political competition and voter mobility the existing model of political competition is extended to allow voters to live in different regions and to migrate between regions in response to an inter regional transfer policy we then show that regions have a different weight in the expected vote function of political parties this gives parties an incentive to bias the transfer policy in favour of relatively high weight regions with potentially adverse efficiency and equity effects however we then show that parties always propose efficient and equitable regional transfers regardless of whether regions have different weights if there is some mobility of citizens across regions mobility constrains parties to act efficiently and equitably even though they face an incentive to act otherwise however when voters are immobile political competition leads to inequitable though efficient outcomes

radio spectrum and the disruptive clarity of ronald coase abstractin the federal communications commission ronald coase exposed deep theoretical foundations via normative argument the government controlled scarce frequencies spillovers were said to be otherwise endemic coase saw that regulators limited conflicts by restricting uses and that property owners routinely perform such functions via the price system the fundamental insight was that analytical symmetry was demanded accounting for the net benefits of both regulation and markets coase augured that the price system would outperform administrative allocation a conclusion mocked by communications policy experts yet one specific slice of the coasean program competitive bidding for licenses commenced at the federal communications commission in 1994 today over 70 u s auctions have been held 31 305 licenses sold and 52 6 billion paid to the treasury the reform is a textbook example of economic policy success even as it raises the question why have market mechanisms not been further implemen

effects of regulation and capital market imperfections on the dynamic behavior of a firm the well known result in the theory of a regulated firm known as the averch johnson effect is that a profit maximizing firm subject to rate of return regulation uses an inefficiently high capital labor ratio to produce its chosen level of output numerous contributions in the literature have been instrumental in clarifying the implications and generalizing the model 1 these contributions however have been mostly couched within a static framework few attempts have been made to investigate the effect of rate of return regulation on the dynamic behavior of the firm in particular its investment plans 2 neoclassical models of investment often assume that the rate of investment under

electoral outcomes with probabilistic voting and nash social welfare maxima abstract this paper provides unexpected support to nash s view of how bargaining determines the social choice we first present a spatial model of electoral competition with probabilistic voting and a very close relation between voters preferences and their choice probabilities the outcome of the electoral competition game is then shown to be precisely the social alternative that maximizes a nash type social welfare function theorem 1 this electoral outcome is also interpreted as a unanimity likelihood maximum corollary 1 within our framework existence and uniqueness of such an outcome are guaranteed corollaries 2 and 3

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

the tradeoff of the commons under stochastic use abstract we develop a model of scarce renewable resources to study the problem of the commons our model formulation differs from the existing literature in that it assumes the use of the commons to be stochastic in nature one example is microwave spectrum for mobile and wireless communications we investigate three mechanisms of resource allocation free usage the exclusive franchise and a regulated monopoly we show that the welfare tradeoff among these three mechanisms depends on the characteristics of the commons and their usage patterns in particular we find that property rights are not always the best solution we then make four extensions that apply to spectrum allocations

distributional consequences of airport congestion pricing abstract imposition of airport congestion pricing redistributes welfare among commercial regional and general aviation this article extends daniel s econometrica63 327 370 1995 stochastic bottleneck model with dynamically adjusting traffic rates queuing delays and congestion fees to include elastic demand heterogeneous operating time preferences and heterogeneous layover and queuing time values using parameters from minneapolis st paul airport simulations of congestion pricing determine its effects on equilibrium traffic patterns queuing delays schedule delays airport revenues and social welfare gains by commercial aviation common travelers and airport authorities exceed losses by general and regional aviation the article evaluates several price and rebate programs and proposes several that are self financing and pareto improving

policy watch medicare public policies are often made without much recourse to economic reasoning economists are sometimes unaware of what is happening in the world of public affairs as a result both the quality of public decision making and the role that economists play in it are less than optimal this feature contains short articles on topics that are currently on the agendas of policymakers thus illustrating the role of economic analysis in illuminating current debates suggestions for future columns and comments on past ones should be sent to daniel weinberg c o journal of economic perspectives hhes division bureau of the census department of commerce washington d c 20233

spectrum auctions yesterday s heresy today s orthodoxy tomorrow s anachronism taking the next step to open spectrum access abstract the auction paradigm for spectrum allocation has moved from heresy to orthodoxy but like its predecessors it will not be the end of history a better alternative not driven by the revenue needs of government is license free spectrum users would gain entry to frequency bands on a pay as you go basis instead of controlling a slice of the spectrum they would transmit their content together with access tokens these tokens are electronic money access prices would vary with congestion set by automatic clearinghouses of spectrum users spot and futures markets for spectrum access would emerge once technology and economics can solve the interference problem in ways other than exclusivity the question arises whether the right to use the spectrum for electronic speech is the government s to sell in the first place

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

george stigler s contribution to the economic analysis of regulation george stigler changed the way economists analyze government regulation this enormous legacy is essentially embodied in two articles his 1962 analysis of electricity rates with claire friedland and his 1971 theoretical piece there were to be sure precursors and successors in his own work but none of them so profoundly affected the course of intellectual inquiry as these two the importance of both articles rests more i believe with the questions each posed than with the answers even by the standards of the day neither piece evinced the sort of technical sophistication that the profession has come to admire neither produced conclusions that were impervious to all serious subsequent challenges but both produced insights that have altered the course of research in the area to this day to understand stigler s contribution it is best to proceed chronologically and to begin with the state of the field around 1962 there is room here only for caricature rather than extensive survey however i think it is fair to say that the field derived its main energy from the normative economics of marginal cost pricing the proper role of government was to correct the private market failures that prevented attainment of marginal cost pricing applied economic analysis of regulation was then largely descriptive and its main tendency was to show how the regulatory institutions constrained departures from marginal cost pricing monopoly was viewed as the main barrier to marginal cost pricing and the natural monopoly occupied center stage in the economics of regulation the prime examples of natural monopoly were sup1 man made monopolies were the main subject matter of industrial organization stigler s profound influence on this field is summarized by harold demsetz s article in this issue

extending the economic theory of regulation to the form of policy the mutually beneficial connection between industries and the governments that regulate them is the subject of a large literature led by stigler 1971 what has not been studied is how firms choose their desired policies from the set including entry barriers price floors subsidies and demand stimulation we take as given that government and incumbents from the supply and demand for regulation and explore the choice of political product

congestion pricing and capacity of large hub airports a bottleneck model with stochastic queues this paper models and estimates congestion prices and capacity for large hub airports the model includes stochastic queues time varying traffic rates and endogenous intertemporal adjustment of traffic in response to queuing delay and fees relative costs of queuing and schedule delays are estimated using data from minneapolis st paul simulations calculate equilibrium traffic patterns queuing delays schedule delays congestion fees airport revenues airport capacity and efficiency gains the paper also investigates whether a dominant airline internalizes delays its aircraft impose it tests game theoretic specifications with atomistic nash dominant stackelberg dominant and collusive airline traffic

the tradeoff of the commons we develop a model of scarce renewable resources to study the commons problem we show that contrary to conventional wisdom property rights can often be less efficient than a commons in particular we study two effects 1 waste which arises when individuals expend resources to use a resource unavailable due to congestion and 2 the risk of underutilization of the resource we provide necessary and sufficient conditions for each effect to dominate the other when the cost of determining the availability of a resource is low

probabilistic voting and equilibrium an impossibility result the introduction of voters uncertainty alone is in no way sufficient to guarantee an equilibrium outcome of a voting process what is needed in addition is the assumption that the voting probabilities depend strictly convex respectively concave of the utility losses caused by the proposed policies of the different parties this assumption is however not compatible with an unrestricted policy space and it has to be rejected for theoretical as well as empirical reasons thus using models of probabilistic voting we still have to accept that cycles can arise and electoral outcomes are prone to manipulation via agenda setting

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

law and economics at chicago it is a double honor to have been invited to deliver the simons lecture on the occasion of the celebration of the centennial of the university of chicago although at my age a century seems a rather short period we all know that the university of chicago has not suffered from the usual human limitations it emerged from the ground fully grown it had neither an infancy nor an adolescence and wasted no time in working its way to the top it started at the top economics at the university of chicago was no exception the first head of the economics department j l laughlin himself a redoubtable authority on money set about recruiting a formidable faculty including thorstein veblen when i went as a student to the london school of economics in 1929 some thirty seven years after the formation of the university of chicago its economics department was recognized to be one of the most powerful in the world foremost in our minds at the time mainly as a result of the teaching of lionel robbins was frank knight he was regarded at the london school of economics as one of the greatest of economists and his book risk uncertainty and profit was closely studied by all serious students of economics there then there was jacob viner an economic theorist of great ability and erudition whose work put him in the top rank of economists another member of the faculty was henry schultz one of the pioneers of econometrics whose empirical work on the derivation of statistical demand schedules was regarded as a major contribution to economics finally there was paul douglas a strange man who thought it more important and interesting to be a united states senator than a professor at the university of chicago his empirical work on wages and

the demand to regulate franchise monopoly evidence from catv rate deregulation in california the demand to regulate franchise monopoly evidence from catv rate deregulation in california the motivation to price control a franchise monopoly is examined in the context of three distinct economic views of regulatory behavior these views are tested against data from the california cable television market over the years 1980 85 during which a subset of monopoly firms converted from regulated to unregulated pricing for basic cable service as the price constraints of regulation appear to be insignificant in a welfare analysis the demand for such controls by municipalities is derived from their utility in enforcing vote maximizing transfer schemes a peltzmanian political outcome with a stiglerian economic welfare result i introduction since the pathbreaking inquiry by stigler and friedland 1962 it has been fair game for economists to investigate how the publicly stated goals of regulation square with the observed economic results whereas empirical research has often revealed a surprisingly low correlation theoretical models of political behavior have been developed to explain how regulators would rationally attempt to maximize political strength and hence personal utility by pursuing a support maximizing transfer scheme how far such incentive structures for regulators go toward enhancing consumer welfare is the primary concern of public policy analysis by economists indeed the study of regulatory results has yielded new insights into the antecedent demand for regulation when publicly announced goals are not achieved economists are often tempted to attribute the discrepancy not to random error but to a strategic desire to mask intended transfer schemes hence results of regulation can shed light on the motives for regulation this paper inquires into the motivations for municipal regulation of the cable television market part ii sets three previously developed views of regulatory behavior into a unified framework and reviews previous research on price regulation in the electric utility industry part iii describes an efficiency test for cable rate regulation in california in a sector dominated by municipally assigned franchise monopolies price and output effects of regulation are likely to be most dramatic and hence most informative moreover cable s changing regulatory regime offers grist for analysis in part iv i examine evidence from the 1979 partial deregulation of catv in california and draw inferences regarding the demand to regulate cable franchises in part v my conclusions appear in part vi ii regulatory behavior at least three alternative models of regulatory behavior have been advanced in the literature looking at the world in the peltzman 1976 sense politicians regulators are seen as engaging in two dimensional support maximization in that redistributing income by whatever institutional method necessarily involves losers as well as winners some competitive equilibrium of transfers will be achieved by maximizing political actors see figure 1 panel a as a rule regulators will transfer wealth from consumers and towards the regulated industry just up to the point at which the marginal industry support gained is equal to the marginal consumer support lost fortuitously peltzman s paradigmatic political regulatory decision focuses upon the correlation between output price and profits of a regulated public utility seen in the profit hill in panel a of figure 1 and the trade off faced specifically by the regulatory agent in gaining support from one constituency at the cost of support from another as in the u sup p indifference curve in figure 1 this framework dovetails with the discussion of price regulation in cable to follow peltzman saw the regulator as a public policy auctioneer garnering maximum political support from both consumers and producers in establishing an optimal regulated price

dynamic behavior of the firm with adjustment costs under regulatory constraint abstract this paper investigates the optimal investment behavior of the regulated profit maximizing firm in a dynamic context the modern adjustment cost approach to investment is incorporated into the theory of a regulated firm which has typically been discussed in a static framework this paper thus generalizes the well known averch johnson thesis which is proved in the static context the paper investigates both the finite and infinite horizon cases

majority rule and election models abstract this paper surveys the theoretical work that has been done on majority rule and economic models of elections section i provides an overview of the topic section 2 reviews the most important results that have been obtained about majority rule as an abstract collective choice rule section 3 identifies some alternative inferences that can be made from those results section 4 covers some models that include additional features that are present in political institutions where majority rule is used section 5 concentrates on some alternative election models and equilibrium concepts section 6 focuses on election models with abstentions and or candidate uncertainty about voter behaviour section 7 compares and contrasts models where candidates are certain about what the voters choices will be contingent upon about the choices made by the candidates and models where they are uncertain about those choices section 8 closes the survey by identifying some emerging areas of research

efficient relocation of spectrum incumbents changes in technologies and in consumer demands have made prior radio spectrum allocations far from efficient to address this problem the fcc has recently reallocated spectrum for more flexible use in bands that are partially occupied by incumbent license holders often it is necessary for the new license holder to relocate incumbents to make efficient use of the spectrum regulations structuring the negotiation between incumbent and new entrant can promote efficiency in particular giving the new entrant the right to move the incumbent with compensation can reduce negotiation costs and promote efficiency when there is private information about spectrum values but good public information about the cost of relocating the incumbent we examine the experience of broadband pcs entrants in relocating microwave incumbents we conclude with some remarks on how these ideas might be applied to digital television spectrum

pervasive shortages under socialism we present a new theory of pervasive shortages under socialism based on the assumption that the planners are self interested because the planners meaning bureaucrats in the ministries and managers offirms cannot keep the official profits that firms earn it is in their interest to create shortages of output and to collect bribes from consumers the theory implies that 1 an increase in the official price of a good might reduce output 2 market socialism is bound to fail even without computational complexities facing the planners and 3 price liberalization will succeed only iffirms get to keep their profits

the antitrust implications of capacity reallocation by a dominant firm when a firm acquires rival firms in one market and moves their capacity to another market should antitrust authorities be concerned we address this question by studying a multi stage game a dominant firm has the opportunity to acquire fringe firms that operate in the same market then the dominant firm has the opportunity to move capacity from that market to a second market the model is motivated by a series of acquisitions in the specialized mobile radio industry aimed at establishing a new cellular carrier we derive necessary and sufficient conditions for the dominant firm to acquire too little capacity relative to the social optimum the results shed light on the consent decree negotiated in us v motorola inc and nextel communications inc 1994

competition for scarce resources we model a downstream industry where firms compete to buy capacity in an upstream market which allocates capacity efficiently although downstream firms have symmetric production technologies we show that industry structure is symmetric only if capacity is sufficiently scarce otherwise it is asymmetric with one large fat capacity hoarding firm and a fringe of smaller lean capacity constrained firms as demand varies the industry switches between symmetric and asymmetric phases generating predictions for firm size and costs across the business cycle surprisingly increasing available capacity can cause a reduction in output and consumer surplus by resulting in such a switch

pareto optimality of policy proposals with probabilistic voting this paper studies the pareto optimality properties of policy proposals and electoral outcomes when there is probabilistic voting theorem 1 proves that when the position of one candidate is taken as fixed the other candidate will propose a pareto optimal alternative this implies that whenever there is an electoral equilibrium in pure strategies the electoral outcome is pareto optimal it also implies that even if there is no such equilibrium the electoral outcomes from a sequence of elections will be pareto optimal except possibly for an initial status quo

on the efficiency of competitive markets for emission permits it is typical for economists and policy makers alike to presume that competitive markets allocate emission permits efficiently this paper demonstrates that competition in the emission permits market cannot assure efficiency when the product market is oligopolistic we provide the conditions under which a bureaucratic mechanism is welfare superior to a tradeable emission permits system price taking behaviour in the permits market ensures transfer of licenses to the less efficient in abatement firms which then become more aggressive in the product market acquiring additional permits as a result the less efficient firms end up with a higher than the welfare maximizing share of emission permits if the less efficient in abatement firms are also less efficient in production competitive trading of permits may result in lower output and welfare

administrative creation of property rights to radio spectrum abstract despite the 1934 communication act s ban on private ownership of radio spectrum the law leaves open to the federal communications commission a range of licensing regimes under which the commission may in its discretion grant spectrum users relatively strong or weak property rights to allotted frequencies this article examines numerous administrative decisions by the fcc to demonstrate how regulatory changes have affected the property interests conferred by spectrum licenses focusing on licensees rights to use divide and broker spectrum flexibly and to prevent unauthorized reception of their signals the article discusses the economic and legal significance of those changes and identifies areas for further reform the authors conclude that although important changes remain to be made the fcc has strengthened property interests on both the transmission and receiving ends of licensed frequencies and through the administrative process has eroded the importance of the statutory distinction

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

spectrum flash dance eli noam s proposal for open access to radio waves abstract as ronald coase posited in his famous article on the nature of the firm there are situations in which decentralized markets are relatively efficient for coordinating economic activity and situations in which they are not with spectrum access assigning property rights to clearly specified private owners is the socially efficient policy because the relevant transaction efficiencies will be internalized by competitive spectrum owners selecting to what degree rights should be subdivided and in what manner marketed where spot markets are optimal an owner will maximize profits by using them where long term contracts are efficient the owner will enter profitably into them hence eli noam s solution imposing open access rules on bands of radio frequencies by government mandate is a mistaken attempt to duplicate the efficiencies of markets by mandating a particular subset of market solutions such a policy predictably will result in underutilization of the spectrum resource

the rationality of u s regulation of the broadcast spectrum in his classic 1983 technologies of freedom ithiel de sola pool so elucidated the prevailing wisdom concerning broadcast licensure in the united states while the key legal questions surrounding this institution involve important first amendment questions hence pool s scarcity analogy to paper ink and presses economists and other policy analysts have often remarked on the more general incongruity in federal licensing while spectrum is regulated on the physical scarcity premise it is awarded to private users on a no fee basis thus conferring significant economic rents on private parties at substantial opportunity cost to the fisc moreover federal communications commission fcc 2 policies have openly sought virtually throughout the agency s entire life span to restrict broadcast licenses and competition for broadcasters particularly cable television to far below the quantity technically available 3 the

investment in competitive equilibrium the optimality of myopic behavior there is an extensive literature on the optimal irreversible investment strategy of a solitary firm facing an exogenous price process this paper shows that the investment strategies that this literature derives may be optimal in competitive equilibrium even though the price process is now endogenous this provides a simple means for computing equilibrium investment strategies

the spectrum as commons tomorrow s vision not today s prescription abstract eli noam has proposed using nascent technologies to treat the electromagnetic spectrum as an open access commons rather than as a subdivided collection of property rights in his view public auctions reduce competition threaten free speech foster fiscal mismanagement and presume illegitimate government ownership of spectrum but government auctioning is our collective decision to sell that which we all own to foster spectrum efficiency via the market threats to free speech are exaggerated especially when asserted on behalf of corporations noam correctly observes that a government auctioneer might make too little spectrum available but concerns about fostering oligopoly are exaggerated his open access alternative would likely increase the cost of assembling the substantial long term rights to use spectrum for standardized reliable telecommunication services if the benefits of open access ever exceed the costs spectrum owners could carry out the necessary subdivision management and

behavior of the firm under regulatory constraint a recent article in this review by averch and johnson 3 on the fair rate of return regulation in public utilities industries or more generally regulated industries attracted the attention of many economists in essence averch johnson argues that the introduction of an active constraint of a fair rate of return type would induce the firm to invest more than the original profit maximizing value of capital and this would create an inefficient allocation of inputs in addition to frequent citations in verbal arguments it has invited some thieoretical extensions by economists such as wvestfield 8 and klevorick 5 all of the writers seem to accept the basic theoretical foundations set by averch and johnson for example klevorick 5 recently proposed that the fair rate of return should be inversely related to the size of the capital of a firm the intuitive basis for this is apparent for it in effect creates a penalty as the amount of capital used by the firm increases however it seems to me that averchjohnson s original arguments are sketchy and contain somewhat ambiguous logic at several important points although their conclusion for which they tried to find empirical support that a firm will tend to increase its investment with the introduction of an active constraint seems to be correct it does not follow from their arguments in particular there seems to be a serious error which arises from confusing movements along a curve and shifts of a curve in section ii we clarify those ambiguities and if necessary correct the mistakes in the third section of this paper we shall provide a new formulation of the problem we shall find that the new formulation will give the same answer as averchjohnson namely that a firm will tend to invest more with the iiltroductioin of an active constraint it should be noted however that while the conclusion happens to be the same this was not the necessity for we needed a completely new formulation to obtain the old conclusion

the determinants of prices in the fcc s 700 mhz spectrum auction this article examines the prices paid for 700mhz licenses in recent federal communications commission auctions econometric modelling confirms the presence of economies of scale and scope in wireless spectrum valuations that is higher prices are recorded for areas with large populations whilst lower prices are realized for geographically large areas also smaller geographic license areas appear to meet bidders demand more effectively and licenses in areas with high incomes are sold at higher prices not surprisingly more strict deployment requirements and the presence of harmful technical interference reduce prices also paired spectrum receives higher prices than unpaired spectrum interestingly high minimum opening bids and upfront deposits are associated with higher prices finally competitive bidding places upward pressure on prices

some empirical evidence on rent seeking we tested for the capture of net gains by winners in rent seeking competitions using the most prominent announcements of government favors in the canadian economy over a twelve year period stockholders returns were not significantly different from zero one possible explanation is that government assists firms only when assistance creates political gains refusing to transfer economic rents to firms maximmizes the resources available to serve political purposes this kind of behavior by government officials would imply that government has market power which is consistent with several well known theories of government

the survival of the welfare state this paper provides an analytical characterization of markov perfect equilibria in a model with repeated voting where agents vote over distortionary income redistribution a key result is that the future constituency for redistributive policies depends positively on current redistribution since this affects both private investments and the future distribution of voters the model features multiple equilibria in some equilibria positive redistribution persists forever in other equilibria even a majority of beneficiaries of redistribution vote strategically so as to induce the end of the welfare state next period skill biased technical change makes the survival of the welfare state less likely

interest groups campaign contributions and probabilistic voting this essay develops a simple model to analyze the impact of campaign contributions on electoral policy decisions of candidates for office interest groups here are firms that select contributions under the assumption that candidates policies and opposing groups donations remain unaltered candidates however recognize that their policy choices affect contributions campaign contributions are used by candidates to affect policy oriented voters perceptions of candidates positions in this framework the introduction of campaign contributions may affect candidates electoral policies and if they do then they benefit surely exactly one of the two interest groups

the impact of corruption on consumer markets evidence from the allocation of second generation wireless spectrum in india abstracttheoretical predictions of the impact of corruption on economic efficiency are ambiguous with models allowing for positive negative or neutral effects while much evidence exists on levels of corruption less is available on its impact particularly its impacts on consumer markets this paper investigates empirically the effect of the corrupt sale of spectrum licenses to ineligible firms on the wireless telecommunications market in india i find that the corrupt allocation had at worst no impact on the number of subscribers prices usage revenues competition and measures of quality i argue that the market based transfer of licenses to competent firms other than the original awardees combined with fierce competition in the telecommunications sector may have mitigated potential deleterious impacts of corruption on consumers these results suggest that the original corrupt allocation did not matter which provides support for the coase theorem

on the efficiency of competitive markets for operating licenses some economists and policy makers have suggested that market allocation of scarce operating licenses broadcasting licenses and airport slots for instance would lead to their efficient use this paper demonstrates that a competitive market allocation of operating licenses whether attained through auctioning selling or allowing resale of the rights does not in general assure efficiency the profit criterion that would guide the allocation of licenses in a competitive market would not necessarily lead to the uses that maximize social benefits the paper shows that the difference between private and social incentives in the allocation process can be quite large the theory is then applied to discussions of allocating airport takeoff and landing slots and broadcasting licenses

auctions markets and spectrum ownership comment on moreton and spiller abstract in their empirical study of the personal communications service auctions patrick s moreton and pablo t spiller have shown that the bidder behavior is consistent with most economists conceptions of competitive markets moreton and spiller also presented evidence that firms competing in these auctions were able to aggregate licenses thus offering some vindication for those economic theorists who championed simultaneous multiple round auctions on these issues their study brings new data to bear on important questions about auction design and public policy moreton and spiller however do not examine the costs of the secondary market in reallocating license blocks and its relationship to the exposure problem develop a specific model of government regulation or consider the effects of block size on bidding behavior these omissions limit the inferences and conclusions they claim for their study

left for dead anti competitive behavior in orbital space in a dynamic investment framework with depreciation we show incumbent satellite operators have incentives to warehouse a fraction of their assigned spectrum and orbital slots keeping nonoperational assets in place which reduces output increases prices and diminishes social welfare exploring three distinct market structures we model firms incentives to warehouse and show conditions under which firms choose to warehouse rather than replace nonfunctioning satellites we find a dominant firm with a competitive fringe produces more and longer duration warehousing relative to perfect competition or monopoly regulators could remediate warehousing by increasing a firm s marginal costs or by increasing the probability of reallocating orbital slots that do not have a fully functioning satellite

implementing a market based spectrum policy abstract the spectrum auctions were a step toward the herzel coase vision of a flexible and efficient market for spectrum this article examines what remains to be done spectrum must be unbundled from broadcast and transmission facilities the commoditization of spectrum will facilitate standardization price discovery and open access to diverse users a liquid secondary spectrum market will lower transactions and entry cost making telecommunications markets contestable auctions should be used to elicit a supply of spectrum from licensees as well as to allocate it to new users in closing the spectrum commons congress granted use to a privileged few unbundled spectrum property rights commoditization and open markets will give the public access to this public resource

new zealand spectrum policy a model for the united states abstract in 1989 the new zealand government began to auction management rights to the electromagnetic spectrum using sealed bid second price vickrey auctions subsequently the united states began to auction spectrum through ascending bid multiple round auctions although students of auction processes find the latter type of auction to be the more efficient form i find that the prices realized in the new zealand cellular auctions are very similar to those realized in the u s personal communications services auctions after adjusting for differences in demographics the flexibility of the new zealand management rights should theoretically allow the winning bidders to find the highest valued use for the spectrum but many of the auctioned rights remain unused several years later a country as small as new zealand simply cannot be as innovative in finding new uses for the spectrum because of the large initial costs of developing the requisite equipment for using it

spectrum property law 101 abstract regulatory doctrine holds that radio spectrum licensees do not have private property rights in their licenses in fact as shelanski and huber show most of the basic attributes of private property are possessed in some measure by all licensees this practical reality has been obscured by the official ideology of public interest obligation attached to spectrum use however public interest regulation has always been marginal in practical effect but public interest ideology reinforced by interest group politics has prevented full realization of the market efficiencies that could be achieved from explicit recognition of spectrum property rights the true public interest lies in removing obstacles to efficient use of the radio spectrum and allowing it to seek its highest valued use to the public spectrum auctions may help to move us in the direction of a less burdened market system but they are only a step not the destination

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

party policy and campaign costs in a multi constituency model of electoral competition in this essay a multi constituency model of electoral competition was developed under the assumption that party candidates possessed no effective autonomy such a model describes the polar extreme opposite that of the more common single constituency framework in which candidates have complete autonomy the existence of a nash equilibrium to the multi constituency election game was established under the assumption that parties maximize the expected number of winning seats or behaved as pure independents under any other reasonable election goal e g maximize probability of winning a majority of constituencies this existence breaks down the nature of any equilibrium was investigated in some detail and the influence of campaign costs both statutory and non statutory on party behaviour analysed this was found to be qualitatively important in particular differingeconomic resources between parties is sufficient to prevent convergence inpolicy space

property rights and wireless license values abstract while extending the scope of spectrum property rights promotes efficiency such reforms are often deterred by equity concerns theoretically however the windfalls may be negative relaxing license restrictions may increase profits by allowing enhanced productivity yet liberalization across a class of licensees can reduce the expected profits by increasing competitiveness this article examines license value changes for regimes that decisively shift toward private property rights in radio spectrum by analyzing the average prices paid in international cellular phone license auctions during 1995 2001 this unique data set encompasses 1 365 licenses assigned by competitive bidding in 38 auctions held in 24 countries licenses awarded by regimes with more expansive spectrum property rights generated winning bids that were 61 percent lower adjusting for other factors this evidence reverses the equity argument against liberalization over the policy margin studied and is consistent with coase s view

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

the cost of rent seeking evidence from cellular telephone license lotteries the inventors of the theory of rent seeking used an analogy with competitive markets to conclude that all monopoly rents would be dissipated in the competition to obtain the property rights to them 23 29 subsequent theorists showed that this conclusion is quite sensitive to assumptions about foresight risk aversion conjectures and bias 15 21 30 since little quantitative information about actual rent seeking competitions is available the theory has developed in an empirical vacuum in this paper we attempt to fill that vacuum with an estimate of rent seeking expenditure by applicants in the federal communications commission s fcc cellular telephone license lotteries held between 1986 and 1989 we go on to compare expenditures with estimates of the value of the licenses at stake these lotteries constitute a unique natural experiment any u s citizen was eligible to enter each geographic lottery once and only once for an expense which we calculate as modest the lotteries were widely publicized and heavily entered there were over 320 000 applications one per market filed for 643 cellular licenses and third party application preparers entered the market rapidly because licenses were awarded sequentially prospective participants in later lotteries could find out that expected net returns from earlier lotteries were positive because of undersubscription the value of the prize was known because sales of previously awarded licenses had begun to take place before later lotteries were held and market analysts were using such sale prices to value licenses not yet awarded the later lotteries seem almost optimally contrived to maximize the dissipation of rents yet comparing the resources invested in entry the price of a fully prepared application with the rents available the market value of cellular telephone licenses shows that dissipation was far short of complete

assigning property rights to radio spectrum users why did fcc license auctions take 67 years abstract while leo herzel 1951 and ronald coase 1959 persuasively argued for auctioning licenses issued by the federal communications commission fcc not until 1993 did the u s congress grant the fcc authority to assign wireless operating permits via competitive bidding why were auctions with obvious efficiency and equity advantages so long in coming why were comparative hearings in the public interest first abandoned as assignment tools in 1981 not for auctions but for lotteries and why were radio and tv licenses pointedly excluded from auctions four factors the special interest of regulators in influencing broadcasting content the limits placed on explicit program regulation by the u s constitution the recent increase in the relative economic importance of nonbroadcast wireless services and the agency problem embedded in central planning are used to explain both the political stability of economically inefficient licensing methods and recent reforms

identification of standard auction models this paper presents new identification results for models of first price second price ascending english and descending dutch auctions we consider a general specification of the latent demand and information structure nesting both private values and common values models and allowing correlated types as well as ex ante asymmetry we address identification of a series of nested models and derive testable restrictions enabling discrimination between models on the basis of observed data the simplest model symmetric independent private values is nonparametrically identified even if only the transaction price from each auction is observed for richer models identification and testable restrictions may be obtained when additional information of one or more of the following types is available i the identity of the winning bidder or other bidders ii one or more bids in addition to the transaction price iii exogenous variation in the number of bidders iv bidder specific covariates while many private values pv models are nonparametrically identified and testable with commonly available data identification of common values cv models requires stringent assumptions nonetheless the pv model can be tested against the cv alternative even when neither model is identified

the determinants of price in 3g spectrum auctions this article examined the empirical relationship between prices paid for national 3g wireless licenses when spectrums were sold by auction the reduced form modelling approach was based on the prem

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

tradeable emission permits regulations in the presence of imperfectly competitive product markets welfare implications in the present paper we analyse the interaction of a competitive market for emission permits with an oligopolistic product market it is well known that a competitive permits market achieves the cost minimizing distribution of abatement effort among the polluting firms for a given reduction in emissions however when the product market is oligopolistic it may redistribute production inefficiently among firms it has been suggested that this inefficiency can outweigh the gains obtained from using emission permits instead of command and control although this argument is clearly correct under full information it is shown in the present paper that it reverses under incomplete information in particular it is shown that when tradeable emission permits are specified according to the standard textbook example they yield higher social welfare than the command and control regulation

optimal abolition of fcc spectrum allocation ronald coase based his 1959 call for spectrum markets on theoretical conjecture today abundant evidence supports his case targeted liberalization in cellular markets as contrasted with regulatory planning of the digital tv transition and other traditional policies suggest enormous efficiency gains are available from wider use of the price system with exclusive frequency rights assigned to owners markets widely reconfigure spectrum use coordinating complex spectrum sharing resulting social gains include increased consumer surplus from enhanced technological innovation and wireless service competition a social bonus arrives in the benefits associated with wider scope for free speech yet the administrative allocation system continues to distribute rents and garner political support liberal reforms in contrast produce large but broadly dispersed efficiency gains and are undersupplied this paper proposes an incremental extension of property rights in spectrum to move beyond the current rent seeking equilibrium eliminating the federal communications commission s centralized spectrum allocation process and with it an attractive nuisance generating anticonsumer outcomes