reciprocal relationships and mechanism design we study an incomplete information game in which players can coordinate their actions by contracting among themselves we model this relationship as a reciprocal contracting procedure where each player has the ability to make commitments contingent on the other players commitments we differ from the rest of the literature on reciprocal contracting by assuming that punishments cannot be enforced in the event that cooperation breaks down we fully characterize the outcomes that can be supported as perfect bayesian equilibrium outcomes in such an environment we use our characterization to show that the set of supportable outcomes with reciprocal contracting is larger than the set of outcomes available in a centralized mechanism design environment in which the mechanism designer is constrained by his inability to enforce punishments against non participants the difference stems from the players ability in our contracting game to convey partial information about their types at the time they offer contracts we discuss the implications of our analysis for modelling collusion between multiple agents interacting with the same principal

creative destruction and productive preemptive acquisitions we develop a model of entrepreneurial innovation for entry and sale into oligopolies suitable for welfare analysis we show that the expected consumer welfare can be higher under commercialization by sale than under commercialization by entry despite increased market power in the product market the reason is that when the quality of the invention is sufficiently high preemptive bidding competition among incumbents drives the acquisition price above the entry value entrepreneurs who sell their inventions will then have a stronger incentive to develop high quality inventions than entrepreneurs who aim at entering the product market incumbents are hurt by this creative destruction process ignited by the entrepreneurs and thus have an incentive to undertake research to block entrepreneurs research activities we show that incumbents own research effort can reduce but not eliminate the entrepreneurs incentives to innovate for entry or sale

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

truthfulness with value maximizing bidders on the limits of approximation in combinatorial markets abstract in some markets bidders want to maximize value subject to a budget constraint rather than payoff this is different to the quasilinear utility functions typically assumed in auction theory and leads to different strategies and outcomes we refer to bidders who maximize value as value bidders while simple single object auction formats are truthful standard multi object auction formats allow for manipulation it is straightforward to show that there cannot be a truthful and revenue maximizing deterministic auction mechanism with value bidders and general valuations approximation has been used as remedy to achieve truthfulness on other mechanism design problems and we study which approximation ratios we can get from truthful mechanisms we show that the approximation ratio that can be achieved with a deterministic and truthful approximation mechanism with n bidders cannot be higher than 1 n for general valuations for randomized approximation mechanisms there is a framework with a ratio that is tight

on the optimality of not allocating we show that the commitment to not allocate may be exploited by a seller social planner to increase the expected social surplus that can be achieved in the sale of an indivisible unit

walrasian equilibrium with gross substitutes in this paper we study the problem of efficient production and allocation of indivisible objects among a set of consumers we assume that the agents preferences depend on the bundle of objects and the quantity of money they consume furthermore we assume that preferences are quasilinear in money and that agents have a large endowment of money with indivisibilities it is well known that many familiar properties of the utility functions fail to ensure existence in their striking analysis of the matching problem kelso and crawford 5 introduce the gross substitutes gs condition which ensures the non emptiness of the core we propose two new conditions and show that with quasilinearity they are equivalent article id jeth 1999 2531 available online at http www idealibrary com on

competitive investment in higher education the need for policy coordination abstract when aggregate advanced skills determine an economy s capacity to attract external capital they function as an impure public good education subsidies are indicated but nash equilibrium in education policies yields excessive subsidies if the supply of capital is not elastic

no price like home global house prices 1870 2012 how have house prices evolved in the long run this paper presents annual house price indices for 14 advanced economies since 1870 based on extensive data collection we are able to show for the first time that house prices in most industrial economies stayed constant in real terms from the 19th to the mid 20th century but rose sharply in recent decades land prices not construction costs hold the key to understanding the trajectory of house prices in the long run residential land prices have surged in the second half of the 20th century but did not increase meaningfully before we argue that before world war ii dramatic reductions in transport costs expanded the supply of land and suppressed land prices since the mid 20th century comparably large land augmenting reductions in transport costs no longer occurred increased regulations on land use further inhibited the utilization of additional land while rising expenditure shares for housing services increased demand

selling an asset to a competitor a seller decides whether to allocate an item among two potential buyers the seller and buyer 1 interact ex post in such a way that each of them suffers a negative externality if the other possesses the item we show that the optimal allocation rule favors buyer 2 who does not interact ex post with the seller and in particular bidder 1 may not obtain the good even if his valuation is highest the auction is therefore subject to resale when resale is possible the seller must distort the original auction we show that the mechanism depends crucially on the way resale is organized ex post the seller may decide to always allocate the good to the agent with the highest valuation when rents are fully extracted by an intermediary on the resale market however she may resort to a stochastic mechanism when the winner of the primary auction has full bargaining power in the resale stage

monotone equilibrium in multi unit auctions in two sided multi unit auctions having a variety of payment rules including uniform price and discriminatory auctions a monotone pure strategy equilibrium mpse exists when bidders are risk neutral with independent multi dimensional types and interdependent values in fact all mixed strategy equilibria are ex post allocation and interim expected payment equivalent to mpse thus for standard expected surplus revenue analysis there is no loss restricting attention to monotone strategies

externalities and asymmetric information a reconsideration of the pigovian theory of regulating externalities via taxation is undertaken for environments with private information the presence of private information may have no effect on the social optimum but when it has an impact it is to cause a group of different agents to share the same production or consumption levels the model developed provides an appealing characterization of when such situations transpire they occur when the individuals who desire most to engage in some activity are the ones who society least wants to participate since such instances could potentially be regulated by the imposition of quantity controls this may explain authorities apparent predilection for quantity limits rather than tax cum subsidy schemes to manage many externalities

dynamic processes of social and economic interactions on the persistence of inefficiencies an economy with a finite number of agents and a finite number of states is considered an exogenous institutional rule prescribes which moves from one state to another are feasible to each coalition at each time an agent is called to act with some exogenous probability and he chooses a coalition a feasible new state to move the economy to and side payments between the agents in the coalition the setup can be applied to various dynamic processes of social and economic interactions such as legislative bargaining coalition formation or exchange economies whenever agents are unable to write long term contracts but are otherwise unconstrained both in their ability to write arbitrary spot contracts and in their ability to collude there can be long run inefficiencies with cycles or inefficient steady states however when agents are sufficiently patient the initial state from which the process starts plays no role in the long run moreover when there exists an efficient state that is free of negat

repeated auctions with impatient bidders and externalities author affiliation ki eun rhee krhee kdischool ac kr acknowledgment i am grateful to kyle bagwell for providing invaluable advice and support throughout the research process i also thank michael riordan eiichi miyagawa and two anonymous referees for helpful comments 1 introductioncollusive bidding behavior has been conventionally studied in a static setup often relying on some unspecified repeated interaction story for the enforcement of a cartel 1 it is not clear however whether the results from static auctions immediately carry over to a repeated setup when bidders are impatient and the enforcement or the participation constraint is binding moreover many empirical analyses for detecting collusion rely on an explicitly repeated structure rendering a theoretical analysis of collusion in a repeated setup necessary 2 several recent theoretical developments in repeated auctions have been made by aoyagi 2003 2007 skrzypacz and hopenhayn 2004 and blume and heidhues 2006 taking standard auctions as stage games these articles present various collusive bidding schemes with asymmetric punishments that outperform the bid rotation scheme which is known to be optimal in static auctions mcafee and mcmillan 1992 this article studies collusive bidding behavior in repeated auctions among both patient and impatient bidders when the outside option of the participation constraint is endogenized because of externalities a stage game involves negative externalities among the bidders when any losing bidder is worse off if a rival wins the good than if no one wins it auctions with externalities have been introduced most notably by jehiel and moldovanu 1996 and jehiel moldovanu and stacchetti 1996 these auctions describe environments in which the outcomes of auctions affect the nature of ensuing market interactions among potential bidders a wide variety of situations in which bidders are a set of oligopoly firms competing in the same market apply to this setting for example procurement auctions for highway construction contracts studied empirically by porter and zona 1993 may qualify as repeated independent private value auctions with negative externalities except that the lowest bidder wins 3 consecutive highway lettings were distributed by the department of transportation dot to a set of oligopoly firms competing in the same industry negative externalities may arise because a firm that wins the auction may experience learning by doing which provides the winning firm with a comparative cost advantage or because the winning firm may gain a reputation that gives the firm an advantage in future private sector competition as jehiel and moldovanu 1996 and jehiel moldovanu and stacchetti 1996 discuss the issue of participation is nontrivial in auctions with externalities because the ex ante payoff a bidder expects by not participating is no longer zero as in standard auctions but is rather endogenously determined by the actions of the other bidders thus an analysis of collusive bidding behavior under both nonbinding and binding participation constraints seems especially worth studying for these auctions the main findings of this article are that i there are no bidding wars along the equilibrium path and bidders expect to receive the maximal continuation values when they are both patient and impatient when bidders are impatient the optimal collusive bidding scheme involves ii a lower threshold type above whom bidding starts when externalities are small or iii more frequent jumps i e more sorting of bidders types when externalities are large in both cases seller s ex ante profit is higher when bidders are impatient if we consider patient bidders to be the ones that are interacting in a stable market 4 results carry an empirical implication either less frequent sales or fewer bid levels in auctions that are let out in stable markets will be observed

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

auctions aftermarket competition and risk attitudes with the experience of the sequence of umts auctions held worldwide in mind we consider a situation where firms participate in license auctions to compete in an aftermarket it is known that when a monopoly right is auctioned auctions select the bidder that is least risk averse this firm will choose a higher value of the aftermarket strategic variable than any other firm will do thereby implying a higher market price under price setting behavior and a lower price due to higher quantity under quantity setting behavior this paper extends the analysis to oligopoly aftermarkets and analyzes whether the monopoly result carries over to oligopoly settings we argue that with multiple licenses and demand uncertainty auctions actually perform even worse from a welfare point of view than the monopoly case would suggest a strategic effect strengthens the monopoly result with respect to prices but weakens the result with respect to quantities

bundling equilibrium in combinatorial auctions this paper analyzes ex post equilibria in the vcg combinatorial auctions if is a family of bundles of goods the organizer may restrict the bundles on which the participants submit bids and the bundles allocated to them to be in t he vcg combinatorial auctions obtained in this way are known to be truth telling mechanisms in contrast this paper deals with non restricted vcg auctions in which the buyers choose strategies that involve bidding only on bundles in and these strategies form an equilibrium we fully characterize those that induce an equilibrium in every vcg auction and we refer to the associated equilibrium as a bundling equilibrium the main motivation for studying all these equilibria and not just the domination equilibrium is that they afford a reduction of the communication complexity we analyze the tradeoff between communication complexity and economic efficiency of bundling equilibrium

the income elasticity of demand for housing evidence from concentration curves abstract this study applies techniques developed in the literature on income and consumption distribution to estimate income elasticities of housing demand although the approach cannot incorporate other determinants of demand raising the possibility of bias it possesses some attractive properties as well the approach economizes on the amount of data required for estimation and allows the elasticity to vary nonmonotonically with income if practitioners possess information on the direction of bias results of the approach can then be used to bound the value of income elasticity

competitive effect of cross shareholdings in all pay auctions with complete information abstract this paper investigates the competitive effect of cross shareholdings in winner take all all pay auctions with two asymmetric bidders we show that cross shareholdings may paradoxically create a pro competitive effect and elicit more effort than a standard contest without cross ownership this observation runs in contrast to the anti competitive effect that cross shareholdings usually create in standard oligopolistic settings such as cournot or bertrand competitions both bidding costs and the sizes of cross shares affect the resultant total effort non monotonically neither a cross share nor a higher bidding cost necessarily decreases effort supply a complete account of equilibrium bidding behaviors is provided and the necessary and sufficient conditions under which cross shareholdings lead to higher or lower levels of overall effort are identified however the pro competitive effect comes at a loss of efficiency

endogenous corruption in a neoclassical growth model abstract the following paper presents a simple neoclassical growth model where corruption is an endogenous result of competition between a public agent and a private agent the model provides a simple theoretical framework in which the level of corruption as well as the effects of corruption on income consumption and growth are identifiable bureaucratic red tape is then added to the model the results suggest that a priori corruption is neither efficiency enhancing nor efficiency detracting with respect to growth but always results in some income redistribution

truthful approximation mechanisms for restricted combinatorial auctions when attempting to design a truthful mechanism for a computationally hard problem such as combinatorial auctions one is faced with the problem that most efficiently computable heuristics can not be embedded in any truthful mechanism e g vcg like payment rules will not ensure truthfulness we develop a set of techniques that allow constructing efficiently computable truthful mechanisms for combinatorial auctions in the special case where each bidder desires a specific known subset of items and only the valuation is unknown by the mechanism the single parameter case for this case we extend the work of lehmann o callaghan and shoham who presented greedy heuristics we show how to use if then else constructs perform a partial search and use the lp relaxation we apply these techniques for several canonical types of combinatorial auctions obtaining truthful mechanisms with provable approximation ratios

capital is back wealth income ratios in rich countries 1700 2010 how do aggregate wealth to income ratios evolve in the long run and why we address this question using 1970 2010 national balance sheets recently compiled in the top eight developed economies for the united states united kingdom germany and france we are able to extend our analysis as far back as 1700 we find in every country a gradual rise of wealth income ratios in recent decades from about 200 300 in 1970 to 400 600 in 2010 in effect today s ratios appear to be returning to the high values observed in europe in the eighteenth and nineteenth centuries 600 700 this can be explained by a long run asset price recovery itself driven by changes in capital policies since the world wars and by the slowdown of productivity and population growth in line with the s g harrod domar solow formula that is for a given net saving

bidding securities in projects with negative externalities abstract we analyze the allocation of an indivisible project in a security bid auction in which i the allocation of the project to one bidder causes a negative externality to his opponents ii the winner has to pay a fixed cost to implement the project and iii the winner s implementation decision is not contractible to study the effect of such features on the seller s expected revenue we focus on a second price auction based on one of four securities i cash ii equity iii a fixed equity hybrid and iv a fixed cash hybrid we show that the fixed equity hybrid generates the highest expected revenue whereas equity generates the lowest even though it is the instrument with the highest linkage absent negative externalities equity would generate the highest expected revenue among these four securities the revenue ranking of the instruments is robust to the information structure and the presence of insurance deposits and entry fees

when do auctions ensure the welfare maximizing allocation of scarce inputs we determine when an unfettered auction will ensure the welfare maximizing allocation of a scarce input that enhances product quality and may reduce production costs a supplier values the input for this use value and for its foreclosure value because once the input is acquired it is unavailable to rivals an unfettered auction often ensures the welfare maximizing allocation of an input increment however it can fail to do so when the input would increase relatively rapidly the competitive position of a rival with a moderate competitive disadvantage bidder handicapping that ensures auctions generate welfare maximizing input allocations differ from standard handicapping policies

markets for ownership the prevailing economic theory of the firm based on a property rights perspective has demonstrated that ownership by dispensable outside parties is an inefficient outcome relative to ownership by productive agents in order to better understand observed patterns of ownership this paper considers the outcome of ma rkets for ownership that operate prior to production taking place the main result is that outside parties will often become the equilibrium asset owners this is precisely because but for ownership such parties would not earn rents in contrast productive agents earn rents even when they do not own assets given that their contribution is complementary with other productive agents their willingness to pay for ownership is less than that of an outside party this result is robust to the introduction of moderate levels of inefficiency arising from outside ownership and to a consideration of opportunities for re sale before production begins the main conclusion drawn is that the nature of the operation of markets for ownership stands alongside incentive effects as important predictors of firm boundaries journal of economic literature classification numbers d23 l22

tv wars exclusive content and platform competition in pay tv the article examines incentives for exclusive distribution of premium television programming static analysis shows that a vertically integrated operator with premium programming always supplies this content to the rival distributor using per subscriber fees to soften competition in a dynamic setting with switching costs exclusivity confers a market share advantage benefiting the operator in the future under certain conditions this future benefit outweighs the opportunity cost of forgone wholesale fees making exclusivity the preferred choice alternative dynamic mechanisms are explored identifying essential features the analysis explains the observed incidence of content exclusivity in pay tv and provides guidance for policy makers

attracting skeptical buyers negotiating for intellectual property rights expropriable disclosures of knowledge to prospective buyers may be necessary to facilitate the sale of intellectual property ip in principle confidentiality agreements can protect disclosures by granting the seller rights to sue for unauthorized use in practice sellers often waive confidentiality rights we provide an incomplete information explanation for the waiver of confidentiality rights that are valuable in complete information settings waiving sacrifices the protective value of confidentiality to gain greater buyer participation buyer skepticism which reduces participation arises endogenously from three elements asymmetric information regarding seller ip rent dissipation from competition for ip and ex post costs from expropriation lawsuits

hedging and competition abstract we consider firms that all else equal wish to minimize variability in their internal capital due to convex costs of raising external funds the firms can hedge the cash flow risk of the project but not that of winning or losing the auction we characterize optimal hedging and bidding strategies in this competition framework we show that access to financial markets makes firms bid more aggressively possibly even above their valuation for the project in addition hedging increases the variance of bids and makes firm values more dispersed further with hedging the covariance of internal capital changes with the risk factor is negative and is more negative the higher the correlation of the hedging instrument with the risk factor

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

compact bid languages and core pricing in large multi item auctions we introduce an auction design framework for large markets with hundreds of items and complex bidder preferences such markets typically lead to computationally hard allocation problems our new framework consists of compact bid languages for sealed bid auctions and methods to compute second price rules such as the vickrey clarke groves or bidder optimal core selecting payment rules when the optimality of the allocation problem cannot be guaranteed to demonstrate the efficacy of the approach for a specific complex market we introduce a compact bidding language for tv advertising markets and investigate the resulting winner determination problem and the computation of core payments for realistic instances of the respective winner determination problems very good solutions with a small integrality gap can be found quickly although closing the integrality gap to find marginally better solutions or prove optimality can take a prohibitively large amount of time our subsequent adaptation of a constraint

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

negotiating cultures in corporate procurement abstract in a repeated procurement problem the incumbent can undertake a relationship specific investment that generates opportunity costs of switching for the buyer we investigate the impact of the negotiating culture on investment incentives favoritism in the procurement contract allocation and buyer profit we compare a stylized competitive negotiating culture with a stylized protective culture the cultures differ in the way the buyer uses the entrance threat to exert pressure on the incumbent our main result is that the relative performance of the cultures depends non monotonically on the expensiveness of the investment

an efficient dynamic auction for heterogeneous commodities this paper proposes a new dynamic design for auctioning multiple heterogeneous commodities generalizing earlier work that treated identical objects an auctioneer wishes to allocate one or more units of each of k heterogeneous commodities to n bidders the auctioneer announces a vector of current prices bidders report back quantities demanded at these prices and the auctioneer adjusts the prices units are credited to bidders at the current prices as their opponents demands decline and the process continues until every commodity market clears bidders rather than being required to behave as price takers are permitted to strategically exercise their market power nevertheless with pure private values the proposed auction yields walrasian equilibrium prices an efficient outcome results as from a vickrey clarke groves mechanism but bidders are only required to evaluate their demands along a one dimensional path of prices rather than reporting their utilities over the entire k dimensional consumption set the auction is also more transparent and potentially simpler for bidders to understand and has the advantage of assuring the privacy of the upper portions of bidders demands theoretically the new auction provides a new foundation for convergence to walrasian equilibrium in an exchange economy practically it provides an efficient method for simultaneously auctioning two or more related types of securities for example three month and six month treasury bills it is also potentially useful for auctioning multiple types of communications spectrum for example licenses for paired and unpaired spectrum

characterization of ex post equilibrium in the vcg combinatorial auctions we prove that when the number of potential buyers is at least three every ex post equilibrium in the vickrey clarke groves combinatorial auction mechanisms is a bundling equilibrium and is symmetric this complements a theorem proved by holzman kfir dahav monderer and tennenholtz 2003 according to which the symmetric bundling equilibria are precisely those defined by a quasi field

reconsidering carbon permits auction mechanism an efficient dynamic model one of major concerns for china and developing countries is the new international trade rule concerning carbon emissions which one needs to know its suitable mechanism and the possible implication on china s carbon trading market precisely in an emission and trade scheme an important question is whether the auction outcome is efficient since this is closely related with the economic costs of emissions reduction due to the unique features of carbon permits existing auction mechanisms do not seem to be suitable for their distribution inspired by the t tonnement process this paper proposes a new auction mechanism for them for both practical application and theoretical extension the discrete and continuous situations are examined respectively the result shows that the proposed auction converges to pareto optimal equilibria and that without ties the equilibrium is unique for bidders the straightforward bidding strategy is the most preferred one in the sense that the strategy makes them avoid the risk of loss intuitively the auctioneer s utility is increasing in the number of bidders while bidders pay off is increasing in permits to a certain extent the proposed auction mechanism resolves the confliction between efficiency and revenue in the multi item auction theory while it increases people s understanding for carbon emission auction mechanism design

choosing the competition and patent licensing this article examines licensing as a means of choosing the competitors which a patentee monopolist will face in the period after the patent expires the queue of entrants consists of two firms which differ in their relative strengths as competitors for example by size or level of marginal cost by structuring the industry to be composed of weak competitors the incumbent is able to prolong its dominant position in the industry after the patent expires examples are presented in which the evidence suggests that choosing the competition was an important motivation of the licensor s behavior

raising rivals cost in multi unit auctions abstract the objective many telecom regulators want to achieve when they decide to auction spectrum is that acquiring firms pay a market price based on the opportunity cost principle the simultaneous ascending auction may fail in this respect as it provides bidders with an opportunity to engage in strategic demand reduction this paper asks whether the combinatorial clock auction cca fares better in this respect we show that the answer to this question depends on the objectives bidders have if bidders have only the slightest preference to raise rivals cost they will use the opportunities the cca provides them to engage in strategic demand expansion this is even the case when the clock phase ends with excess demand

stationary equilibria in bargaining with externalities this paper studies infinite horizon bargaining between a seller and multiple buyers when externalities are present we extend the analysis in jehiel and moldovanu by allowing for both pure and mixed equilibria jehiel p moldovanu b 1995a cyclical delay in bargaining with externalities rev econ stud 62 619 637 a characterization of the stationary subgame perfect equilibria in generic games is presented equilibria with delay exist only for strong positive externalities since each buyer receives a positive payoff when the seller makes an agreement with some other buyer positive externalities induce a war of attrition between buyers

monetary policy cooperation and multiple equilibria abstract we consider international monetary policy regimes in a world of two identical economies characterized by unemployment persistence in the non cooperative regime markov perfect nash equilibrium policies are generally not unique furthermore policies may be asymmetric in this otherwise symmetric model monetary policy cooperation also exhibits multiple equilibria but these are fewer and always symmetric cooperation may be counterproductive or beneficial for either country depending upon the initial non cooperative and resulting cooperative outcome

how not to raise money we show that standard winner pay auctions are inept fund raising mechanisms because of the positive externality bidders forgo if they top another s high bid revenues are suppressed as a result and remain finite even when bidders value a dollar donated the same as a dollar kept this problem does not occur in lotteries and all pay auctions where bidders pay irrespective of whether they win we introduce a general class of all pay auctions rank their revenues and illustrate how they dominate lotteries and winner pay formats the optimal fund raising mechanism is an all pay auction augmented with an entry fee and reserve price

sustaining policy cooperation between economies of different size abstract i consider an example of a two country model featuring national heterogeneity and demonstrate that heterogeneity plays an important role for the countries gains from international policy cooperation and just as important for the incentives to break the cooperative agreement i find that national heterogeneity unambiguously reduces trigger strategies support for policy cooperation in other words the more countries differ the harder it is to sustain policy cooperation

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

auction protocols for decentralized scheduling decentralized scheduling is the problem of allocating resources to alternative possible uses over time where competing uses are represented by autonomous agents market mechanisms use prices derived through distributing bidding protocols to determine schedules we investigate the existence of equilibrium prices for some general classes of scheduling problems the quality of equilibrium solutions and the behavior of an ascending auction mechanism and bidding protocol to remedy the potential nonexistence of price equilibria due to complementarities in preference we introduce additional markets in combinations of basic goods finally we consider direct revelation mechanisms and compare to the market based approach journal of economic literature classification numbers c62 c70 d44

correlated information and mechanism design in models of asymmetric information possession of private information leads to rents for the possessors this induces mechanism designers to distort away from efficiency the authors show that this is an artifact of the presumption that information is independently distributed rent extraction in a large class of mechanism design games is analyzed and a necessary and sufficient condition for arbitrarily small rents to private information is provided additionally the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition similar conditions allow full rent extraction in milgrom weber auctions

resale markets and the assignment of property rights the consumption of an indivisible good causes identity dependent externalities to non consumers we analyse resale markets where the current owner designs the trading procedure but cannot commit to future actions we ask the following questions 1 doer the identity of the initial owner matter for the determination of the final consumer 2 is the outcome always efficient the major conclusion of our paper is that the irrelevance of the initial structure of property rights arises in resale processes even if there are transaction costs that hinder efficiency this result complements the coasian view where the irrelevance of the assignment of property rights is a consequence of efficiency

structural change in a multisector model of growth we study a multi sector model of growth with differences in tfp growth rates across sectors and derive sufficient conditions for the coexistence of structural change characterized by sectoral labour reallocation and constant aggregate growth path the conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists we present evidence from us two digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services we show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model

a mechanism design approach to the tiebout hypothesis we revisit the tiebout hypothesis in a world in which agents may learn extra information as to how they value the various local public goods once located and jurisdictions are free to commit to whatever mechanism to attract citizens it is shown in quasi linear environments that efficiency can be achieved as a competitive equilibrium when jurisdictions seek to maximize local revenues but not necessarily when they seek to maximize local welfare interpretations and limitations of the result are discussed

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

the english auction with differentiated commodities abstract we study economies with indivisibilities that satisfy the gross substitutes gs condition we define an excess demand set with the property that increasing the prices of all goods in excess demand eventually leads to the smallest walrasian prices this procedure is a generalization of the auction studied by g demange d gale and m j sotomayor polit econ 94 1986 863 872 in our auction truthful revelation of demand is a perfect bayesian equilibrium if the smallest walrasian prices correspond to the vickrey clarke groves payments however no dynamic auction can reveal sufficient information to implement the vickrey mechanism if all gs preferences are allowed journal of economic literature classification numbers d4 d44 d5 d51

the distribution of wealth and fiscal policy in economies with finitely lived agents we study the dynamics of the distribution of wealth in an overlapping generation economy with finitely lived agents and intergenerational transmission of wealth financial markets are incomplete exposing agents to both labor and capital income risk we show that the stationary wealth distribution is a pareto distribution in the right tail and that it is capital income risk rather than labor income that drives the properties of the right tail of the wealth distribution we also study analytically the dependence of the distribution of wealth of wealth inequality in particular on various fiscal policy instruments like capital income taxes and estate taxes and on different degrees of social mobility we show that capital income and estate taxes can significantly reduce wealth inequality as do institutions favoring social mobility finally we calibrate the economy to match the lorenz curve of the wealth distribution of the u s economy

the forward method as a solution refinement in rational expectations models this paper generalizes the standard forward method of recursive substitution to a general class of linear rational expectations models with potentially multiple fundamental solutions we propose a key property embedded in the forward solution the no bubble condition as an economically sensible solution renement in the class of fundamental solutions in the literature the no bubble condition has been assumed to rule out non fundamental bubble solutions however since the condition involves expectations of the future endogenous variables it must be veried for every rational expectations equilibrium we show that the forward solution is the only fundamental solution satisfying the no bubble condition and that it is hard to justify economically fundamental solutions violating this condition we provide several economic examples where the fundamental solutions obtained by other solution methods and rened by other solution selection criteria violate

fundamentals behind house prices abstract we build a two sector neoclassical growth model with housing to reveal a set of fundamental forces behind the movement of house prices the relative price of house exhibits secular growth that is determined by sectoral technological progress and factor intensities off the balanced growth path it comoves negatively with the real rate of interest

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

the design of an efficient private industry government sponsored auctions for production rights e g license auctions privatizations etc shape the industry structure are there mechanisms that induce an efficient industry structure at least when there are no positive costs to public funds the answer is no whenever firms have private information about both fixed and marginal costs our analysis also suggests that the second best industry may either be more competitive or more monopolistic than the first best one these insights are in sharp contrast with the ones obtained for models where firms have one dimensional private information thus requiring more delicate policy recommendations jel d43 d45 d82 l1

collective decisions with interdependent valuations abstract many collective decision problems have in common that individuals desired outcomes are correlated but not identical this paper studies collective decisions with private information about desired policies each agent holds private information which mainly concerns his own bliss point but private information also affects all other agents we concentrate on two specific mechanism the median and mean mechanisms establish the existence of symmetric bayesian nash equilibria of the corresponding games and compare the performance of the mechanisms for different degrees of interdependencies applications of our framework include the provision of public goods and the design of decision processes in international organizations

auctions with quantity externalities and endogenous supply abstract this paper studies the design of license auctions when the number of licenses allocated in the auction determines structure of the post auction market i first show that a sequence of conditional reserve prices that specify minimum acceptable bid at each supply level can be used to determine supply endogenously then i construct a static auction called multi dimensional uniform price auction and a dynamic auction called walrasian clock auction that allow the auctioneer to condition reserve price on supply and allow bidders to condition bids on supply i show that both proposed auctions can implement the efficient market structure that maximizes total surplus in the post auction market in a dominant strategy equilibrium i next characterize the optimal auction and show that the two proposed auctions can yield the optimal revenue under a sequence of optimal reserve prices

fees versus royalties and the private value of a patent we compare how much profit an owner of a patented cost reducing invention can realize by licensing it to an oligopolistic industry producing a homogeneous product by means of a fixed fee or a per unit royalty our analysis is conducted in terms of a noncooperative game involving n 1 players the inventor and the n firms in this game the inventor acts as a stackelberg leader and it has a unique subgame perfect equilibrium in pure strategies it is shown that licensing by means of a fixed fee is superior to licensing by means of a royalty for both the inventor and consumers only a drastic innovation is licensed to a single producer

fiscal centralization versus decentralization growth and welfare effects of spillovers leviathan taxation and capital mobility abstract this paper develops an endogenous growth model with spillovers of public goods leviathan taxation and mobile capital to examine the relative merits of centralized and decentralized fiscal systems for economic growth and social welfare we show that a decentralized system dominates a centralized system in terms of economic growth however the difference in social welfare between a decentralized and a centralized system is non monotonic and displays a hump shaped relationship with respect to capital mobility since higher capital mobility induces stronger tax competition this finding implies that there is an optimal degree of tax competition some tax competition is desirable but fierce tax competition may be harmful we also show that there is a critical level of spillovers of public goods above which centralization dominates decentralization in terms of social welfare as in previous studies however if spillovers are below this critical level capital mobility also matters in the welfare comparison between centralized and decentralized systems

no one likes to be second choice a decision maker is interested in appointing one individual from a group of candidates to a public position with an exogenous wage he must decide in what order to approach them candidates who are more valuable to the decision maker are less likely to be available the candidates preferences have a social component each candidate finds the position more attractive if he is highly ranked by the decision maker relative to the other candidates however the decision maker s preferences are his private information as a result candidates infer the decision maker s evaluation of them based on the number of candidates who have previously turned him down the main result is that when the number of candidates is suficiently large all of the candidates reject the decision maker s offers including those whom he most values moreover the decision maker s payoff is not monotonic in the number of candidates

mediators in position auctions abstract a mediator is a reliable entity which plays on behalf of the players who give her the right to play the mediator acts in a pre specified way based on messages received from the players however a mediator cannot enforce behavior that is players can play in the game directly without the mediator s help a mediator generates a new game for the players the mediated game the outcome in the original game of an equilibrium in the mediated game is called a mediated equilibrium monderer and tennenholtz introduced a theory of mediators for games with complete information we extend the theory of mediators to games with incomplete information and apply the new theory to position auctions a central topic in electronic commerce we provide a minimal set of conditions on position auctions which is sufficient to guarantee that the vcg outcome function is a mediated equilibrium in these auctions

theory and estimation in the economics of housing demand the main purpose of this paper is to review recent theoretical and empirical developments in the economics of housing demand in particular we ask what is known concerning the permanent income elasticity of housing demand vis a vis the current or measured income elasticity what is known concerning price elasticities what is the appropriate functional form for housing demand equations what is the role of demographic variables what is known concerning dynamic aspects of housing demand what appear to be the major sources of bias in existing estimates of demand equations

mechanism and network design with private negative externalities a revenue maximizing monopolist is selling a single indivisible good to buyers who face a loss if any of its rival buyers obtain it the rivalry is modeled through a network an arc between a pair of buyers indicates that a buyer considers another buyer its rival and the magnitude of the loss is the private information of each buyer this loss exposure due to competitive considerations can be viewed as a negative externality first using a myersonian approach we derive the monopolist s optimal mechanism for any given network second we show that revenues depend on the network structure thus in applications where it is possible the monopolist might consider designing not only the mechanism but also the network if not fully at least partially third we provide and fully describe the solution to the monopolist s market design problem that is the joint network and mechanism design problem specifically despite the nonmonotone impact of additional competition on the monopolist s revenues we deter

fiscal federalism decentralization and economic growth a meta analysis the theoretical literature on fiscal federalism has identified several channels through which government decentralization could affect economic growth much of the literature focuses on the efficiency aspects of a decentralized provision of public services but decentralization may also increase growth by raising the ability of the political system to innovate and carry out reforms in contrast some authors argue that decentralization increases corruption and government inefficiency and thus may diminish growth given this theoretical ambiguity several studies have attempted to identify the effect of decentralization on economic growth empirically over the last two decades we review and conduct a meta analysis of this empirical literature based on our analysis we point out open questions and discuss possible ways to answer them jel h77 043 c52 i introduction building on various theoretical contributions an empirical literature analyzing the effect of fiscal decentralization on economic growth has emerged since the 1990s the relevant studies vary as to whether they use cross sectional time series or panel data as to whether they rely on cross country or single country samples and they vary in estimation methods decentralization measures and sample composition given the size and heterogeneity of the empirical literature it is useful to review the individual studies and summarize their main findings conducting a comprehensive search we identify 31 published and unpublished studies on the effect of fiscal decentralization on economic growth each of these studies estimates several models resulting in over 400 individual estimates while we first review these studies in a traditional manner our main aim is to analyze these estimates quantitatively specifically the main contribution of this article is to offer a meta analysis of the empirical findings on fiscal decentralization and economic growth a meta analysis is a useful methodology in our context as it is difficult to obtain clear cut conclusions with only a traditional survey of empirical literature the individual studies vary substantially in their characteristics and correspondingly in the findings they report by conducting a meta analysis however we can identify how the idiosyncratic characteristics of a particular study relate to its findings the meta analysis approach thus addresses model uncertainty with regard to each individual estimate in addition it can also serve as a partial response to the methodological critique of empirical research on fiscal decentralization by rodden 2004 as it helps to clarify the quantitative effects of different decentralization measures and estimation techniques finally as meta analytical techniques are rarely used in economics we also aim at contributing to the further establishment of this methodology stanley 2001 2008 the next section briefly discusses the various theoretical arguments as to why fiscal decentralization may affect economic growth we then provide a short traditional survey of the empirical studies in section iii we review this literature more systematically and quantitatively in section iv in section v we report the results of meta regressions and discuss how the idiosyncratic characteristics of a given study are related to its specific findings finally section vi provides a discussion of the results and some conclusions ii how could fiscal federalism affect economic growth theoretical approaches within the framework of the solow swan model solow 1956 swan 1956 fiscal federalism may be associated with a different level of efficiency in governance than unitary systems leading to a different value of solow s a the level of technology a regime change toward federalism would then be associated with temporarily different growth rates and eventually different levels of income but not with persistent growth differences

allocation decisions in network industries abstract in this paper i want to propagate a new analytical tool the usage of menu auctions for modelling complicated auctions negotiations rent seeking etc is advocated because contrary to normal auctions and bargaining models an arbitrary number of additional aspects can be taken into account after concentrating on truthful equilibria bernheim b d whinston m d 1986 menu auctions resource allocation and economic influence quarterly journal of economics 1 31 a certain broad class of menu auctions show unique and efficient allocations under an additional concavity condition even the equilibrium bids are unique two examples are discussed the privatisation of a state owned industry and the buying of wholesale electricity concluding contracts with a number of producers by a utility these examples also serve to trace the sources of non concavities which can prevent the uniqueness of bids and can provide the auctioneer with incentives to exclude bidders from the competition

public infrastructure non cooperative investments and endogenous growth two countries strategically invest in productive infrastructure within a general equilibrium model with endogenous growth these public investments generate externalities dynamic analysis reveals that 1 under constant returns the two countries growth rates differ during the transition but are identical on the balanced growth path 2 a country with decreasing returns can experience sustained growth provided that the other country grows at a positive constant rate 3 cooperation does not necessarily lead to higher growth for each country and it can increase or decrease the gap between countries growth rates depending on the countries consumption preferences regarding domestic and foreign goods comportements non cooperatifs en matiere d investissement dans les infrastructures publiques et croissance endogene deux pays investissent strategiquement dans des infrastructures productives au sein d un modele d equilibre general avec croissance endogene ces capitaux publics generent des externalites l analyse dynamique revele que 1 quand les rendements sont constants les taux de croissance des deux pays different au cours de la transition mais sont identiques sur le sentier de croissance equilibree 2 un pays avec des rendements decroissants peut connaitre une croissance soutenue a condition que l autre croisse a un rythme constant positif 3 la cooperation ne conduit pas necessairement a une croissance plus elevee pour chaque pays et elle peut augmenter ou diminuer l ecart des taux de croissance entre les pays en fonction des preferences

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

auctions as coordination devices this paper develops an economic argument relating auctions to high market prices at the core of the argument is the claim that market competition and bidding in an auction should be analyzed as part of one game where the pricing strategies in the market subgame depend on the bidding strategies during the auction i show that when there are two licenses for sale the only equilibrium in the overall game that is consistent with the logic of forward induction is the one where firms bid an amount almost equal to the profits of the cooperative market outcome and follow a cooperative pricing strategy in the market game resulting in high prices with three or more licenses the auction format co determines whether or not the forward induction argument works

international fiscal policy coordination and economic growth this paper examines the effects of policy coordination in a two country model of endogenous growth governments choose taxes to provide public inputs and public consumption goods tax rates affect the rewards to investment and rates of economic growth two regimes are examined one with independent policy making and one with policy coordination whatever the regime the choice of public inputs is always efficient without coordination however governments choose inefficient tax rates but taxes may be either higher or lower than under policy coordination as a consequence growth rates may be lower or higher than those under policy coordination copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

how important is discount rate heterogeneity for wealth inequality abstract this paper investigates the role of discount rate heterogeneity for wealth inequality the key idea is to infer the distribution of preference parameters from the observed age profile of wealth inequality the contribution of preference heterogeneity to wealth inequality can then be measured using a quantitative life cycle model i find that discount rate heterogeneity increases the gini coefficient of wealth by around 0 07 to levels that are close to the data the share of wealth held by the richest 1 of households rises by around 0 04 but falls short of the data by more than 10 percentage points discount rate heterogeneity also helps to account for the large wealth inequality observed among households with similar lifetime earnings

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

the housing cost disease abstract using a simple two sector life cycle economy with housing services and bequests we show that a rising labor efficiency in the general economy relative to the construction sector can go a long way toward explaining a significant fraction of the rising trends in wealth to income ratios housing wealth and wealth inequality that have been documented in most advanced countries at least since the 70s this mechanism which we label housing cost disease has adverse effects on social welfare when the planner puts sufficient weight on the less wealthy households

intergenerational transfers and the accumulation of wealth h t ouseholds acquire wealth from two sources they save out of income they have earned and they receive transfers from other people the first method of wealth accumulation goes under the name of life cycle saving in which people save during their working lives and dissave after retirement the second involves either an inter vivos transfer that is a transfer between living people or a bequest a transfer that occurs at the death of the donor while inter vivos transfers and bequests will arise in dynastic models where preferences include a taste for the well being of one s descendents few empirical life cycle models reflect these concerns indeed a sharp debate has arisen over the ability of the simple life cycle model to explain observed wealth accumulation understanding the relative sizes of these sources of wealth accumulation affects a variety of issues for example the effects of government debt social insurance public transfer programs estate taxes and incentives for charitable giving depend to some extent on the magnitude and nature of private saving and transfers of wealth analyses of the inequality of wealth may depend on whether most of wealth is earned or received as transfers appropriate policies for encouraging private saving may look rather different depending on whether most saving is to be consumed later in life or passed along to the next generation finally evidence on transfer patterns relates to more fundamental

the role of optimal threats in auction design abstract this paper studies revenue maximizing auctions when buyers outside options depend on their private information and are endogenously chosen by the seller we show that the revenue maximizing assignment of the object can depend crucially on the outside options that the seller can choose as threats depending on the shape of outside options sometimes an optimal mechanism allocates the object in an ex post efficient way and other times buyers obtain the object more often than is efficient

privatization and foreign competition abstract this paper determines the equilibrium market structure in an international oligopoly where a state enterprise is sold at an auction the paper suggests that high greenfield costs and high trade costs do not necessarily induce foreign acquisitions in privatizations despite the fact that foreign firms would gain considerably from acquiring in such situations the reason is that domestic firms can then prevent foreign firms from becoming strong local competitors and thus their willingness to pay for the state assets is high

equilibrium rejection of a mechanism we study a mechanism design problem in which players can take part in a mechanism to coordinate their actions in a default game by refusing to participate in the mechanism a player can revert to playing the default game non cooperatively we show with an example that some allocation rules are implementable only with mechanisms which will be rejected on the equilibrium path in our construction a refusal to participate conveys information about the types of the players this information causes the default game to be played under different beliefs and more importantly under different higher order beliefs than the interim ones we find a lower bound on all the implementable payoffs we use this bound to establish a condition on the default game under which all the implementable outcomes are truthfully implementable without the need to induce rejection of the mechanism

does total factor productivity drive housing prices a growth accounting exercise for four countries abstract housing prices diverge from construction prices after 1997 in four major countries besides total factor productivity tfp differences between construction and the general economy account for the evolution of construction prices in the us and germany but not in the uk and spain