional cases prices are not fully revealing a two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing resolving a well known paradox

bidding in a possibly common value auction abstract we analyze a second price auction with two bidders in which only one of the bidders is informed as to whether the object is valued commonly we show that any equilibrium strategy of the bidder who is uninformed must be part of an equilibrium when both bidders instead know that the auction is not common value regardless of the way in which the values are different we derive sufficient conditions for equilibrium existence

reputation in repeated second price auctions abstract a model in which two bidders take part in a series of second price comon value auctions is examined the question of an optimal auction from an auctioneer s standpoint in a repeated auction setting is partially addressed it is shown that the results from single auction models do not carry over to repeated auctions when one of the bidders is endowed with a reputation for bidding aggressively second price auctions with two bidders are highly susceptible to manipulative behaviour by an aggressive bidder and yield much lower revenues to the auctioneer

econometrics of first price auctions in this paper we propose an estimation method for the empirical study of theoretical auction models we focus on first price sealed bid and descending auctions and we adopt the private value paradigm where each bidder is assumed to have a different private value only known to him for the object that is auctioned following mcfadden 1989 and pakes and pollard 1989 our proposed method is based on simulations specifically the method relies on a simulated nonlinear least squares objective function appropriately adjusted so as to obtain consistent estimates of the parameters of interest we illustrate the proposed method by studying a market of agricultural products where descending auctions are used our analysis takes into account heterogeneity of the auctioned objects and the fact that only the winning bid is observed we estimate the parameters that characterize the distribution of the unobserved private values for each auctioned object

taxes subsidies and insurance as drivers of united states coastal development abstract ever increasing coastal populations in the united states and worldwide are putting growing quantities of people and property at risk due to coastal disasters at the same time poorly planned development policies and practices erode the natural capital of coastal regions eliminating existing landscape protection from intense wind and waves government tax subsidy and insurance policies can encourage or discourage particular forms of development in the u s there is no consistent set of incentives or disincentives for coastal development and many programs have ambiguous or contradictory goals federal programs are highly fragmented being administered by a variety of government agencies state and local governments can also implement policies to improve coastal disaster protection but often fail to do so in other cases state and local policies designed for local economic growth work against the goals of federal policy increasing flood damage risk while relying on federal aid once disaster does strike these programs frequently lead to perverse subsidies where economically inefficient policies degrade natural capital and foster economic inequality in this study we evaluate the existing tax subsidy and insurance structures that led to coastal development patterns on the u s gulf coast over the last sixty years and propose alternative policies that could create a more sustainable just economically efficient and storm adaptive region

equilibria in open common value auctions abstract a sufficient condition for uniqueness of nash equilibrium in second price common value auctions is identified we establish that there exists a continuum of equilibria in irrevocable exit common value auctions for the case of two bidders we provide plausible sufficient conditions under which the expected seller revenue is maximized at the symmetric equilibrium an example in which the auctioneer s revenue at the symmetric equilibrium in a second price auction is strictly greater than the revenue at many asymmetric equilibria in the corresponding irrevocable exit auction is provided

reputation and equilibrium characterization in repeated games with conflicting interests a two person game is of conflicting interests if the strategy to which player one would most like to commit herself holds player two down to his minimax payoff suppose there is a positive prior probability that player one is a commitme nt type who will always play this strategy then player one will get a t least her commitment payoff in any nash equilibrium of the repeated game if her discount factor approaches one this result is robust against further perturbations of the informational structure and in striking contrast to the message of the folk theorem for games with incomplete information copyright 1993 by the econometric society

egalitarianism and efficiency in repeated symmetric games abstract we analyze the symmetric equilibria of repeated symmetric games where there is a conflict of interests over equilibria the battle of the sexes or the hawk dove game are key examples if one restricts attention to symmetric equilibria efficient equilibria must be egalitarian for finitely repeated games and generic discount factors there is a unique outcome path which ensures efficiency within the class of symmetric equilibria this is also true for the infinitely repeated games if the players are sufficiently impatient journal of economic literature classification numbers c72 c73

the identity of ecological economics retrospects and prospects the paper first reveals the relevance of ecological economics in the time of a triple crisis ecological social and economic and promotes it as a distinct paradigm comprised of two interconnected and interdependent aspects the qualitative framework within which it operates and the quantitative models and techniques it uses to observe ecosystem resilience measure progress towards sustainability and evaluate policies while acknowledging the progress that has so far been made the paper argues that divergences in understanding the meaning and content of ecological economics hinder its effectiveness and influence on real world policy making and calls for a unified framework as a common ground that would strengthen the field and direct research the implication of this position then follows pointing out what has so far been missing from the ecological economics analysis and what should be done for it to become a more problem oriented and policy relevant alternative copyright oxford university press

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

commercial lending and distance evidence from community reinvestment act data a number of large banking organizations have substantially broadened the distances at which they are willing to extend commercial loans but there is also evidence to suggest that this has occurred primarily at the high side of the distribution of lending distances in this paper we employ a new source of data to examine the relationship between lending decisions and distance between lender and borrower for that part of the distance distribution where arguably most of the competitive interactions among lenders still occur we report three basic findings 1 distance operates as a deterrent to lending even within areas traditionally defined as local markets 2 distance is more of a deterrent for small banks than for larger organizations even within these areas and 3 for those commercial loans made within areas currently treated by regulators as markets distance has not been declining in importance indeed a preponderance of the evidence suggests that it is becoming if anything more of a factor possible explanations and policy implications are discussed

the employment effects of credit market disruptions firm level evidence from the 2008 9 financial crisis this article investigates the effect of bank lending frictions on employment outcomes i construct a new data set that combines information on banking relationships and employment at 2 000 nonfinancial firms during the 2008 9 crisis the article first verifies empirically the importance of banking relationships which imply a cost to borrowers who switch lenders i then use the dispersion in lender health following the lehman crisis as a source of exogenous variation in the availability of credit to borrowers i find that credit matters firms that had precrisis relationships with less healthy lenders had a lower likelihood of obtaining a loan following the lehman bankruptcy paid a higher interest rate if they did borrow and reduced employment by more compared to precrisis clients of healthier lenders consistent with frictions deriving from asymmetric information the effects vary by firm type lender health has an economically and statistically significant effect on employment at small and medium firms but the data cannot reject the hypothesis of no effect at the largest or most transparent firms abstracting from general equilibrium effects i find that the withdrawal of credit accounts for between one third and one half of the employment decline at small and medium firms in the sample in the year

interbank liquidity crunch and the firm credit crunch evidence from the 2007 2009 crisis we study the credit supply effects of the unexpected freeze of the european interbank market using exhaustive portuguese loan level data we find that banks that rely more on interbank borrowing before the crisis decrease their credit supply more during the crisis the credit supply reduction is stronger for firms that are smaller with weaker banking relationships small firms cannot compensate the credit crunch with other sources of debt furthermore the impact of illiquidity on the credit crunch is stronger for less solvent banks finally we find no overall positive effects of central bank liquidity but instead higher hoarding of liquidity

do loan commitments cause overlending i begin with a model that generates quantity credit rationing by banks in the spot credit market when the real interest rate is high and there is an economic downturn then i rationalize a bank loan commitment as partial insurance against such future rationing incorporating uncertainty about both the creditworthiness of borrowers and the abilities of banks to screen borrowers i extend the bank contracting literature wherein i examine banks decisions of whether to lend under the commitments sold earlier i show that this discretion of whether to honor borrowing requests under commitments generates reputational concerns on the part of banks and can lead to an equilibrium in which loan commitments serve their role in increasing credit supply relative to the spot credit market but produce the inefficiency of excessive credit supply when the real interest rate is low and the economy is doing well despite this welfare is higher with loan commitments than with spot credit numerous empirical predictions and policy implications are drawn out

coordination in auctions with entry abstract we examine self enforcing bidder coordination in auctions in which bidding is costly conditions on the distribution of valuations are identified that guarantee multiple equilibria under slightly stronger conditions within the set of sunspot payoffs only those that are convex combinations of payoffs of extreme asymmetric equilibria are interim efficient for the bidders if preplay communication is possible every no communication equilibrium payoff is interim pareto dominated for the bidders by some cheap talk equilibrium payoff when the number of auctions is large communication equilibria exist that yield ex post efficient payoffs for the bidders almost surely journal of economic literatureclassification numbers d44 d82

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

collusion and the choice of auction auctions are used in many different markets including the leasing of a substantial fraction of the natural resources in the united states the procedures used in the auctions conducted by the federal government have been a continuing source of controversy one of the concerns has been the possibility of collusion among bidders this article shows that cartels are stable if the seller uses open ascending bid oral auctions but not if he uses sealed high bid auctions this may help to explain the frequent use of sealed high bid auctions

sequential common value auctions with asymmetrically informed bidders we study an in nitely repeated rst price auction with common values we focus on one sidedincomplete information in which one bidder learns the objects value which itself does not change overtime learning by the uninformed bidder occurs only through observation of the bids the proprietaryinformation is eventually revealed and the seller extracts essentially the entire rent for large discountfactors both players pay offs tend to 0 as the discount factor tends to 1 however the uninformed bidderdoes relatively better than the informed bidder we discuss the case of two sided incomplete informationand argue that under a markovian re nement the outcome is pooling as information is revealed onlyinsofar as it does not affect prices

resale in second price auctions with costly participation abstract we study sealed bid second price auctions with costly participation and resale each bidder chooses to participate in the auction if her valuation is higher than her optimally chosen participation cutoff if resale is not allowed and the bidder valuations are drawn from a strictly convex distribution function the symmetric equilibrium where all bidders use the same cutoff is less efficient than a class of two cutoff asymmetric equilibria existence of these equilibria without resale is sufficient for existence of similarly constructed two cutoff equilibria with resale moreover the equilibria with resale are more asymmetric and under a sufficient condition more efficient than the corresponding equilibria without resale

hybrid auctions revisited abstract we examine hybrid auctions with affiliated private values and risk averse bidders and show that the optimal hybrid auction trades off the benefit of information extraction in the ascending bid phase and the cost of reduced competition in the sealed bid phase

the moderating role of capital on the relationship between bank liquidity creation and failure risk abstract we examine the role of bank capital in moderating the relationship between bank liquidity creation and the failure risk in u s banks over the period of 2003 2014 we find that conditional on bank capital bank liquidity creation is related to bank failure risk negatively the negative relationship is moderated positively i e strengthened by changes in bank capital this finding is consistent with the view that banks may strengthen their solvency through increased capital in response to the illiquidity risk associated with liquidity creation and higher capital enhances the ability of banks to create liquidity the result is robust to different estimation methods and alternative measures of liquidity creation bank failure risk and bank capital further analysis shows that the significant and negative effect is more prominent for small banks and the impact of bank capital was more pronounced during the recent financial crisis of 2007 2009

bidding behavior in asymmetric auctions an experimental study abstract we review an asymmetric auction experiment based on plum int j game theory 20 1992 393 private valuations of the two bidders are independently drawn from distinct but commonly known distributions one of which first order stochastically dominates the other we test the qualitative properties of that model of asymmetric auctions in particular whether the weak bidder behaves more aggressively than the strong and then test bidders preference for first vs second price auctions

how not to run auctions the european 3g telecom auctions abstract there were enormous differences in the revenues from the european third generation 3g or umts mobile phone license auctions from 20 euros per capita in switzerland to 650 euros per capita in the uk though the values of the licenses sold were similar poor auction designs in some countries facilitated collusion between firms and failed to attract entrants the sequencing of the auctions was also crucial we discuss the auctions in the uk netherlands germany italy austria switzerland belgium greece and denmark

reputation and equilibrium selection in games with a patient player a single long run player plays a simultaneous move stage game against a sequence of opponents who play only once but observe all previous play let the stackelberg strategy be the pure strategy to which the long run player would most like to commit himself if there is positive prior probability that the long run player will always play the stackelberg strategy then his payoff in any nash equilibrium exceeds a bound that converges to the stackelberg payoff as his discount factor approaches one when the stage game is not simultaneous move this result must be modified to account for the possibility that distinct strategies of the long run player are observationally equivalent

modeling competitive bidding a critical essay in analyzing bidding modeling matters this paper is a critical analysis of the models available to aid competitive bidding decision making bidding strategy and auction design in real transactions after an introductory overview this paper describes the contexts in which auctions arise reviews the mainstream theory of single isolated auctions and discusses the important work involved in enrichment of this theory in doing so it indicates results that have been obtained and the sort of changes in analytical approach that are needed to tackle other critical enrichments the paper summarizes briefly what is known about the direct use of models by bidders and auction designers a general theme of this paper is that enriched models are needed to bring bidding theory closer to direct applicability in decision making

reputation in multi unit ascending auction with common values this paper considers a multi unit ascending auction with two players and common values a large set of equilibria in this model is not robust to a small reputational perturbation in particular if there is a positive probability that there is a type who always demands many units regardless of price then the model has a unique equilibrium payoff profile if this uncertainty is only on one side then the player who is known to be normal lowers her demand in order to stop the auction immediately at the reserve price hence her possibly committed opponent buys all the units she demands at the lowest possible price if the reputation is on both sides then a war of attrition emerges

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

the benefits of relationship lending in a cross country context a meta analysis relationship lending may create benefits for borrowers by reducing information asymmetries however empirical evidence is mixed we conduct a meta analysis to summarize and explain the heterogeneity in the results in the literature using hand collected information from 101 studies in the united states europe asia and latin america from 1970 to 2010 we find that strong relationships are generally beneficial for borrowers but lending outcomes differ across the relationships dimensions long lasting exclusive and synergy creating bank relationships are associated with higher credit volume and lower loan rates these benefits are more likely in the united states and in countries where bank competition is high they are not related to the importance of small and medium sized enterprises in an economy suggesting that prevalence of relationship lending does not necessarily come along with borrower benefits our inferences are robust when we control for observed systematic heterogeneity in the original

experimental comparisons of auctions under single and multi unit demand i introduction the study of multiple unit auctions is important because of their widespread use and the high value of goods sold examples include auctions of u s treasury debt cut flowers wine foreign exchange and other financial and monetary instruments moreover since auctions are often proposed by economists as a method of sale for other goods as in mcmillan 1994 the use of auctions can be expected to increase in the future many different auction rules are used to sell these diverse commodities and auction rule changes are often suggested usually with the intention of increasing revenue or improving the allocations and thus there is a considerable and increasing number of known auction formats evaluating new or comparing different auction mechanisms using field tests can be very costly and risky however experimental methods can and have been used by economists to study the behavioral characteristics of different auction procedures kagel 1995 provides a recent comprehensive survey most experimental studies consider the behavior of auctions when there is a single unit to be sold a few studies such as cox et al 1984 1985 and mccabe et al 1990 1991 study multiple unit auctions in environments in which each bidder demands at most one object from a set of identical objects being sold the studies of smith 1967 belovicz 1979 miller and plott 1985 and burns 1985 consider multi unit demand environments these are environments in which bidders have demand for multiple identical units and are permitted to purchase multiple units of the commodity sold the extension to multi unit demand is important since the presence of multi unit demand is a characteristic of many auctions in the field including all of the examples above in this study we consider the behavior of two types of multi unit auction under both single unit and multi unit demand we construct a laboratory environment which we use to study an english clock ec which is a special type of english auction and a sealed bid auction with lowest accepted bid pricing sb in the sb each bidder pays a per unit price equal to the lowest accepted bid the ec was chosen because it is known to provide highly efficient allocations in auctions of single unit goods and therefore is likely to be suggested for many field applications the sb was chosen because of its widespread use which makes its outcomes a useful basis of comparison for the outcomes of the english clock auction 1 however we do not attempt to represent a particular field situation here instead since our interest is in understanding the basic properties of the auctions we chose an experimental design that enables us to make simple comparisons across treatments and with previous and possibly future studies the design enables us to perform simple testing of game theoretic models in some of the treatments in our view the difference between single and multi unit demand is critical as we discuss in section ii many of the results of auction theory that are valid in single unit demand environments no longer apply in multi unit demand environments suggesting that the observed behavior of auctions might also differ between the two environments therefore we isolate the effects of multi unit demand by conducting single unit demand experiments under identical market demand and supply conditions as the multi unit demand experiments these and other aspects of the experimental design are described in detail in section iii the results and a discussion are given in sections iv and v respectively ii institutions theory and previous studies the english clock auction this variant of the english auction was modeled by milgrom and weber 1982 and studied by mccabe et al 1990 1991 in our version the auction begins with all bidders publicly and simultaneously announcing their initial quantity demanded at price zero if there is excess demand the price is increased by a small increment and the bidders then announce new quantities demanded

bank size and household financial sentiment surprising evidence from university of michigan surveys of consumers we analyze comparative advantages disadvantages of small and large banks in improving household sentiment regarding financial conditions we match sentiment data from the university of michigan surveys of consumers with local banking market data from 2000 to 2014 surprisingly the evidence suggests that large rather than small banks have significant comparative advantages in boosting household sentiment findings are robust to instrumental variables and other econometric methods additional analyses are consistent with both scale economies and the superior safety of large banks as channels behind the main findings these channels appear to more than offset stronger relationships with and greater trust in small banks

market structure and incomplete information price formation in a real world repeated english auction abstract this paper examines the effect of buyer size on price formation in an english auction of used state police cars while open auctions generally favor competitive pricing bikhchandani 1988 develops a model of a second price common value auction in which bidders can use strategic behavior based on repeated sales to develop an aggressive reputation and as a result pay lower prices in equilibrium the paper tests this hypothesis by examining sales of 340 used automobiles sold at 13 public auctions conditional on the volume of purchases made by the three largest buyers at the auctions the empirical results show that the number of buyers plays a stronger role in price formation than does buyer size

on some myths about sequenced common value auctions abstract equilibria are constructed for classes of game models of sequenced second price auctions having identical common valued objects in some of these the equilibrium price falls on average and in others the seller loses on average by committing to announce publicly something that he knows both of these possibilities are surprises journal of economic literature classification number d44

structural econometric analysis of descending auctions since vickrey s 1961 paper the theory of auctions has considerably expanded particularly over the last decade see e g milgrom 1985 1986 and mcafee and mcmillan 1987 for recent surveys in contrast except for some experimental work only a few empirical studies have attempted to validate the new theoretical auction models using field auction data two approaches have emerged the first has concentrated upon testing some implications of the theory of auctions using reduced form econometric models with observed bids as the explained variables explanatory variables might then be the reservation price the number of potential bidders when observed and some characteristics of the auctioned object examples are hansen 1985 1986 hendricks et al 1987 and hendricks and porter 1988 the second approach which is structural has a long tradition in econometrics starting from the work of the cowles commission this approach is followed in this paper the basic idea is simple and relies upon

relationship lending hierarchical distance and credit tightening evidence from the financial crisis abstract this paper examines the firms credit availability during the 2007 2009 financial crisis using a dataset of 5331 bank firm relationships provided by borrowers credit folders of three italian banks it aims to test whether a strong lender borrower relationship can produce less credit rationing for borrowing firms even during a credit crunch period the results show that exclusivity of the relationship can mitigate the firm credit rationing we also verify the influence of lending organizational structure during crisis a new measure of distance in lending technologies has been introduced the hierarchical distance calculated as the distance between the branch that originates the loan and the location of the hierarchical level responsible for financing decision our findings document a negative impact of distance on credit availability consistent with the idea that proximity facilitates the transmission of soft information

repeated common value auctions with asymmetric bidders abstract this paper considers a first price common value auction with one sided private information among bidders an object is rented each period to the highest bidder without revealing the bids made in previous periods the paper extends single crossing arguments used in static games to show the existence of equilibrium in this repeated auction the model predicts that bidders bid more aggressively in a repeated auction than in a static auction because a higher bid increases the amount of information learned through bidding the aggressive bidding behavior also implies that the per period revenue of the repeated auction is higher than that of the one period counterpart this bidding behavior leads to a theoretical explanation for the winner s curse in repeated auctions in addition the model yields predictions like an increasing wage schedule over time and the institution of a signing bonus that are consistent with labor market observations