variable returns to scale in production and patterns of specialization this paper discusses some trade and welfare implications of the two sector model based on increasing returns to scale irs in one industry and decreasing returns to scale drs in the other it has been shown by horst herberg and murray kemp that given homothetic production functions with irs in one industry and drs in the other the production possibilities frontier ppf is strictly concave to the origin near the irs axis and strictly convex to the origin near the drs axis while this result constitutes an important finding and is contrary to the general impression among economists even twelve years after the publication of herberg and kemp s paper no attempt has been made to analyze its implications for welfare and patterns of specialization in this paper i consider a simple twocommodity model with irs in one industry and drs in the other and discuss some interesting implications of variable returns to scale vrs first i demonstrate that in this model if a small open economy specializes completely in production it will do so in the drs commodity and not in the irs commodity as is generally believed second if at a given price ratio an internal production equilibrium exists a welfaremaximizing small open economy will never specialize completely in production even though the ppf exhibits decreasing opportunity costs over a part of its range third given output generated economies and diseconomies of scale welfare maximization for a small country requires a permanent tax subsidy scheme encouraging expansion of the irs industry and contraction of the drs industry finally in a two country model with identical tastes and technology across the countries free trade equilibrium may result in incomplete specialization by the exporter of the irs commodity and complete specialization by the exporter of the drs commodity in the course of the analysis i argue that tinbergen s formulation of frank graham s case for protecting the irs industry is incorrect i then present a possible reformulation of it in section i the basic production model is introduced in section ii the model is analyzed and in section iii it is argued that all the results continue to hold in the multifactor case

estimation of a taiwan monetary reaction function with time varying parameters this paper employs a nonlinear kalman filter to examine the time varying responses of taiwan s monetary policy in the presence of a limited dependent variable the kalman filtered parameters reveal that the responses are not constant but change over time furthermore a counter cyclical reaction function is identified and a stronger than usual discretionary policy during the recessions is found

adaptive versus rational expectations and the fisher effect substantial controversy remains over the causes of interest rate fluctuations this controversy frequently focuses on the role of expected inflation the theoretical determinats of the nominal rate are examined usig the is lm as model and it is shown that the augmented fisher equation is sensitive to the expectations generating mechanism the model assumes that the nominal rate ceteris paribuschanges one for one with expected inflation the total impact however may take any value from zero to one the empirical analysis sequentially estimates reduced form equations based on adaptive and rational expectations the results confirm prior findings that nominal rates do not adjust one for one with inflation the results also yield some insight on the applicability of the assumption of rational versus adaptive expectations

equivalence of auctions and posted prices abstract we determine the equilibrium in two transaction mechanisms auctions and posted prices agents choose whether to participate in markets where trades are consummated by auctions or in markets where sellers post prices we show that the selling mechanisms are practically equivalent previous studies have shown that auction markets emerge as a unique evolutionary stable equilibrium when compared to bargaining markets posted price markets dominate bargaining markets similarly journal of economic literature classification numbers c78 c73 d44

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

money supply announcements and interest rates another view in this paper i use a new approach to analyze the impact of money supply announcements on the bond market before 1980 the only available work on this subject consisted of a few unpublished papers by conrad 1978 sivesind 1978 and urich 1979 1 more recently published papers by grossman 1981 and urich and wachtel 1981 have appeared roley 1982 extends the grossman study to incorporate data after the federal reserve policy statement of october 6 1979 both grossman and urich and wachtel are primarily concerned with the question of money market efficiency using survey data made available by money market services of san francisco and data on treasury bill yields each finds that the market responds quickly to unanticipated changes in the money supply but that anticipated changes have no effect on interest rates in addition grossman finds that when he adds other variables such as past changes in the money

interest rate volatility and home mortgage loans the us economy has experienced substantial fluctuations in real and nominal interest rates since the 1970s this article investigates empirically the relationship between home mortgage loans and volatility in mortgage rates for the period 1971 02 to 2003 03 contrary to common wisdom we find a positive relationship between mortgage rate volatility and home mortgage loans further investigation indicates that this is due to volatility in the bond market in times of high interest volatility households disinvest in government securities and invest in real assets which yields a positive relationship between mortgage rate volatility and home mortgage loans

the identification of monetary policy disturbances explaining the liquidity puzzle abstract this paper examines recent work on the identification of monetary policy disturbances its main finding is that the empirical anomalies found in the literature reflect a failure to properly address the federal reserve s policy of accommodating reserve demand shocks a new method of identifying monetary policy using nonborrowed reserves is proposed using this specification policy has a strong persistent liquidity effect regardless of subsample policy granger causes output even in the presence of interest rates explaining approximately 49 of the variance in output at a two year horizon and the residual explanatory power of interest rates for output is negligible

exogenous tax changes and interest rates testing for ricardian equivalence using an efficient markets model this article tests the ricardian theory i e barro 1974 using mishkin s 1981 1982 efficient markets model of interest rates employing romer and romer s 2010 measure exogenous tax changes i am able to test whether the u s bond market reacts in a keynesian or ricardian manner to exogenous tax policy changes this helps avoid the endogeneity problems associated with measuring the interest rate effects of deficits and provides a cleaner test of the pure ricardian thought experiment i find a significant negative relationship between tax changes and interest rates which is inconsistent with the ricardian model and support the keynesian crowding out framework

multiple equilibria coordination and transitional growth abstract we study a small open economy with two sectors and two factors of production in one of the sectors external economies of scale are generated through the industry level capital input this leads to a divergence between private and social production possibility frontiers as well as to multiple equilibria the equilibrium selection problem that arises is solved by agents who follow a simple trial and error learning rule the growth path of the economy as agents learn lies below the production possibility frontier and may display cyclical transitional dynamics we also show that coordination problems which may prevent the economy from attaining the good equilibrium may be alleviated by the temporary use of policy instruments that shape the allocation of resources

gains from trade under variable returns to scale recently several trade theorists have investigated the welfare consequences of international trade under variable returns to scale for example kemp and negishi 11 using the revealed preference arguments obtain the sufficient conditions under which the opening of trade and an improvement in the terms of trade are nonharmful in the presence of variable returns to scale production subsidies and consumption taxes eaton and panagariya 7 reexamine these issues in the context of pareto welfare criterion it is noteworthy that the assumption of constant returns to scale is retained in their discussions on production subsidies and consumption taxes 1 the purpose of this paper is to explore the welfare implications of tariffs and consumption taxes as well as the welfare rankings of these policy instruments under variable returns to scale we obtain several interesting results for example social welfare for a small country can be maximized by introducing in addition to free trade a policy of production tax cum subsidy such that the output of the industry exhibiting greater smaller returns to scale is pushed to the maximum minimum a higher tariff rate needs not result in a lower welfare whereas a higher rate of consumption tax necessarily leads to a lower welfare furthermore a tariff may be superior to an equivalent consumption tax the paper evolves as follows the model and assumptions are presented in section ii section iii is the analysis regarding non optimality of free trade free trade versus no trade

daily monetary impulses and security prices this paper uses swiss data to study the real long run effects of monetary policy daily unexpected changes in the monetary base are found to be negatively correlated with security price changes this result is unaffected when implicitly following geske and roll 1983 we try to measure the autonomous component of monetary policy by taking into account a reaction function of monetary policy to changes in real variables

does the federal reserve affect asset prices abstract the federal reserve is probably one of the institutions most closely monitored by investors this indicates that investors believe the actions of the fed have implications for asset prices to this date the trading activities of the fed in the financial markets have not been examined to see how the fed influences asset prices using daily data on open market operations omos and asset prices this study fills this void one finding of the paper is that omos granger cause both short and long term interest rates furthermore the sign of the relationship confirms the existence of the liquidity effect given that its trades represent a small portion of the market volume how the fed influences bond prices is a puzzle the only reasonable explanation is that the fed s trades have high information content judging by the impulse response paths the reaction of interest rates to open market operations is fast additionally it appears that monetary policy has a lasting impact on interest rates

how much is a dollar worth tipping versus equilibrium coexistence on competing online auction sites theory models of platform competition predict that prices and buyer seller ratios should be approximately equal on coexisting auction sites using field experiments on ebay and yahoo auctions we find evidence that is inconsistent with equilibrium hypotheses and suggest that the market is tipping prices on ebay are consistently 20 70 percent higher than those on yahoo and ebay attracts two additional buyers per seller on yahoo prices and bidders counts are unaffected by the auction ending rule various differences between the sites cannot account for the magnitude of these disparities however a model of imitation dynamics can rationalize our findings

the vanishing liquidity effect of money on interest analysis and implications for policy this paper seeks to re examine the effects of money on interest rates the earlier literature on this topic determined fairly well the pattern of response of interest rates to changes in money growth the notable studies of cagan 1972 cagan and gandolfi 1969 and gibson 1970 served to establish the professions stylized pattern as presented in section i section ii presents new evidence on the subject and finds that the old empirical generalizations no longer hold specifically the results suggest that the initial liquidity effect of faster money growth is likely to be offset within the month following the monetary policy change sections iii and iv investigate the reasons for the changing pattern of monetary effects on interest rates and discuss the policy implications of the new pattern

economies of scale imperfect competition and the pattern of trade it has been long recognised that economies of scale and market structures have significant impacts on a country s comparative advantage and pattern of trade but the assumption of perfect competition used since the classicists has deterred the analysis of these elements in international trade theory this is evidenced by most of the current textbooks on international trade which usually offer a small section or at best a small chapter on imperfect competition and economies of scale in relation to international trade very recently however a handful of works have appeared that have dealt with economies of scale and imperfect competition in a general equilibrium framework in keeping with the modern theory of international trade negishi i972 krugman i979 i980 dixit and norman i980 helpman i981 and ethier forthcoming a brief summary of these contributions can be given as follows negishi is mainly concerned with proving the existence of equilibrium and gains from trade in a world of imperfect competion krugman i979 using the negishian model basically allows for product differentiation a la dixit and stiglitz i977 the very existence of product differentiation in turn allows for intra industry trade and it also implies that there are gains from trade from consuming more varieties of products even between economies which are identical in factor endowments technology and tastes using this model krugman i980 shows a larger domestic market hypothesis of pattern of trade which says that a country tends to be a net exporter of the products which have relatively larger domestic markets the existence of economies of scale is what explains this dixit and norman present three models of imperfect competition in the first one they consider a cournot model with entry in which it is shown that trade leads to a greater equilibrium number of firms and hence more competition and to an increase in welfare in the second model they examine the effect of trade on product selection in a monopoly model their third model appears to be richest among the three it incorporates product differentiation and intra industry trade as in krugman s papers an economy is divided into two sectors a competitive sector and a monopolistically competitive sector and then equilibrium in a trading world economy is characterised two conclusions stand out first as for the inter industry trade the factor abundance hypothesis the heckscher ohlin theorem explains the pattern of trade second as for the intra industry trade a smaller country has comparative advantage in the production of differentiated goods which are produced in the monopolistically

standard auctions with financially constrained bidders we develop a methodology for analyzing the revenue and efficiency performance of auctions when buyers have private information about their willingness to pay and ability to pay we then apply the framework to scenarios involving standard auction mechanisms in the simplest case where bidders face absolute spending limits first price auctions yield higher expected revenue and social surplus than second price auctions the revenue dominance of first price auctions over secondprice auctions carries over to the case where bidders have access to credit these rankings are explained by differences in the extent to which financial constraints bind in different auction formats

production possibilities with a public intermediate good this paper considers the shape of the production possibility set with a public intermediate good of the atmos phere type the elements which tend to give rise to a concave product ion frontier are isolated from those which tend to generate a convex one by using the notion of the production surface the results from earlier models are both generalized and sharpened

auctions versus posted price selling two popular selling methods posted price selling and auctions are compared here in an independent private values model without auctioning costs auctioning is always optimal when auctioning is costly auctions are still preferable if the marginal revenue curve is sufficiently steep the global steepness of the marginal revenue curve is found to coincide with the dispersion around the mean for a number of standard distributions finally the prices of the monopoly seller and of the social optimum are compared copyright 1993 by american economic association

rejoinder causes and implications of some bidders not conforming to the sealed bid abstraction this paper presents the authors rejoinder to zeithammer and adams zeithammer r c adams 2010 the sealed bid abstraction in online auctions marketing sci 29 6 964 987 this rejoinder clarifies and qualifies conclusions of the original paper and makes suggestions for fruitful areas of future research in particular the original paper shows that bidding style can make a big difference in managerial decisions but a structural model would be necessary to make confident predictions under different reserve prices the rejoinder also clarifies the interpretation of feedback as a measure of bidder experience and the relationship between bidder experience and bidding style

returns to scale in canadian manufacturing an interprovincial comparison this paper measures the degree of returns to scale at the two digit standard industrial classification sic in canadian manufacturing employing both gross output and value added data using a model developed by r j caballero and r k lyons the study distinguishes between internal and external returns to scale the caballero and lyons model is extended by disaggregation to the provincial level in order to measure the returns to scale of geographic provincial concentration the empirical results suggest that in canada there are increasing returns that are primarily national rather than internal to the province or the industry

market structure and ldcs manufactured export performance typically trade theory and analysis of domestic market structure have proceeded separately this paper considers ldcs performance in exporting manufactured products using a model which embraces customary explanatory variables namely factor endowments scale economies and skill levels and a market structure variable in marked contrast to practice in other empirical studies the data employed are not based on coefficients derived from us industries but are taken from local industrial censuses undertaken by individual countries differences in results across countries indicate the need for care in determining policy prescriptions for individual countries with respect to the degree of competition

a structural model of competing sellers auctions and posted prices in an original data set of goods listed for sale online i observe that both auctions and posted prices are popular with buyers and sellers in the compact disc market to explain why these two mechanisms coexist i estimate a structural model of competing sellers who differ in the value of their outside options buyers are allowed to value auctioned and posted price goods differently but the estimated value distributions suggest that differences across buyers do not explain the mechanism coexistence that i observe in contrast differences across sellers outside options are important the value of the outside option segments the market with high outside option sellers choosing to post a fixed price there are two key forces at work that drive this empirical result first competition between sellers favors coexistence over an auction only or a posted price only marketplace because sellers prefer to be in a market with fewer rivals second sellers with more valuable outside options prefer the posted price mechanism because posted price goods sell less often than auctioned goods but at a higher price as a result a larger outside option reduces the loss from not selling and favors the posted price mechanism

a theoretical explanation of some stylized facts of economic growth this paper presents a three good two country general equilibrium model that is consistent with several stylized facts of economic growth the three goods are manufactures agriculture and services manufactures are subject to economies of scale the model predicts that services a nontraded good must be more expensive in the country with higher per capita income it also shows that as per capita income increases we should expect the productivity in commodities relative to services to rise the model is able to generate many other stylized facts of economic growth

monetary policy and long term interest rates an efficient markets approach abstract this paper is an application of efficient markets theory to analyze empirically the relationship of money supply growth and long term interest rates this approach has the advantage over calier research on this subject in that it imposes a theoretical structure on this relationship that flows easier interpretation of the empirical results as well as more powerful statistical tests on the interest of ascertaining the robustness of the results many different empirical tests are carried out in this paper and they uniformly do not support the preposition that increases in the money supply are correlated with declines in long rates

commentary do bids equal values on ebay we argue that the zeithammer and adams paper zeithammer r c adams 2010 the sealed bid abstraction in online auctions marketing sci 29 6 964 987 successfully documents consistent patterns in ebay bidding data that cast doubt on the common assumption that bidders in such auctions follow a bid value strategy these anomalies lend support to the authors alternative model in which some bidders bid reactively and consequently bid below their valuation most of the time the consistency of the authors findings as well as the ability of their alternative explanation to account for all of their test results lends great support to their thesis however we think that several of their empirical tests examine ancillary assumptions about bidder behavior and do not test the bid value assumption directly furthermore although their reduced form model incorporating reactive bidders is a good first attempt at expanding the canonical framework we worry that their counterfactual pricing analysis using the reactive model is suspect because the parameters they estimate are not structural overall the zeithammer and adams paper is a carefully argued critique of empirical methods used to study online auctions and provides valuable ideas to improve on these methods

bidding behavior and decision costs in field experiments i introduction positive opportunity costs of mental effort may invalidate the predictions of traditional models of rational or hyperrational agents conlisk 1996 uses deliberation costs as a recurring theme when discussing four important reasons for incorporating bounded rationality in economic models smith and walker 1993 and smith and szidarovszky 1999 present effort models that predict individual behavior will more closely match the predictions of rational behavior theories as 1 the stakes of the decision increase and 2 the decision costs decrease smith and walker 1993 find evidence of these two effects in a comprehensive review of 31 published laboratory experiments camerer and hogarth 1999 extend smith and walker s survey by examining 74 experimental papers and find evidence in favor of the cognitive effort theory noting that higher levels of incentives have the largest effects in judgment and decision tasks p 34 although the laboratory evidence is compelling there has been little verificati on of these predictions outside the laboratory 1 the present article fills this gap by examining field data from 214 multiunit sports card auctions carried out in an active marketplace on the floor of a sports card show we auctioned four types of trading cards with book values ranging from 3 to 70 providing significant variation in the stakes of the auction our auctions also included two distinct types of subjects some auctions had sports card dealers bidding against each other whereas others had individual card collectors as the participants this variation allows us to explore the second dimension of decision cost theory do dealers who commonly participate in sports card auctions and therefore likely require less effort to bid optimally bid more rationally than nondealers our measure of rational bidding comes from multiunit auction theory which predicts strategic demand reduction in uniform price auctions 2 for each type of bidder and each type of card we measure this demand reduction behavior in the uniform price auction relative to a control the multiunit vickrey 1961 auction where bidders are predicted to fully reveal their demands our sports card data generated from sales of 428 cards with a combined book value of nearly 10 000 provide two major insights first we find that the predicted strategic behavior is considerably greater when the auctioned cards have higher values second dealers exhibit more of the predicted strategic behavior than do nondealers for both lower and higher priced cards one conjecture to explain this finding is that nondealers may find that the cognitive effort required to bid strategically exceeds the benefits especially for low valued cards by contrast dealers have more experience with auctions and make their living by buying selling trading cards so their cognitive costs are likely much lower than those of nondealers these two findings are consistent with recent theoretical models of monetary rewards and decision costs and extend previous experimental evidence from the laboratory into the field ii experimental design as mentioned recent theoretical literature has suggested that demand reduction inherent in uniform price auctions with multiunit demand can induce inefficient allocations and possible reductions in auction revenue to avoid the inefficiencies associated with the uniform price auction theorists have identified an alternative mechanism the generalized vickrey auction which gives bidders a dominant strategy of revealing their true valuations for all units of the good in this multiunit vickrey auction as in the uniform price auction each bidder can submit up to n different sealed bids on individual units and the highest n bids are declared winners if a bidder submits one or more of the winning bids his or her price for the first unit equals the highest rejected bid submitted by someone else and his or her price for the kth unit equals the kth highest of the rejected bids submitted by others

tests of rationality neutrality and market efficiency a monte carlo analysis of alternative test statistics abstract this paper examines the small sample properties of three testing strategies used to analyze the rationality monetary neutrality and market efficiency hypotheses we focus on the original two step barro test of the mre hypothesis formed entirely from ols results a test that employs the correct variance covariance formulae for these two step estimates and mishkin s fimle testing framework each test is examined under likely model respecifications the findings highlight the extensive bias incurred by drawing inferences from simple unadjusted two step estimates and reveal the relative power of all tests in identifying alternatives to the null hypotheses

field experiments on the effects of reserve prices in auctions more magic on the internet i present experimental evidence on the effects of minimum bids in first price sealed bid auctions the auction experiments manipulated the minimum bids in a preexisting market on the internet for collectible trading cards from the game magic the gathering i examine a number of outcomes including the number of participating bidders the probability of sale the levels of individual bids and the auctioneer s revenues the benchmark theoretical model is one with symmetric risk neutral bidders with independent private values the results verify a number of the predictions concerning equilibrium bidding many bidders behave strategically anticipating the effects of the reserve price on others bids

money supply announcements interest rates and foreign exchange abstract this paper presents a test of the joint hypothesis that money supply announcements affect the real interest rate and that changes in the real interest rate affect the exchange rate in the short run the test results are consistent with the joint hypothesis for example it is found that announcement of an unexpected jump in the money supply is accompanied by an increase in interest rates and an appreciation of the dollar if the rise in interest rates was entirely due to higher inflationary expectations the dollar should not appreciate

inferring ascending auction participation from observed bidders abstract participation in internet auctions goes well beyond those who place a bid participants arrive in random order and if the auction s standing price has already exceeded a participant s valuation she will not bid even so her unreported valuation is a relevant part of demand for the item and in an alternate random order her bid would have been registered i provide a method to estimate the average number of participants from the average number of bidders per auction this enables estimation of the distribution of participant valuations from either the distribution of closing prices or the distribution of all observed bids

australian monetary growth and short term nominal interest rates an interest parity efficient markets approach the relationship between monetary growth and nominal interest rates continues to attract considerable attention in the literature mishkin 1982 has found that by explicitly imposing market efficiency in an interest rate model for the us empirical analysis does not support the keynesian proposition that increases in monetary growth are associated with reductions in short term rates in this paper a similar theoretical structure is used but unlike mishkin explicit account is taken of the fact that australia s capital market is closely integrated with international money markets incorporating this into the interest rate model indicates there is some empirical support for the keynesian proposition in the australian case the analytical model also incorporates a measure of interest rate volatility to account for the risk premium present in the forward rate for 90 day bank bills

welfare effects of quotas under variable returns to scale recently there has been a growing use of quantitative restrictions on imports by countries for protecting their import competing industries it is well known that the quantitative restriction on imports set below the free trade level would result in higher domestic prices smaller quantities of importables available to consumers and hence a reduction in national real income thus import quotas similar to tariffs in a small economy reduce welfare this result has been derived in the traditional heckscher ohlin trade model with production functions subject to constant returns to scale crs while the assumption of crs greatly simplifies the analysis it is not easily justified in view of reality firms usually are exposed to various kinds of externalities which give rise to economies or diseconomies of scale

increasing returns and the gains from trade it is known that gains from trade are positive in the presence of increasing returns to scale if all increasing returns industries expand in the shift from autarky sufficient conditions for gains when some increasing returns industries expand and others contract suffer from the limitations that the production frontier must be convex changes must satisfy a prespecified hierarchical pattern or that total factor supplies must be fixed between equilibria conditions which can not generally be assured this paper develops a necessary and sufficient condition for gains and from it a sufficient condition that does not depend on these restrictions copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

analysis and design of business to consumer online auctions business to consumer online auctions form an important element in the portfolio of mercantile processes that facilitate electronic commerce activity much of traditional auction theory has focused on analyzing single item auctions in isolation from the market context in which they take place we demonstrate the weakness of such approaches in online settings where a majority of auctions are multiunit in nature rather than pursuing a classical approach and assuming knowledge of the distribution of consumers valuations we emphasize the largely ignored discrete and sequential nature of such auctions we derive a general expression that characterizes the multiple equilibria that can arise in such auctions and segregate these into desirable and undesirable categories our analytical and empirical results obtained by tracking real world online auctions indicate that bid increment is an important factor amongst the control factors that online auctioneers can manipulate and control we show that consumer bidding strategies in such auctions are not uniform and that the level of bid increment chosen influences them with a motive of providing concrete strategic directions to online auctioneers we derive an absolute upper bound for the bid increment based on the theoretical upper bound we propose a heuristic decision rule for setting the bid increment empirical evidence lends support to the hypothesis that setting a bid increment higher than that suggested by the heuristic decision rule has a negative impact on the auctioneer s revenue

international trade and industrial organization this survey reviews recent contributions to the interface between international trade and industrial organization import competition places a substantial limit on domestic market power in the short run competitive conditions can influence the speed and efficiency of a domestic market s adjustment to international disturbances exports effects on competition among national sellers are unclear and depend on the scope for price discrimination models of trade with monopolistic competition explain intra industry trade and also the widely observed sensitivity of firm size to market size exposure to trade also increases the technical efficiency of production diverse policy issues turn on the distinction between national and global welfare and the scope for commitment

a note on the neoclassical ambiguity and the specific factor production model under variable returns to scale abstract this note investigates the relationship between commodity price changes and factor rewards in a specific factor production model that admits variable returns to scale the principal result is that in the presence of variable returns to scale the so called neoclassical ambiguity may be resolved without resorting to detailed knowledge of the mobile factor s preferences that is to say the effect of a commodity price change may as it does with the returns to those factors specific to each industry raise or lower the real reward of the mobile factor in terms of either commodity depending only on the characteristics of the technology

commentary bidders experience and learning in online auctions issues and implications this study explores the implications of rejecting the sealed bid abstraction proposed by zeithammer and adams zeithammer r c adams 2010 the sealed bid abstraction in online auctions marketing sci 29 6 964 987 using a conditional order statistic model that relies on the joint distribution of the top two proxy bids of an auction zeithammer and adams show that inexperienced bidders reactive bidding is the main cause of the rejection of the sealed bid abstraction their empirical study suggests that a large percentage of bidders reactively bid and there is weak evolutionary pressure for bidders to converge to sealed bidding we discuss theoretical implications of this rejection and the role of bidder experience as well as inferences about bidder learning tracking an inexperienced bidder s bidding behavior over time we show that bidders learn and their bidding strategy gravitates toward rational bidding potential biases in bidder experience measurement and bidder learning can be assessed using a cross sectional time series data set that tracks a random sample of new ebay bidders learning speed is faster with their complete bidding history rather than feedback ratings or winning observations only we highlight the importance of proper measures of bidder experience and its effect on bidding strategy evolutions both of which play important roles in clarifying bidding behavior in online auctions

covered interest rate parity the australian case in differentiating between long run and instantaneous covered interest parity and in introducing domestic influences proxied by unanticipated growth in the monetary base as short run determinants of domestic interest rates this study sheds new light on the interest parity relationship in the australian context indeed the results of the empirical tests indicate that previous studies have misspecified the dynamics of the relationship omitted significant domestic influences and consequently produced biased estimates

pennies from ebay the determinants of price in online auctions this paper presents an exploratory analysis of the determinants of prices in online auctions for collectible united states one cent coins at the ebay web site starting with an initial data set of 20 000 auctions we perform regression analysis on a restricted sample of 461 coins for which we obtained estimates of book value we have three major findings first a seller s feedback ratings reported by other ebay users have a measurable effect on her auction prices negative feedback ratings have a much greater effect than positive feedback ratings do second minimum bids and reserve prices have positive effects on the final auction price in particular minimum bids appear only to have a significant effect when they are binding on a single bidder as predicted by theory third when a seller chooses to have her auction last for a longer period of days this significantly increases the auction price on average

the effect of money shocks on interest rates in the presence of conditional heteroskedasticity most current empirical work finds no evidence that money shocks lower interest rates we show that these nonresults are mainly due to a failure to model the conditional heteroskedasticity of interest rates autoregressive conditional heteroskedasticity arch models find a significant liquidity effect where ordinary least squares ols models do not the existence of a liquidity effect is found using different models and sample periods when arch models are used in estimation but never when ols is employed

on the role of discrete bid levels in oral auctions abstract bids in oral auctions are restricted to discrete levels this paper both examines the choice of levels at which bids will be allowed and also presents a simple model of the role of the discrete levels in bidding strategy we consider two different distributions of bidders values identifying cases in which revenue is maximized by increasing intervals by constant intervals and by decreasing intervals moreover conditions under which the choice of bid levels that maximizes bid taker revenue also maximizes economic efficiency are developed we present a model of the economic trade off between auction duration and step size we consider the previously undiscussed issue of when economically motivated bidders should skip bid levels and when they should merely make minimum advances and develop a model in which it is equilibrium behavior always to make the minimum allowed advance

trade policy and its impact on quality of imports this paper examines the role of trade policies in influencing a foreign monopolist s decision on price quantity and in particular the quality of its product we show that a specific tariff leads to higher quality whereas an ad valorem tariff usually does the opposite quotas and specific tariffs are shown to be equivalent and both dominate an ad valorem tariff in terms of welfare we also show that subjecting imports to minimum quality requirements hampers national welfare finally we present a comprehensive ranking of all the policy instruments considered in this paper

effects of minimum bid increments in internet auctions evidence from a field experiment i study the role of minimum bid increments mbi in internet auctions using natural field experiment data from a finnish online auction site huuto net internet auctions are typically viewed as secondprice implying truthful bidding however due to the presence of the mbi equilibrium bidding behavior involves bid shading i sell otherwise identical gift cards while varying the mbi and test between truthful bidding and bid shading truthful bidding is rejected consistently with equilibrium behavior bid shading increases as the mbi increases this implies that real world bidders are capable of reacting rationally even to seemingly small variations in their strategic environment this version september 17 2015 replaces the february 15 2013 version this abstract was borrowed from another version of this item

monetary policy and short term interest rates an efficient markets rational expectations approach this paper is an application of efficient markets rational expectations theory to analyze empirically the relationship of money supply growth and short term interest rates a hotly debated issue in the literature this approach has the advantage over earlier research on this subject in that it imposes a theoretical structure that allows easier interpretation of the empirical results as well as more powerful statistical tests the empirical results uniformly do not support the proposition that increases in money growth are correlated with declines in short rates the relationship between money supply growth and nominal interest rates is a hotly debated issue in the literature one view associated with keynesian structural macromodels has an increase in money growth leading at least in the short and medium runs to a decline in interest rates 2 an alternative view associated with milton friedman 6 7 indicates that interest rates might rise in response to higher money growth because there is a rise in inflationary expectations and hence a rise in interest rates through a fisher 5 effect

government financing decisions and asset returns abstract this paper presents an empirical investigation of the relation between government financing decisions and asset returns in particular the focus is on whether a substitution of debt financing for tax financing of a given level of expenditures is associated with an increase in interest rates the paper brings a different perspective to empirical investigations of government fiscal policies by examining the response of asset prices in an efficient capital market to such policies rather than focusing on aggregate consumption behavior the results are consistent with the idea that asset prices are unrelated to how the government finances its expenditures the results however also indicate that the capital market is not indifferent with respect to the level of government expenditures as higher interest rates are associated with increases in government purchases

a note on unanticipated money growth and interest rate surprises mishkin and makin revisited the relationship between monetary expansion and interest rates has long been an important macroeconomic issue friedman 1 hypothesized a dynamic adjustment process where the interest rate initially falls due to a liquidity effect then gradually rises in response to increased money demand higher prices and expectations of higher future inflation the relative size of these effects and the speed of the adjustment process are empirical questions that have recently received some attention in rational expectations econometric models in a recent article mishkin 5 found that interest rate and money growth surprises have a significant positive correlation makin 3 later published a paper where the correlation is negative and significant makin explained these contradictory findings as a result of the different method each uses to measure interest rates

interdependence of industries coordination failure and strategic promotion of an industry abstract this paper analyzes coordination failure that arises from interdependence of industries assuming one of these industries is characterized by oligopolistic competition marshallian externalities are logically explained the conditions that create external economies are identified and policy implications for strategic promotion are discussed

an integrated view of tests of rationality market efficiency and the short run neutrality of monetary policy abstract this paper analyzes an important class of models in which expectations play an important role topics included in the analysis are tests of 1 rationality of forecasts in either market or survey data 2 capital market efficiency 3 the short run neutrality of monetary policy and 4 granger causality in macroeconometric models the common elements of these tests are highlighted in particular cross equation tests for rationality or the short run neutrality of money are shown to be equivalent to more common regression tests in the literature these results demonstrate that the exact specification of the relevant information set used in rational forecasts is not necessary for the cross equation tests to have desirable asymptotic properties also discussed are the conditions for identification of coefficients and testability of hypotheses

mechanism choice and the buy it now auction a structural model of competing buyers and sellers a striking feature of many online sales platforms is the coexistence of multiple sales mechanisms items on ebay for instance are frequently offered through auctions posted prices and buy it now auctions in this article i study how this mechanism multiplicity influences the welfare of buyers and sellers i specify and estimate a structural model of mechanism choice in online markets in which i consider both sides of the market on the demand side buyers choices among available listings are equilibrium outcomes of an entry game on the supply side sellers make equilibrium decisions when choosing sales mechanisms and prices i estimate this model using data from sales of baseball tickets on ebay and calculate consumer and seller rents in three markets the actual market with all three sales mechanisms and two counterfactual markets with auctions and fixed prices or only fixed price listings respectively i find that the addition of auctions to fixed price markets hurts sellers and risk averse buyers but benefits risk neutral buyers additionally the consumer surplus increases when buy it now auctions are offered but the seller surplus is reduced further i discuss the intuition for the cause of this result

the return of the liquidity effect a study of the short run relation between money growth and interest rates in this article i use band pass filters to investigate the short run relationship between money growth and interest rates i find a negative correlation between short run movements in money growth and interest rates which i interpret as evidence that the liquidity effect dominates the anticipated inflation effect

increasing returns dynamic stability and international trade abstract a simple two country two good model in which economies of scale form the basis of international trade is presented it is shown that the larger country exports the good characterized by increasing returns and imports the good subject to constant returns a key feature of the paper is a comprehensive stability analysis it turns out that a normal output price response is necessary for d stability furthermore the marshall lerner condition must be satisfied in terms of the short run import demand elasticities for local dynamic stability finally if international factor mobility is permitted cross hauling of specific factors may be observed

trade spatial separation and the environment we develop a simple two sector dynamic model to show how pollution can provide a motive for trade by spatially separating incompatible industries we assume that the production of smokestack manufactures generates pollution which lowers the prod uctivity of an environmentally sensitive sector farming two identical unregulated countries will gain from trade if the share of world income spent on smokestack goods is high in contrast when the share of world income spent on the dirty good is low trade can usher in a negatively reinforcing process of environmental degradation and real income loss for the exporter of smokestack goods 1999 elsevier science b v all rights reserved

immiserizing transfer under variable returns to scale this paper examines the welfare consequences of a unilateral transfer for both the transfer paying and the transfer receiving country in which the production functions are subject to variable returns to scale we obtain the conditions for the strong paradox that is the welfare of the transfer paying country improves and that of the transfer receiving country declines in the standard two country framework the conditions for the weak paradox that is both the transferor and transferee gain or lose simultaneously and the normal results that is the transferor loses and the transferee gains are also derived transferts appauvrissants quand les rendements a l echelle sont variables ce memoire examine les effets de bien etre d un transfert unilateral a la fois pour le pays donateur et le pays recipiendaire quand les fonctions de production ont des rendements variables a l echelle les auteurs d6veloppent les conditions qui sous tendent le paradoxe fort i e le cas oii le bien r ils d6rivent aussi les conditions qui sous tendent le paradoxe faible i e le cas oui les deux pays gagnent ou

estimation in english auctions with unobserved heterogeneity we propose a framework for identification and estimation of a private values model with unobserved heterogeneity from bid data in english auctions using variation in the number of bidders across auctions and extend the framework to settings where the number of bidders is not cleanly observed in each auction we illustrate our method on data from ebay motors auctions we find that unobserved heterogeneity is important accounting for two thirds of price variation after controlling for observables and that welfare measures would be dramatically misestimated if unobserved heterogeneity were ignored

measuring market distortion international comparisons policy and competitiveness this paper develops a framework to simultaneously estimate production possibility frontiers and measure distortions in factor and product markets the econometric results based on a panel of 61 countries over the period 1970 through 1985 reveal very little distortion in factor markets but considerable distortion in product markets in addition the distortions tend to vary with the cyclical behaviour of economic activity further the results suggest that in order to improve efficiency commercial policy should aim at reducing product market distortions rather than factor market ones

industrial clusters equilibrium welfare and policy this paper studies the size and number of industrial clusters that will arise in a multi country world in which one sector has a propensity to cluster because of increasing returns to scale it compares the equilibrium with the world welfare maximum showing that the equilibrium will generally have clusters that are too small while there are possibly too many countries with a cluster allowing national governments to subsidize will move the equilibrium to the world welfare maximum so there is no race to the bottom if subsidy rates were capped then there would be a proliferation of too many and too small clusters

the paper work of medicine understanding international medical costs this paper draws on international evidence on medical spending to examine what the united states can learn about making its healthcare system more efficient we focus primarily on understanding contemporaneous differences in the level of spending generally from the 2000s medical spending differs across countries either because the price of services differs for example a coronary bypass surgery operation may cost more in the united states than in other countries or because people receive more services in some countries than in others for example more bypass surgery operations within the price category there are two further issues whether factors earn different returns across countries and whether more clinical or administrative personnel are required to deliver the same care in different countries we first present the results of a decomposition of healthcare spending along these lines in the united states and in canada we then delve into each component in more detail administrative costs factor prices and the provision of care received bringing in a broader range of international evidence when possible finally we touch upon the organization of primary and chronic disease care and discuss possible gains in that area

factor mobility trade and welfare abstract the paper develops a north south model which is driven by scale economies in the modern sector the model predicts that skilled and unskilled labor migrate from south to north and capital migrates from north to south migration of skilled labor and capital exhibits complementarity with trade while migration of labor may exhibit complementarity or substitutability if the terms of trade effects are ignored small movements of all factors affect the welfare of the population in south negatively and of that in north positively the effects of migration on the terms of trade are ambiguous in general

the impact of money on short term interest rates this study reviews empirical evidence from four research methods related to the impact of money on short term nominal rates the studies consistently fail to find evidence supporting the much hypothesized short term negative relationship between money and nominal rates since at least april 1975 reasons for the absence of a negative relationship include the tendency of financial markets to anticipate corrective action by the fed whenever ml deviates from targeted growth ranges and a rapid adjustment of inflationary expectations to changes in money growth

are forign exchange intervention and monetary policy related and does it really matter the relationship between foreign exchange intervention and monetary policy underlies the question of whether sterilized interventions can affect the exchange rate in this article the author examines this relationship using data on u s foreign exchange interventions from 1985 to 1990 recently made publicly available she examines whether interventions could be viewed as signaling changes in future monetary policy variables the author also considers whether changes in monetary policy may induce interventions in an effort by central bankers to lean against the wind of exchange rate movements interestingly she finds evidence both that interventions help predict monetary policy variables and that monetary variables help predict interventions copyright 1995 by university of chicago press

naturally occurring markets and exogenous laboratory experiments a case study of the winner s curse we examine the relevance of experimental findings from laboratory settings that abstract from the field context of the task that theory purports to explain using common value auction theory as our guide we identify naturally occurring settings in which one can test the theory experienced agents bidding in familiar roles do not fall prey to the winner s curse yet experienced agents fall prey to the winner s curse when bidding in an unfamiliar role we conclude that the theory predicts field behaviour well when one is able to identify naturally occurring field counterparts to the key theoretical conditions

transboundary pollution and the gains from trade we analyse the effects of transboundary pollution on trade patterns and welfare in a general equilibrium trade model production in a dirty industry generates pollution that negatively effects productivity both at home and abroad in a clean industry trade may lead to the spatial separation of production but the existence of transboundary pollution can offset the benefits from specialization we present a general model in which the effects of a country s pollution is country specific we analyse particular cases that correspond to an acid rain problem and a problem in which one country has a cleaner technology than the other we also present some results for small open economies to examine the effects of transboundary pollution in the absence of terms of trade effects

accumulation of human capital in ldcs in the presence of unemployment this paper takes up an aggregative growth framework to study how human and physical capital evolve over time as households allocate their investment between the two assets in the context of unemployment of educated labor it develops a general equilibrium model of an economy with two sectors a composite good sector and a schooling sector where output is subject to increasing returns to scale a temporary equilibrium for this economy depends on the endowments of physical and human capital as well as on the output elasticity of returns to scale and the price elasticity of education the dynamic evolution of this economy is explored in terms of the accumulation of the two types of capital a rise in education subsidy increases the demand for education at the cost of investment in physical capital and could lead to inefficient substitution between skilled and unskilled workers in the long run copyright 1994 by the london school of economics and political science

the positive theory of production externalities under perfect competition abstract aggregate cost and factor demand functions are used to develop a local envelope function which is applied in a general equilibrium model with production externalities to shed new light on the relationship between the true economy marginal costs and outputs this relationship induces a structure to the relationship between actual prices and outputs by means of the assumption of no factor demand reversals associated with externality effects we also provide generalisations of the stolper samuelson and rybczynski theorems highlighting the role of the externality effects

arriving in time estimation of english auctions with a stochastic number of bidders we develop a new econometric approach for the estimation of second price ascending bid auctions with a stochastic number of bidders our empirical framework considers the arrival process of new bidders as well as the distribution of bidders valuations of objects being auctioned by observing the timing of bidder arrival the model is identified even when the number of potential bidders is stochastic and unknown the relevance of our approach is illustrated with an empirical application using a unique dataset of art auctions on ebay our results suggest a higher impact of sellers reputation on bidders valuations than previously reported in cross sectional studies but the impact of reputation on bidder arrival is largely insignificant interestingly a seller s reputation impacts not only the actions of the bidders but the actions of the seller as well in particular experience and a good reputation increase the probability of a seller posting items for sale on longer lasting auctions which we find inc

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices