multidimensional mechanism design for auctions with externalities abstract in an auction with externalities a buyer s type is multidimensional and specifies the payoff he would get for each of the n 1 possible outcomes the seller keeps the object or buyer i i 1 n gets the object we provide a characterization of multidimensional incentive compatible mechanisms similar to that for one dimensional mechanisms although reservation utilities are endogenous and type dependent the participation constraint is binding for only one critical type a main difficulty in a multidimensional setting is the integrability condition we present a geometric characterization for discontinuous conservative vector fields in auctions where the buyers submit scalar bids and the seller transfers the object to one of the buyers for sure a second price auction maximizes revenue with two buyers this auction remains optimal even if the seller can set a reservation price journal of economic literature classification numbers c7 c72

how not to sell nuclear weapons we consider situations where a sale affects the ensuing interaction between potential buyers these situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity dependent externality we construct a revenue maximizing auction for the seller we observe that 1 outside options and participation constraints are endogenous 2 the seller extracts surplus also from agents who do not obtain the auctioned object 3 the seller is better off by not selling at all while obtaining some payments if externalities are much larger than valuations

nonfarm income diversification and household livelihood strategies in rural africa concepts dynamics and policy implications abstract asset activity and income diversification lie at the heart of livelihood strategies in rural africa this paper introduces a special issue on the topic income diversification and livelihoods in rural africa cause and consequence of change we concentrate on core conceptual issues that bedevil the literature on rural income diversification and the policy implications of the empirical evidence presented in this special issue

gold digging careers in rural east africa small scale miners livelihood choices rural livelihood studies over the past two decades have stressed directional movement away from smallholder agriculture and the diffuse ad hoc uncertain and low earning character of most rural non agricultural income diversification based on a recent survey of small scale mining in tanzania this article documents the higher risks greater potential earnings more elaborate division of labor and career trajectory of miners tracing cohort entry groups indicates that those willing to withstand the hardships of moving from one gold strike to another and time commitment to a career considered dangerous and alienated from agrarian traditions of the tanzanian countryside may be materially rewarded for their efforts

how do firms form their expectations new survey evidence author s coibion o gorodnichenko y kumar s abstract 2018 american economic association all rights reserved we survey new zealand firms and document novel facts about their macroeconomic beliefs there is widespread dispersion in beliefs about past and future macroeconomic conditions especially inflation this dispersion in beliefs is consistent with firms incentives to collect and process information using experimental methods we find that firms update their beliefs in a bayesian manner when presented with new information about the economy and that changes in their beliefs affect their decisions inflation is not generally perceived as being important to business decisions so firms devote few resources to collecting and processing information about inflation

inflation expectations and consumer spending at the zero bound micro evidence i introduction many theoretical studies suggest that policy makers can generate greater current spending by making people believe in higher future inflation when nominal interest rates are stuck at the zero lower bound zlb krugman 1998 using a simple two period model and with japan s low interest rate environment in the 1990s in mind was the first to show that a central bank s commitment to high inflation is effective eggertsson and woodford 2003 show that this proposition is relevant even in a standard dynamic stochastic general equilibrium dsge model more recently with many central banks such as the federal reserve starting to face the zlb and to cope with weak economic demand many policy proposals have been made based on the perception that an increase in expected inflation is a good thing to stimulate economic activity 1 the logic for these suggestions is based on the fisher equation and the intertemporal substitution effect if nominal interest rates are fixed higher inflation expectations lead to lower real interest rates creating an incentive to spend now rather than in the future however according to basic economic theory lower real interest rates may suppress current spending if adverse forces such as the income effect dominate the intertemporal substitution effect thus the consequences of low real interest rates are an empirical matter therefore the question arises why standard dsge models somewhat confidently suggest that the substitution effect dominates other effects a large number of empirical studies which typically use vector autoregression var models show that if central banks unexpectedly reduce nominal short term interest rates or if a negative monetary shock occurs spending is stimulated standard dsge models are constructed to match such findings for example christiano eichenbaum and evans 2005 show that their dsge model can replicate the var estimates of impulse responses following a monetary policy shock in such models given that prices and thus expected inflation are sticky a lower nominal interest rate leads to a lower real interest rate which generates greater current spending based on the implicit assumption that the intertemporal substitution effect dominates other adverse effects several studies including eggertsson and woodford 2003 incorporate the zlb into such dsge models and suggest that even the expectation of a modest inflationary boom in the future has a dramatic effect on current spending by lowering real interest rates however as mentioned above the justification of standard dsge models largely depends on empirical results about the effects of changes in nominal interest rates rather than changes in expected inflation and these results are obtained using the data of major industrialized countries that did not face the zlb constraint until very recently in fact there are only few studies that directly examine the effects of inflation expectations on consumer spending using data in a zlb environment bachmann berg and sims 2014 examine this issue using the micro data from the michigan survey of consumers conducted in the united states the michigan survey collects repeated cross sectional data on quantitative measures of expected inflation as well as qualitative measures of readiness to spend namely responses to questions about whether now is a good or bad time to buy durable goods the data are available at a monthly frequency and cover the period from january 1984 to december 2012 bachmann berg and sims 2014 regard the period from december 2008 onward as the zlb period the estimation result of their baseline ordered probit model is the opposite of the prediction of standard theoretical models the impact of expected inflation on the readiness to spend on durables is negative and statistically significant although small in absolute value at the zlb they then consider several potential explanations underlying these results including nominal money illusion that is households understand how nominal interest rates impact the intertemporal relative prices between spending now and spending in the future but they may not understand how inflation expectations do

aid with blinkers environmental governance of uranium mining in niger summary the role of development cooperation in fostering improved environmental governance of extractive industries in african countries exposed to the expanding global uranium frontier remains ambiguous with primary data this paper demonstrates how foreign aid to niger has ignored grievances on grave environmental impacts and rampant institutional failures while a crisis discourse on desertification and food insecurity diverts attention from geopolitical interests in mineral wealth we argue that aid delivery remains insufficient to address structural deficiencies cemented by decades of investment friendly politics of mining and conclude that domestic reforms must be backed by stronger transnational accountability mechanisms to overcome corporate impunity

indicative bidding an experimental analysis indicative bidding is a practice commonly used in sales of complex and very expensive assets theoretical analysis shows that efficient entry is not guaranteed under indicative bidding since there is no equilibrium in which more qualified bidders are more likely to be selected for the final sale furthermore there exist alternative bid procedures that in theory at least guarantee 100 efficiency and higher revenue for the seller we employ experiments to compare actual performance between indicative bidding and one of these alternative procedures the data shows that indicative bidding performs as well as the alternative procedure in terms of entry efficiency while having other characteristics that favor it over the alternative procedure our results provide an explanation for the widespread use of indicative bidding despite the potential problem identified in the equilibrium analysis

inflation expectations and firm decisions new causal evidence author s coibion o gorodnichenko y ropele t abstract 2019 the author s we use a unique design feature of a survey of italian firms to study the causal effect of inflation expectations on firms economic decisions in the survey a randomly chosen subset of firms is repeatedly treated with information about recent inflation whereas other firms are not this information treatment generates exogenous variation in inflation expectations we find that higher inflation expectations on the part of firms leads them to raise their prices increase demand for credit and reduce their employment and capital however when policy rates are constrained by the effective lower bound demand effects are stronger leading firms to raise their prices more and no longer reduce their employment

entry by takeover auctions vs bilateral negotiations firms often enter new markets by taking over an incumbent we analyze a potential entrant s choice of target under two exogenously given takeover mechanisms i auctions where other incumbents can bid for the target against the entrant and ii bilateral negotiations between the entrant and the target the entrant s choice of target depends on the mechanism and it may not maximize its ex post profit nor consumer welfare in an auction the entrant pays a higher price to take over a target with higher synergies because these impose stronger negative externalities on incumbents and increase their willingness to pay for preventing entry auctions increase the price obtained by the target but reduce welfare compared to negotiations because they may discourage the entrant from acquiring a target with higher synergies

the scramble in africa reorienting rural livelihoods abstract structural adjustment and market liberalization policies of the past 15 years have accelerated deagrarianization in sub saharan africa peasant producers have veered away from production of traditional export crops and commercial staple foods in rural areas remote from roads and urban markets nonagricultural income diversification has been substituted in the search for much needed cash earnings citing recent village survey evidence this paper argues that the economic restructuring of african smallholders work lives has been accompanied by deep rooted social change divisions of labor and decision making power within peasant households have altered and wealth differentiation between households has deepened depeasantization of the countryside is currently taking place as rural household members of both genders scramble for viable livelihoods

paralyzed by fear rigid and discrete pricing under demand uncertainty we propose a new theory of price rigidity based on firms knightian uncertainty about their competitive environment this uncertainty has two key implications first firms learn about the shape of their demand function from past observations of quantities sold this learning gives rise to kinks in the expected profit function at previously observed prices making those prices both sticky and more likely to reoccur second uncertainty about the relationship between aggregate and industry level inflation generates nominal rigidity we prove the main insights analytically and quantify the effects of our mechanism our estimated quantitative model is consistent with a wide range of micro level pricing facts that are typically challenging to match jointly it also implies significantly more persistent monetary non neutrality than in standard models allowing it to generate large real effects from nominal shocks

inflation expectations as a policy tool abstract we assess the prospects for central banks using inflation expectations as a policy tool for stabilization purposes we review recent work on how expectations of agents are formed and how they affect their economic decisions empirical evidence suggests that inflation expectations of households and firms affect their actions but the underlying mechanisms remain unclear especially for firms two additional limitations prevent policy makers from being able to actively manage inflation expectations first available surveys of firms expectations are systematically deficient which can only be addressed through the creation of large nationally representative surveys of firms second neither households nor firms expectations respond much to monetary policy announcements in low inflation environments we provide suggestions for how monetary policy makers could pierce this veil of inattention through new communication strategies as well as the potential pitfalls to trying to do so

governance institutions resource rights regimes and the informal mining sector regulatory complexities in indonesia summary this study examines how shifting resource governance regimes affect labor inequities in the small scale mining sector in indonesia it focuses on the implications of governance decentralization processes and mining regulation reforms for indigenous and migrant populations who rely on informal unlicensed mining for income in central kalimantan while the findings illustrate the territorially uneven impacts of recent reforms they highlight how dominant paradigms that prioritize the enforcement of property rights schemes have contributed to problems of livelihood insecurity and poor environmental governance the article urges for more nuanced attention to contested articulations of power as well as local resource rights and institutional arrangements to assist rural communities in reversing marginalization

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

deagrarianization and rural employment in sub saharan africa a sectoral perspective abstract sub saharan africa is steadily becoming less rural in character for decades development thinking has prescribed industrialization as the virtuous path leading away from economic dependence on agriculture but africa s industrial record has been plagued with underperformance an alternative perspective centered on the process of deagrarianization and attendant rural employment generation may offer more explanatory power and policy direction this paper outlines key theoretical components and practical concerns of a deagrarianization approach the nature and incidence of deagrarianization in sub saharan africa is contrasted with that experienced in developed industrial countries conceptual approaches dealing with rural non agricultural employment are identified within different social science disciplines through a thematic review of the literature the conclusion highlights the need for more focused study of the deagrarianization process and rural service sector development

negative externalities may cause delay in negotiation we study the strategic equilibria of a negotiation game where potential buyers are affected by identity dependent negative externalities the unique equilibrium of long finitely repeated generic games can either display delay where a transaction can take place only in several stages before the deadline or in spite of the random element in the game a well defined buyer exists that obtains the object with probability close to one

standard auctions with identity dependent externalities i analyze equilibrium bidding behavior in the open ascending bid auction with identity dependent externalities with reciprocal externalities the allocation is determined by bidders consumption values alone with large nonreciprocal externalities the open auction generates higher expected revenue compared to standard sealed bid auctions the progress of the open auction reveals more information about the identity of the potential winner allowing active bidders greater opportunity to avoid incurring payoff reducing externalities the associated option value to staying active up until a relatively high price translates into higher expected revenue multiple bidders may sequentially quit at the same price and relative to sealed bid auctions bidders experience less ex post regret

household informedness and long run inflation expectations experimental evidence this article uses an experiment embedded in a survey to analyze the response of consumers long run inflation expectations to information about the federal reserve s inflation target and past inflation on average respondents revise forecasts toward the 2 target with either information treatment forecast uncertainty and heterogeneity decline with the treatments but remain substantial since the information in the treatments is publicly available these findings are consistent with models of imperfect information in which agents do not fully and continually update their information sets or incorporate all available information into their expectations response to treatments varies with prior informedness and with demographic characteristics

asymmetric information about rivals types in standard auctions an experiment this paper studies experimentally how information about rivals types affects bidding behavior in firstand second price auctions the comparative static hypotheses associated with information about rivals enables us to test the relevance of such information as well as the general predictions of the auction theory by providing an effective means to control for risk aversion and other behavioral motives that were difficult to control for in previous experiments our experimental evidence provides strong support for the theory and sheds light on the roles of risk aversion and the spite motive in first and second price auctions respectively

collusion in auctions with externalities in standard auctions collusion among buyers eliminates bidding competition despite informational asymmetries collusion can however be imperfect when the situation involves externalities among buyers that is when a buyer is worse off if one rival wins the goon rather than if nobody gets it for intermediate values of the externality and under various objective functions the seller finds it optimal to design an auction that leads in equilibrium to a collusive outcome that is ex post inefficient for the group of buyers an ex ante incentive efficient collusion mechanism for the buyers is characterized in this situation

are negative supply shocks expansionary at the zero lower bound the standard new keynesian model predicts that economies behave differently at the zero lower bound completely wasteful government spending or forward guidance is very stimulative and capital des

theoretical and experimental analysis of auctions with negative externalities abstract we investigate a private value auction in which a single entrant on winning imposes a negative externality on two regular bidders in an english auction when all bidders are active regular bidders free ride exiting before price reaches their values in a first price sealed bid auction incentives for free riding and aggressive bidding coexist limiting free riding compared to the english auction we find substantial though incomplete free riding in the clock auction in first price auctions regular bidders bid more aggressively than the entrant and both bid higher than in auctions with no externality predictions regarding revenue efficiency and successful entry between the two auctions are satisfied

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting