the value added of laboratory experiments for the study of institutions and common pool resources abstract this article provides an overview of the effects of communication on experimental studies of behavior and outcomes in common pool resource cpr dilemmas aggregate outcomes in cpr dilemmas without communication approximate predictions of non cooperative game theory but allowing cheap talk results in higher outcomes when exogenous rules are monitored at realistic levels subjects cheat even though following the rule would generate optimal outcomes if given the opportunity experimental subjects will devise their own rule systems and impose sanctions on each other these findings complement field research on more complex resources and communities by confirming the critical importance of communication and endogenous rule formation

community based tradable permits for localized pollution this paper considers the assignment of tradable permits representing property rights of an environmental good to community members who are harmed by pollution generated by firms these community members can in turn sell permits to polluters according to their personal preferences for a special case with a sole household market transactions between the household and polluters achieve an efficient pollution level however for a group of households the decentralized market solution fails to yield social efficiency because of competitive consumption of the environmental goods we design a revenue sharing mechanism akin to unitization under which market transactions also achieve efficient resource allocation importantly in some cases efficiency can be achieved even when regulators are ignorant of the private valuation of the environmental good

the influence of private contractual failure on regulation the case of oil field unitization an analysis of the interdependence between regulation and private contractual failure reveals that the feasible range of regulation is restricted by the same forces that block private agreement the focus of the study is oil field unitization regulation in oklahoma texas and wyoming federal lands from 1948 through 1975 despite large potential gains from unitization private negotiations fail because of lease heterogeneities and information problems regarding lease value estimates in response the federal and state governments have adopted strikingly different policies to encourage unitization with different results only the federal government s regulations are effective because they surmount information problems texas has the least successful regulation the paper argues that the policy differences are due to the political influence of small firms that benefit from nonunitized production 25 references 2 tables

the long term consequences of resource based specialisation using geological variation in oil abundance in the southern us i examine the long term effects of resource based specialisation through economic channels in 1890 oil abundant counties were similar to other nearby counties but after oil was discovered they began to specialise in its production from 1940 90 oil abundance increased local employment per square kilometre especially in mining but also in manufacturing oil abundant counties had higher population growth higher per capita income and better infrastructure 2010 the author s the economic journal 2010 royal economic society

fairness and efficiency in a subjective claims problem abstract in a subjective claims problem agents have conflicting perceptions on what constitutes a fair division of a jointly produced cake in a large scale experimental study involving a three agent subjective claims problem we compare the performance of four mechanisms which use agents reports on fair shares as input and yield a division of the cake or less as output the mechanisms differ with respect to the desirable properties they possess and they are compared in terms of efficiency and perceived allocative and procedural fairness successful in terms of both fairness and efficiency are two mechanisms that explicitly ask for an assessment of the partners fair shares and that do not induce agents to exaggerate their assessment of the own fair share one of the two successful mechanisms does not ask for an assessment of the own fair share while the other punishes overly selfish own claims

bouncing out of the banking system an empirical analysis of involuntary bank account closures using a new database we document the determinants of involuntary consumer bank account closures during 2001 2005 approximately 30 million debit accounts were involuntarily closed for excessive overdrafting we focus on multiple factors to explain this phenomenon household economics and financial decision making ability social capital bank policies and the alternative financial services sector involuntary closures are more frequent in us counties with a larger fraction of single mothers lower education levels lower wealth and higher unemployment closures are higher in communities with high property crime rates and low electoral participation bank policies have an independent relation to closures with counties having more competitive banking markets and more multi market banks experiencing higher closure rates bank structure also seems to affect the speed at which banks adjust their policies to changes in household income finally using both national data and a state level shift in regulation we find evidence that access to payday lending leads to higher rates of involuntary account closure

efficient adaptation in long term contracts take or pay provisions for natural gas to mitigate the inflexibility of long term contracting for natural gas parties will look for terms that minimize the need for costly adjudication while maintaining incentives for appropriate adaptation the authors examine the incident of take or pay provisions in contracts between natural gas producers and pipelines from this perspective they argue that take obligations can be viewed as a mechanism for effecting appropriate incentives for contractual performance and show that efficient breach considerations define an optimal take percentage as a function of characteristics of the transaction these incentives are distorted by regulated price ceilings which cause the adoption of take obligations in excess of optimal levels the findings refute the common perception that take or pay provisions are just an artifact of wellhead price regulation and serve no useful purpose in the absence of regulation 20 references 1 figure 1 table

household risk management and optimal mortgage choice the portfolio of the typical american household is quite unlike the diversie ed portfolio of liquid assets discussed in e nance textbooks the major asset in the portfolio is a house a relatively illiquid asset with an uncertain capital value the value of the house generally exceeds the net worth of the household which e nances its homeownership through a mortgage contract to create a leveraged position in residential real estate other e nancial assets and liabilities are typically far less important than the house and its associated mortgage contract the importance of housing in household wealth is illustrated in figure i this e gure plots the fraction of household assets in housing and in equities against the wealth percentile of the household poor households appear at the left of the e gure and wealthy households at the right data come from the 1989 and 1998 survey of consumer finances the e gure shows that middle class american families from roughly the fortieth to the eightieth percentile of the wealth distribution have more than half their assets in the form of housing even after the expansion of equity ownership during the 1990s equities are of negligible importance for these households 1

contractual responses to the common pool prorationing of crude oil production this paper examines bargaining among firms to mitigate rent dissipation following the major oil discoveries of 1926 35 because of high bargaining costs firms chose prorationing instead of consolidation and unitization and success varied the analysis also shows that prorationing took the form it did because concession such as per well quotas were required to draw in small operations and the quotas led to predictable responses regarding rent dissipation prorationing despite its costs controlled total field production and costs conserved natural reservoir energies and lengthened field life when private agreements failed the parties successfully appealed for state enforcement since similar heterogeneities influnce regulations elsewhere in the economy detailed analysis of bargaining among firms is essential for insight into the emergence of various institutional forms 33 references 3 tables

strategic delay in market entry two firms are contemplating entry into a market that is viable for only one firm in a good state we show that even if each firm receives a signal that perfectly reveals a good state both might strategically delay entry owing to the fear that the other firm might enter in the same period as well we also find the conditions where the informed firm will let the rival firm know about the market s profitability and the two will merge to enter the market we discuss the applications of this model to the oil industry and the generic drug industry jel classification l71 d8

the real costs of credit access evidence from the payday lending market using geographic differences in the availability of payday loans i estimate the real effects of credit access among low income households payday loans are small high interest rate loans that constitute the marginal source of credit for many high risk borrowers i find no evidence that payday loans alleviate economic hardship to the contrary loan access leads to increased difficulty paying mortgage rent and utilities bills the empirical design isolates variation in loan access that is uninfluenced by lenders location decisions and state regulatory decisions two factors that might otherwise correlate with economic hardship measures further analysis of differences in loan availability over time and across income groups rules out a number of alternative explanations for the estimated effects counter to the view that improving credit access facilitates important expenditures the results suggest that for some low income households the debt service burden imposed by borrowing inhibits their ability to pay important bills copyright 2011 oxford university press

the windy commons wind power generation is growing rapidly in the united states doubling nearly every three years since 1998 yet wind is an open access resource and past experiences with open access resources suggest that tragedies of the commons may occur while the engineering literature has focused on turbine siting within a wind farm to maximize profits and minimize interaction effects the economics literature has overlooked interaction effects between windfarms we provide a qualitative framework for measuring wake externalities and use simulation modeling to determine their magnitude we find that a turbine wake externalities and thus losses to downwind sites increase with the square of wind velocity and can be substantial b decentralized ownership across wind farms leads to overcapitalization in upwind sites and undercapitalization in downwind sites relative to sole ownership c when multiple potential patches are considered more land will be used upwind for wind power under decentralized ownership and d numerical simulations suggest that total rents are reduced under decentralized ownership by up to 12 while total power produced increases by approximately 10 under our central parameters decentralized ownership may be preferred to a sole owner depending on the value society places on clean power relative to dirty power

governing a groundwater commons a strategic and laboratory analysis of western water law we examine strategic behavior in groundwater depletion within the setting of state governance of groundwater resources in the american west solving a dynamic common pool resource model for its optimal solution and its subgame perfect equilibrium provides benchmarks for behavior observed in laboratory experiments three forms of legal rules common pool depletion with a rule of capture to establish ownership absolute ownership doctrine entry restrictions prior appropriation doctrine and stock quotas correlative rights doctrinekre examined in terms of their impact on individual strategic behavior in laboratory experiments

natural resource economics under the rule of hotelling abstract natural resource stocks held in situ are physical assets equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere i discuss a number of factors relating to the evolution of extraction costs to the durability of the resource to market structure and to uncertainty that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks the emphasis is put on how those factors can potentially help bridge the gap between the basic hotelling s rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources i also highlight some theoretical and empirical issues that need further attention

who is behavioral cognitive ability and anomalous preferences in this paper we ask whether variation in preference anomalies is related to variation in cognitive ability evidence from a new laboratory study of chilean high school students with similar schooling backgrounds shows that small stakes risk aversion and short run discounting are less common among those with higher standardized test scores the relationship with test scores survives controls for parental education and wealth we find some evidence that elementary school gpa is predictive of preferences measured at the end of high school two laboratory interventions provide suggestive evidence of a possible causal impact of cognitive resources on expressed preferences jel j24 d14 c91

price dispersion in mortgage markets using transaction level data on canadian mortgage contracts we document an increase in the average discount negotiated off the posted price and in rate dispersion our aim is to identify the beneficiaries of discounting and to test whether dispersion is caused by price discrimination the standard explanation for dispersion in credit markets is risk based pricing our contracts are guaranteed by government backed insurance so risk cannot be the main factor we find that lenders set prices that reflect consumer bargaining leverage not just costs the presence of dispersion implies a lack of competition but our results show this to be consumer specific

rent seeking in natural resource quota allocations this paper examines the incentives for rent seeking in the allocation of natural resource quotas to competing user groups by political bodies the political body has discretion in making the allocation and competing user groups rent seek to influence the allocation we investigate ways in which the governmental body can affect the behavior of the players by setting the ground rules for the competition a political body can affect an allocatively pareto efficient outcome by choosing an appropriate default pre rent seeking policy surprisingly an allocatively efficient default policy is unlikely to minimize social costs however winner take all default policies are likely to maximize not minimize rent seeking a competitive post allocation market reduces rent seeking but is not either itself or in combination with an efficient default policy capable of minimizing social costs however forcing winners in political redistributions to fully compensate losers both lowers the rent seeking levels relative to a potential compensation criterion and when used together with an efficient default policy is capable of obtaining the first best solution of an allocatively efficient allocation with zero rent seeking

a dynamic model of cleanup estimating sunk costs in oil and gas production the environmental remediation required to permanently decommission most industrial projects is an expensive irreversible investment real options literature shows that temporary closure has value under uncertainty however even if there is no intention to restart operations there is an incentive to label a closure as temporary to avoid having to remediate ongoing or future environmental externalities i estimate a dynamic discrete choice model of closure under price and quantity uncertainty to evaluate the likelihood of reactivation the model reveals that the option to temporarily close is being widely used to avoid environmental remediation of oil and gas wells in canada

naive diversification strategies in defined contribution saving plans there is a worldwide trend toward defined contribution saving plans and growing interest in privatized social security plans in both environments individuals are given some responsibility to make their own asset allocation decisions raising concerns about how well they do at this task this paper investigates one aspect of the task namely diversification it is shown that some investors follow the 1 n strategy they divide their contributions evenly across the funds offered in the plan consistent with this naive notion of diversification it is found that the proportion invested in stocks depends strongly on the proportion of stock funds in the plan

exploration and development of u s oil and gas fields 1955 2002 we study the exploration and development of oil and gas fields in the u s over the period 1955 2002 we make four contributions to explain the economic evolution of the oil and gas industry during this period first we derive a testable model of the dynamics of competitive oil and gas field exploration and development second we show how to empirically distinguish hotelling scarcity effects from effects due to technological change third we test these hypotheses using statewide panel data of exploration and development drilling we find that the time paths of exploration development and total wells drilled are dominated by hotelling scarcity effects finally we offer an explanation for why fixed costs from exploration can make the contracting equilibrium in the mineral rights market efficient

mitigating contractual hazards unilateral options and contract length in this article we consider the ways in which the desire for efficient low cost adaptation to change influences the tradeoff between the design and duration of long term contractual relationships we examine the distortions in contract terms occasioned by nonprice competition for natural gas in the presence of wellhead price regulation deviations from optimal contract incentives significantly raise the cost of being bound to long term agreements and shorten the duration of contracts the approach we adopt suggests a method for empirically assessing the efficiency of alternative contracting practices and legal standards

why does the law of one price fail an experiment on index mutual funds we conduct an experiment to evaluate why individuals invest in high fee index funds in our experiments subjects allocate 10 000 across four s p 500 index funds and are rewarded for their portfolio s subsequent return subjects overwhelmingly fail to minimize fees we can reject the hypothesis that subjects buy high fee index funds because of bundled non portfolio services search costs for fees matter but even when we eliminate these costs fees are not minimized instead subjects place high weight on annualized returns since inception fees paid decrease with financial literacy interestingly subjects who choose high fee funds sense they are making a mistake

payday loan choices and consequences high cost consumer credit has proliferated in the past two decades raising regulatory scrutiny we match administrative data from a payday lender with nationally representative credit bureau files to examine the choices of payday loan applicants and assess whether payday loans help or harm borrowers we find consumers apply for payday loans when they have limited access to mainstream credit in addition the weakness of payday applicants credit histories is severe and longstanding based on regression discontinuity estimates we show that the effects of payday borrowing on credit scores and other measures of financial well being are close to zero we test the robustness of these null effects to many factors including features of the local market structure

divide and conquer multiple leasing in common pool oil fields a theoretic model is developed to analyse strategic leasing behaviours of u s landowners in a non exclusively owned common oil pool oil field development is modelled as a simultaneous move two stage non cooperative game the landowners choose leasing strategies in the first stage independent lease operators choose extraction strategies in the second ownership structure is distinguished from operation structure and their relationship analyzed it is shown that in a non exclusively owned oil field it is individually rational for a landowner to subdivide his landholding and delegate production rights to multiple inde pendent firms although more dispersed production control leads to heavier common pool

partial enclosure of the commons abstract we examine the efficiency distributional and environmental consequences of assigning spatial property rights to part of a spatially connected natural resource while the remainder is competed for by an open access fringe we refer to this as partial enclosure of the commons we obtain sharp analytical results regarding partial enclosure of the commons including 1 while second best it typically improves welfare relative to no property rights 2 all resource users can be made better off 3 positive rents arise in the open access area and 4 the resource maintains higher stocks under spatial heterogeneity we also characterize spatial regions that are ideal candidates for partial enclosure typically society should seek to enclose those patches with high environmental productivity and high self retention but whether high economic productivity promotes or relegates a patch may depend on one s objective

analyzing collective action collective action problems pervade all societies as well as ecological systems used by humans substantial evidence has accrued during the last several decades that human actors are able to solve some but definitely not all collective action problems on their own without external rules and enforcement imposed from the outside in this article i review some of the structural variables that have been found to affect the likelihood of collective action then i address the need to base future work on collective action on a more general theory of human behavior than has been used to model collective action over the last five decades in the last section i discuss how structural variables affect the core relationships of reputation trust and reciprocity as these affect levels of cooperation

shrouded attributes consumer myopia and information suppression in competitive markets bayesian consumers infer that hidden add on prices e g the cost of ink for a printer are likely to be high prices if consumers are bayesian firms will not shroud information in equilibrium however shrouding may occur in an economy with some myopic or unaware consumers such shrouding creates an inefficiency which firms may have an incentive to eliminate by educating their competitors customers however if add ons have close substitutes a curse of debiasing arises and firms will not be able to profitably debias consumers by unshrouding add ons in equilibrium two kinds of exploitation coexist optimizing firms exploit myopic consumers through marketing schemes that shroud high priced add ons in turn sophisticated consumers exploit these marketing schemes it is not possible to profitably drive away the business of sophisticates it is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms we show that informational shrouding flourishes even in highly competitive markets even in markets with costless advertising and even when the shrouding generates allocational inefficiencies

addressing global environmental externalities transaction costs considerations is there a way to understand why some global environmental externalities are addressed effectively whereas others are not the transaction costs of defining the property rights to mitigation benefits and costs is a useful framework for such analysis this approach views international cooperation as a contractual process among country leaders to assign those property rights leaders cooperate when it serves domestic interests to do so the demand for property rights comes from those who value and stand to gain from multilateral action property rights are supplied by international agreements that specify resource access and use assign costs and benefits including outlining the size and duration of compensating transfer payments and determining who will pay and who will receive them four factors raise the transaction costs of assigning property rights i scientific uncertainty regarding mitigation benefits and costs ii varying preferences and perceptions across heterogeneous populations iii asymmetric information and iv the extent of compliance and new entry these factors are used to examine the role of transaction costs in the establishment and allocation of property rights to provide globally valued national parks implement the convention on the international trade in endangered species of wild fauna and flora execute the montreal protocol to manage emissions that damage the stratospheric ozone layer set limits on harvest of highly migratory ocean fish stocks and control greenhouse gas emissions jel d23 p14 q22 q51 q54 q58

interindustry part time and full time wage differentials regional and national analysis this paper provides more evidence that the wage differential is far smaller than is suggested by simple comparison of gross wages of full time and part time workers it is noted that to obtain a more reasonable measure of the full time and part time wage differential it is necessary to adjust for differences in workers characteristics labour market conditions and sample selection it is found that in general full time and part time workers exhibit different personal characteristics in particular full time workers possess more human capital and experience than part timers also labour market conditions such as unions and pension plans favour full timers these differences may partly account for the wage disparity between full time and part time workers it was noted that the nonrandomness of the workers into full time and part time jobs influences the wage determination of both full time and part time workers the results indicate that the adjustment of the wage equations to reflect the above menti

contracting for environmental property rights the case of vittel based on a real case of contracting for environmental property rights we explore several implications of coase s insights the case study adds empirical content to basic transaction costs concepts by analysing the design and implementation of a contractual arrangement between a pollutee a bottler of mineral water and several polluting farmers we analyse the bargaining between the two parties to determine how transaction cost issues valuation disputes bilateral monopoly conditions and third party effects were overcome and how they succeeded in contracting for environmental property rights we compare the vittel case with other similar cases to draw lessons for environmental rights negotiations

individual account investment options and portfolio choice behavioral lessons from 401 k plans abstract this paper examines how the menu of investment options made available to workers in defined contribution plans influences portfolio choice using unique panel data of 401 k plans in the u s we present three principle findings first we show that the share of investment options in a particular asset class i e company stock equities fixed income and balanced funds has a significant effect on aggregate participant portfolio allocations across these asset classes second we document that the vast majority of the new funds added to 401 k plans are high cost actively managed equity funds as opposed to lower cost equity index funds third because the average share of assets invested in low cost equity index funds declines with an increase in the number of options average portfolio expenses increase and average portfolio performance is thus depressed all of these findings are obtained from a panel data set enabling us to control for heterogeneity in the investment preferences of workers across firms and across time

what the stock market decline means for the financial security and retirement choices of the near retirement population this paper investigates the effect of the current recession on the retirement age population data from the health and retirement study suggest that those approaching retirement age early boomers ages 53 to 58 in 2006 have only 15 2 percent of their wealth in stocks held directly or in defined contribution plans or iras their vulnerability to a stock market decline is limited by the high value of their social security wealth which represents over a quarter of the total household wealth of the early boomers in addition their defined contribution plans remain immature so their defined benefit plans represent sixty five percent of their pension wealth simulations with a structural retirement model suggest the stock market decline will lead the early boomers to postpone their retirement by only 1 5 months on average health and retirement study data also show that those approaching retirement are not likely to be greatly or immediately affected by the decline in housing prices we end with a discussion of important difficulties facing those who would use labor market policies to increase the employment of older workers

pensions and household wealth accumulation abstract economists have long suggested that higher private pension benefits crowd out other sources of household wealth accumulation we exploit detailed information on pensions and lifetime earnings for older workers in the 1992 wave of the health and retirement study and employ an instrumental variable iv identification strategy to estimate crowd out the iv estimates suggest statistically significant crowd out each dollar of pension wealth is associated with a 53 67 cent decline in nonpension wealth with less precision we use an instrumental variable quantile regression estimator and find that most of the effect is concentrated in the upper quantiles of the wealth distribution

mental accounting in portfolio choice evidence from a flypaper effect this paper documents a lack of coordination between the asset allocations of different financial accounts in a household portfolio our findings are predicted by the theory of mental accounting richard h thaler 1985 1990 1999 agents sometimes make decisions about individual accounts in their portfolio without considering their other accounts the setting for our analysis is a large u s firm when an employee at this firm makes a 401 k contribution the company makes a matching contribution proportional to the employee s contribution up to a match threshold in march 2003 the firm changed its 401 k matching rules creating a natural experiment both before and after the rule change the initial allocation of participants own contribution flows was determined by the participants 1 the change in march 2003 was to the policy determining the initial asset allocation of the employer match contributions in the first regime before march 2003 the firm directed matching contribution flows entirely into employer stock this was not a binding restriction as participants could freely reallocate their match balances after matching contributions were made although in practice participants rarely did so in march 2003 the company changed its match policy requiring new enrollees to actively choose the asset allocation for both their own and match contribution flows the change between these regimes was economically neutral any allocation of balances in one regime could be replicated in the other nevertheless allocations to employer stock differed vastly across the two regimes employees who enrolled in february 2003 just before the regime change allocated 23 of their own contribution flows to employer stock since all of their match contributions were directed into employer stock this resulted in a 56 total 401 k allocation to employer stock combining the own contribution and match contribution accounts few of these february enrollees made subsequent trades to reduce their employer stock balances in either account employees who enrolled in march 2003 right after the change allocated 23 of their total own plus match contribution flows to employer stock notice that own contribution allocations to employer stock in the first regime precisely match the combined allocation of own and match contributions in the second regime 23 in both cases even though combined allocations differ greatly across the regimes these results imply that each dollar of employer stock contributed to enrollees through the match in the first regime increased the employees total holdings of employer stock by a full dollar rather than being offset by reduced employer stock holdings elsewhere or being sold off directly in other words money sticks where it hits a phrase attributed to arthur okun generating an asset allocation flypaper effect that is akin to the flypaper effects of public finance corporate finance and intra household consumption 2 after considering several explanations for the asset allocation flypaper effect we conclude that it is due in part to mental accounting our results can be explained by the following simple model in the first regime new enrollees actively allocated only their own contribution flows effectively ignoring the fact that their matching contributions were entirely directed into employer stock in the second regime the match allocation became salient because new enrollees were required to choose both their match and own contribution allocations during the enrollment process this caused enrollees to consider their entire 401 k portfolio instead of just their own contribution accounts as a result the fraction of total contributions allocated to employer stock under the second regime equaled the fraction of own contribution flows allocated to employer stock under the first regime the average participant allocated roughly one quarter of assets to employer stock in whatever accounts were salient whether the set of salient accounts was narrow regime one or broad regime two the dependence of portfolio outcomes on account salience is inconsistent with investors having a clear target asset allocation for their entire portfolio which they efficiently implement through their investment choices in accordance with much prior research we also find that investors are quite passive rarely reallocating their portfolios 3 however our central finding concerns asset allocation decisions made at enrollment a point when people have overcome their passivity and are taking action investor passivity thus cannot account for the unresponsiveness of own contribution allocations to the match allocation at enrollment under the first regime although passivity helps explain why these initial decisions are rarely reversed subsequently

accounting for heterogeneous private risks in the provision of collective goods controversial compulsory contracting institutions in horizontal hydrofracturing abstract common pool resources are frequently analyzed with a simple template the problem is the tragedy of the commons and the solution is political institutions thus the tragedy of the commons is resolved by governing the commons in this paper we argue that there is also the possibility of a tragedy of governing the commons if political institutions lock participants into a certain pattern of resource use and then there is an exogenous shock say a technological change that increases the risks to one group then the situation may no longer be a classic common pool situation and institutions may actually exacerbate rather than ameliorate distributional conflict we develop a general model showing that whenever there is heterogeneity in private risks some technological innovation could potentially turn a previously stable institution into a source of conflict we take the compelling recent example of horizontal hydrofracturing changing the welfare implications of the institution of compulsory pooling and use a new individual level dataset of landowners affected by compulsory pooling in new york to demonstrate the empirical support for our model

forced sales and house prices the market for housing differs in several important ways from the textbook model of a liquid asset market with exogenous fundamentals this implies that the price at which a house is sold can be influenced not only by general supply and demand conditions but also by idiosyncratic factors including the urgency of the sale and the effects of the ownership transfer on the physical quality of the house first houses are productive only when people are living in them owning an empty house is equivalent to throwing away the dividend on a financial asset second houses are fragile assets that need maintenance and are vulnerable to van dalism unoccupied houses are particularly vulnerable and expensive to protect third short term rental contracts involve high transactions costs resulting from the moving costs of renters and the need of homeowners to protect their property against damage fourth houses are expensive indivisible and heterogeneous assets each house has certain unique characteristics which are likely to appeal to certain poten tial buyers and not to others so selling a house requires matching it with an appro priate buyer because of the high costs of intermediation in housing this task is normally undertaken by a real estate broker rather than a dealer fifth most home owners must finance their purchases using mortgages collateralized debt contracts that transfer home ownership to the mortgage lender through a foreclosure process if the homeowner defaults the expansion of mortgage credit in the early 2000s and the recent decline in house prices have led to an unprecedented increase in foreclosures since 2006 foreclosures transfer houses to financial institutions which must maintain and pro tect them until they can be sold foreclosed houses are likely to sell at low prices both because they may have been physically damaged during the foreclosure pro cess and because financial institutions have an incentive to sell them quickly in a liquid market an asset can be sold rapidly with a minimal impact on its price but

an institutional theory of hydraulic fracturing policy the use of high volume horizontal hydraulic fracturing fracking has increased substantially over the past five years in the united states use of this drilling technology to extract natural gas from hitherto impermeable shale is expected to increase even more in coming decades two institutions integration contracts and well spacing requirements evolved to mitigate the common pool economic wastes associated with conventional oil and gas drilling u s regulators have applied these institutions to fracking however shale plays differ geologically from conventional plays and are subject to different extractive technologies we theorize that the point source pollution characteristics of conventional drilling allowed integration contracts and well space requirements to minimize local negative environmental externalities as an unintended byproduct of minimizing common pool economic wastes the non point source pollution characteristics of fracking however make these institutions insufficient to minimize negative environmental externalities associated with drilling in shale plays because the economic waste problem is different if policymakers understand the crucial differences between conventional oil and gas plays and shale plays and the drilling technologies applied to them they should be better equipped to craft fracking regulatory policies that internalize problematic externalities

labour s record on financial regulation in 1997 the new labour government launched major initiatives in the area of financial regulation setting up the financial services authority as a comprehensive regulatory body supported by the legislative framework of the financial services and markets act 2000 we evaluate the labour government s record on financial regulation in terms of its achievements and failures especially in dealing with the global financial crisis that started in 2007 while we identify some clear flaws in regulatory design and enforcement our evaluation highlights some inherent difficulties of financial regulation

economies of scale in a multiplant technology evidence from the oilpatch a unique micro data set detailing operating costs and technical characteristics of 133 texas oil leases was used to estimate an econometric cost function yielding a number of interesting findings first evidence of economies of scale in crude extraction implies additional gains from oil field unitization and helps explain the paradox that voluntary unitization often occurs in the later stages of a field s life second marginal operating costs per well were found to be about 30 percent below average costs explaining why many wells remain operational despite falling crude oil prices finally the results confirmed a number of plausible technical relationships for example operating costs rise sharply with depth explaining the existence of shallow low production stripper wells

claimholder incentive conflicts in reorganization the role of bankruptcy law when a firm is financial distress in most cases a set of mutually advantageous reorganization plans exist this article shows that the bankruptcy code by providing rules governing the negotiation process yields a unique solution to the reorganization process in addition the structure imposed by the code mitigates the holdout problem created by the individual claimant s divergent incentives article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the opportunity for conspiracy in restraint of trade an experimental study a study is a limited exploration into the relationship between the opportunity for conspiracy in restraint of trade and the resulting market performance laboratory experimental methods are applied to separate competing theories the competitive model predicts well relative to cartel models nevertheless when measurements are taken relative to the performance of markets where conspiracies are not possible the effects of attempted conspiracies can be determined

the dynamic efficiency costs of common pool resource exploitation we conduct the first empirical investigation of common pool resource users dynamic and strategic behavior at the micro level using real world data fishermen s strategies in a fully dynamic game account for latent resource dynamics and other players actions revealing the profit structure of the fishery we compare the fishermen s actual and socially optimal exploitation paths under a time specific vessel allocation policy and find a sizable dynamic externality individual fishermen respond to other users by exerting effort above the optimal level early in the season congestion is costly instantaneously but is beneficial in the long run because it partially offsets dynamic inefficiencies jel d24 q21 q22

consumer financial protection the recent financial crisis has led many to question how well businesses deliver services and how well regulatory institutions address problems in consumer financial markets this paper discusses consumer financial regulation emphasizing the full range of arguments for regulation that derive from market failure and from limited consumer rationality in financial decision making we present three case studies of mortgage markets payday lending and financing retirement consumption to illustrate the need for and limits of regulation we argue that if regulation is to be beneficial it must be tailored to specific problems and must be accompanied by research to measure the effectiveness of regulatory interventions

transactions costs and the efficient organization of production a study of timber harvesting contracts a transaction costs framework is developed to explain the choice between lump sum and per unit payment provisions in private timber harvesting contracts predictions about which contract type minimizes the transaction costs of presale measurement and contract enforcement and monitoring are derived and tested using private timber sales contracts from north carolina the empirical results provide strong support for the transaction costs approach and also reject several predictions from a risk based model the transaction costs framework also provides insights into the choice between negotiated and competitive sales procedures

private storage of common property abstract many resources extracted under the rule of capture are not utilized immediately but are stored instead for later use oil is stockpiled fish are frozen groundwater is bottled rivers are dammed land deforested as the way to establish title remains uncultivated we examine the positive and normative effects of such storage privatization of common property through storage may eliminate inefficiencies altogether but the accelerated extraction it induces may also exacerbate them even if rapid extraction does not reduce ultimate recovery once storage commences extraction accelerates until the open access reserves are drained in limiting cases these speculative acquisitions are instantaneous the naturally occurring analogue of policy induced speculative attacks studied in the international finance literature when some reserves are privately owned while others are open access the order of extraction no longer follows the progression from lowest to highest per unit cost first noted by o c herfindahl in extractive resources and taxation m gaffney ed univ of wisconsin press madism 1997 instead the common property may be extracted in its entirety before any private reserves are extracted even if it has the higher per unit extraction cost

product differentiation search costs and competition in the mutual fund industry a case study of s p 500 index funds we investigate the role that non portfolio fund differentiation and information search frictions play in creating two salient features of the mutual fund industry the large number of funds and the sizeable dispersion in fund fees in a case study we find that despite the financial homogeneity of s p 500 index funds this sector exhibits the fund proliferation and fee dispersion observed in the broader industry we show how extra portfolio mechanisms explain these features these mechanisms also suggest an explanation for the puzzling late 1990s shift in sector assets to more expensive and often newly entered funds an influx of highinformation cost novice investors

contracting problems and regulation the case of the fishery the inefficiencies of common property fisheries are of continuing concern to economists the early work by scott gordon 1954 and anthony scott 1955 outlined the problem and later studies by james crutchfield and giulio pontecorvo 1969 and frederick bell 1972 provided empirical estimates of the losses that result those studies were followed by the dynamic models of colin clark 1976 and james quirk and vernon smith 1970 of optimal harvest rates and the use of corrective taxes or quotas to achieve them but in spite of a large and growing literature and the persuasiveness of the outlined efficiency criteria most fisheries retain common property aspects with overcapitalization and excessive labor input why those conditions persist and the failure of the regulatory response to them are the issues addressed in this paper we examine a number of fisheries but focus on the texas shrimp industry which is one of the nation s most valuable fisheries for a single species and which shares the common property characteristics observed elsewhere it is considered overcapitalized and catch per unit of effort is falling 2 examination of the fishery reveals the many margins along which rent dissipation occurs and the nature of the regulations necessary for controlling fishing effort to avoid those losses the regulatory environment in texas is complicated by conflict within the fishery between inshore and offshore fishermen the latter assert that bay shrimping reduces the number of shrimp that successfully migrate to the gulf the inshore fishery is highlighted by another issue the recent resettlement of some 30 45 000 vietnamese refugees including many fishermen along the texas coast marine advisory service paul starr their entry has been met by hostility and violence from existing shrimpers who recognize that they are in an environment characterized by the absence of property rights bay shrimpers have lobbied the texas legislature for broad limits on new entrants yet ironically the sale of additional boats by individual shrimpers to the vietnamese has facilitated entry of the refugees into the fishery regulations in the texas shrimp and other fisheries are incomplete leaving many options for rent dissipation uncontrolled because of high contracting costs among fishermen and political factors that mold government actions contracting costs are high among heterogeneous fishermen who vary principally with regard to fishing skill 3 montana state university and texas a m university respectively we benefitted from comments by terry anderson raymond c battalio gardner brown oscar burt micha gisser wade griffin john r moroney anthony d scott peter temin and participants in workshops at texas a m university and the university of washington research assistance was provided by scott barnhart and phil mizzi funding was provided by sea grant texas a m university throughout this paper we use the terms common property and open access interchangeably here the terms describe a situation where no property rights group or individual exist s for the resource 2catch per unit of effort in the inshore texas gulf and federal gulf waters is presented for 1963 77 by w l griffin c g tydlacka and w e grant they show catch per unit of effort generally falling in inshore and offshore waters while catch per unit of effort fluctuates from year to year it falls from approximately 360 kg shrimp per unit of effort to 220 kg from 1963 to 1977 the common property nature of the fishery is reflected in the following statistics since 1975 the number of vessels has grown by 23 percent nelson swartz for fish houses the record of entry is similar between 1970 a d 1977 the number of firms grew from 259 to 287 though during that period many left the industry as others entered the number of fish houses was calculated from license data supplied by the texas parks and wildlife department the record of entry by fish houses suggests that monopsony as discussed by colin clark and gordon munro is absent in the fishery 3there may be minor differences in labor leisure choices and capital but our statistical evidence and discussions with fishermen indicate that catch variations are largely due to skill government regulations in the texas bays restrict capital and our empirical evidence shows boats to be relatively homogeneous

international telecom settlements gaming incentives carrier alliances and pareto superior reform liberalized countries that allow competition in international telecommunications favor traffic re routing practices as arbitrage against foreign monopolists this view is seriously incomplete monopolists allied with carriers in liberalized countries can use these practices to reduce termination payments to nonalliance carriers thereby harming also consumers in liberalized countries by gaming regulations that require equal termination rates at both ends and proportional return the monopolist s traffic is allocated among carriers in proportion to their shares of traffic to its country we also present a simple bilateral settlements reform that eliminates gaming incentives and other proportional return distortions yet benefits both countries

100 bills on the sidewalk suboptimal investment in 401 k plans we identify employees at seven companies whose 401 k investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty free 401 k withdrawals for any reason because they are older than 59 at the average firm 36 of match eligible employees over 59 forego arbitrage profits that average 1 6 of their annual pay or 507 a survey educating employees about the free lunch they are foregoing raised contribution rates by a statistically insignificant 0 67 percent of income among those completing the survey

strategic decision making with information and extraction externalities a structural model of the multistage investment timing game in offshore petroleum production when individual petroleum producing firms make their exploration and development investment timing decisions positive information externalities and negative extraction externalities may lead them to interact strategically with their neighbors this paper examines whether these inefficient strategic interactions take place by estimating a structural econometric model of the firms multi stage investment timing game results show that firms interact strategically on small tracts but not on large tracts for small tracts having a neighboring tract explored reduces real profits by about 26 million while having a neighboring tract developed raises real profits by about 3 5 million

spatial externalities and the common pool resource mechanism abstract this paper expands the common pool resource cpr game of walker et al 1990 to incorporate spatial structure with two spatially linked common pool resources subjects participated in a five player common pool resource game under three alternative spatial structures non spatial bi directional and uni directional linkages within the experiment results indicate that behavior in the uni directional cpr game yielded the highest average yields whereas those in the bi directional game were lower than in the non spatial game furthermore investment patterns in the uni directional game were proportionally lower in the sink cpr than those in the source cpr this behavior is consistent with the individual incentives of the game and highlights the importance of understanding the spatial structure present within our natural resources

energy and depletable resources economics and policy 1973 1998 abstract this paper reviews the impact of the literature in depletable resources and energy economics over the period 1973 1998 particularly the initial period of publication of the journal of environmental economics and management 1974 1998 a discussion of prominent policy issues in this arena is provided along with an indication of what academic economics papers have contributed to that debate this is followed by a citation analysis of contributions in the fields of energy and exhaustible resource economics for each of these two fields a list of the top papers in each five year period from 1974 to 1998 is presented along with a list of the top journals in each decade based on average citations per article the top ten cited articles in the fields in the journal of environmental economics and management are also presented

optimal defaults and active decisions defaults often have a large influence on consumer decisions we identify an overlooked but practical alternative to defaults requiring individuals to make an explicit choice for themselves we study such active decisions in the context of 401 k saving we find that compelling new hires to make active decisions about 401 k enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt in enrollment procedure producing a savings distribution three months after hire that would take 30 months to achieve under standard enrollment we also present a model of 401 k enrollment and derive conditions under which the optimal enrollment regime is automatic enrollment i e default enrollment standard enrollment i e default non enrollment or active decisions i e no default and compulsory choice active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences are highly heterogeneous financial illiteracy however favors default enrollment over active decision enrollment