informative externalities and pricing in regulated multiproduct industries this paper addresses the issue of how to organise a two product industry with interdependent demands when the regulator cannot observe the demand level of the goods produced two industry structures are compared a multiproduct monopoly in which an informed firm produces both goods and a differentiated duopoly where two firms control one good each but the level of demand is known by one firm only focusing on the informative costs of regulation the paper shows that if goods are substitutes the regulator may achieve a better performance through integration of production with complements instead decentralisation tends to be preferred

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

risk allocation and the costs and benefits of public private partnerships we study the agency costs of delegated public service provision focusing on the link between organizational forms and uncertainty at project implementation we consider a dynamic multitask moral hazard environment where the mapping between efiort and performance is ex ante uncertain but new information may come along during operations our analysis points out at the e ciency gains that bundling planning and implementation as under public private partnerships can bring in terms of better project design and lower operational costs bundling also results in increasingly better performance as uncertainty is reduced by growing experience in the sector bundling should instead be viewed with caution when the private sector seeks to radically innovate on public service provision or to introduce new services but lacks the knowledge and expertise to anticipate the impact of the innovative design procedure technology on the cost of operations the compounding of asymmetric information ex post plus moral hazard and renegotiation may generate diseconomies of scope in agency costs which for high operational risk can make unbundling optimal in this context the use of private flnance can help re establishing the beneflt of bundling only if lenders have su cient expertise to help assessing project risks

multi dimensional screening a user s guide abstract multi dimensional screening models have many potential applications but economists have so far been hindered by the considerable technical difficulties involved in their resolution this paper studies the simplest formulation of the general screening model and we provide a complete solution to this case we then show how this model can be applied to multi product nonlinear pricing and to multi product monopoly regulation finally we discuss how the model has been applied to other economic situations of interest including auction design and optimal taxation

towards a re interpretation of the economics of feasible socialism this paper re examines the debate on whether socialism is feasible from the perspective of the literature on the division of labour and organisational forms the central argument is twofold first each of the major protagonists in the debate provide a partial explanation as to when market socialism planned socialism and participatory socialism are feasible second the different perspectives on when socialism is feasible can be reconciled through seeing the arguments in terms of specific techno economic paradigms which are underpinned by their own concepts of the division of labour and efficiency attributes the authors show that theories on the economics of socialism reflect different techno economic paradigms and that when and whether the various views on socialism are appropriate depend on the prevailing external conditions economic growth path and mode of institutional arrangement copyright 2004 oxford university press

collusion under asymmetric information when applied to groups the revelation principle postulates a bayesian nash behavior between agents their binding agreements are unenforceable or the principal can prevent them at no cost we analyze instead a mechanism design problem in which the agents can communicate between themselves and collude under asymmetric information we characterize the set of implementable collusion proof contracts both when the principal offers anonymous and nonanonymous contracts after having isolated the nexi and the stakes of collusion we proceed to a normative analysis perform some comparative statics discuss our concept of collusion proofness and provide some insights about transaction costs in side contracting

the principal agent relationship with an informed principal the case of private values we analyze the principal agent relationship when the principal has private information as a three stage noncooperative game contract proposal acceptance refusal and contract execution we assume that the information does not directly affect the agent s payoff private values equilibrium exists and is generically locally unique moreover it is pareto optimal for the different types of principal the principal generically does strictly better than when the agent knows her information equilibrium allocations are the walrasian equilibria of an economy where the traders are different types of principal and exchange the slack on the agent s individual rationality and incentive compatibility constraints

monopoly provision of product quality and warranties an exploration in the theory of multi dimensional screening we address the monopoly problem of designing and pricing a product line of goods distinguished by different quality and warranty levels consumers vary in their evaluations of these attributes so that the problem is one of screening it is sufficiently complex that the local approach commonly used does not work instead we use new techniques for dealing with incentive constraints between nonadjacent consumer types these techniques allow us to characterize optimal allocations that may not be monotonic in particular although the more eager types of buyer do pay higher prices and yield the monopoly higher profit they may receive lower quality or lower warranty coverage we find preference restrictions that restore monotonicity concave risk tolerance implies that warranty coverage increases in type and constant absolute risk aversion implies that quality increases in type

regulatory risk vertical integration and upstream investment abstract we investigate the impact of regulatory risk on vertical integration and upstream investment by a regulated firm that provides an essential input to downstream competitors regulatory risk reflects uncertainty about the regulator s commitment to a regulatory policy that promotes the regulated firm s noncontractible investment we show that when the regulator sets the regulatory policy after the vertical industry structure has been established some degree of regulatory risk is ex ante socially beneficial regulatory risk makes vertical integration profitable and stimulates high upstream investment at a lower social cost this occurs for moderate costs of high investment and firms small risk aversion our analysis sheds new light on some relevant empirical patterns in vertically related markets

multidimensional incentive compatibility and mechanism design abstract incentive compatibility conditions are characterized in general for problems in which several goods are to be allocated and agents types are multidimensional two questions of monopoly pricing under multidimensional uncertainty are then analyzed first we find the optimal nonlinear pricing scheme when the monopolist knows only the distribution of an arbitrarily parameterized family of demand curves and second we solve for the optimal bundling policy for a multiproduct monopolist

technological effort and disembodied technology exports an econometric analysis of inter industry variations in india abstract this paper attempts a preliminary test of the determinants of indian technological capability as measured by disembodied technology exports by a sample of the largest private sector quoted companies in india after placing the study in the context of research on the nature of technological activity in developing countries the authors describe the variables which they have used to explain inter industry variation in technology exports the results of a preliminary statistical investigation are presented despite acknowledged limitations of data the authors are able to suggest some interesting tendencies which could be the subject of further investigation a formal rd b skill and scale requirements appear to promote technological development rather than retard it c the presence of foreign ownership does not seem to inhibit technological development or technology exports

promoting technological capability in the capital goods sector the case of singapore abstract this paper contributes to the new interest in technological change in semi industrial countries by examining technological capability in the machine producing sector in singapore the difficulties involved in conceptualizing and measuring technological capability in less developed countries are discussed and the case study material is then presented particular attention is paid to the role of government promotion in the development of technological capability in this connection the present study provides a useful contrast with the position in hong kong studied in an earlier paper while both singapore and hong kong have instituted a near free trade regime there is a far greater degree of government intervention in the former than in the latter case by contrast the governments of both south korea and taiwan have granted selective protection in order to encourage some kinds of domestic machine production the paper ends with some critical comments regarding the singapore government s policy towards the machine producing sector

towards an understanding of technical change in semi industrialized countries in industrialized countries technical change in manufacturing pertains to cost reduction improvements in production processes and to the creation of new products in sic s semi industrialized countries which are characterized by protection market and information distortions and rationing technical change consists mostly of the adaptation of imported technologies to local conditions the firms operating in these countries try to optimize an objective function generally of profits or net worth under various constraints to some extent possibilities of substitution exist between directly productive and r d activities or between investment in new capital equipment and maintenance and modification activities to keep old machinery running and even expanding output most frequent constraints include credit rationing with severe limitations in the financing of working capital quotas for the supply of raw material inputs produced by the state import restrictions etc as far as import restrictions the relevant case seems to be not that of a high tariff but an outright prohibition of imports of certain materials or equipment as this will generally demand r d to modify the received technology the feasibility of doing so seems to depend strongly on the availability of the required technical skills

information revelation in the property right theory of the firms abstract i incorporate revelation of asymmetric information through shared ownership partnership into the property right theory of the firms shared ownership is optimal as a joint result of mitigating hold up and inducing truthful information revelation due to the incomplete contracting nature shared ownership is incentive compatible if it induces truthful information revelation within the relationship as well as when the relationship breaks off the equilibrium path incentive compatibility results in the optimality of partnership even for the most efficient type of the informed party inefficient investment thus arises the level of shared ownership depends on the relative magnitude of the information rent effect and the hold up effect shared ownership is robust to semi truthful information revelation under which hold up occurs in equilibrium with an endogenously determined probability related to the revelation strategy

collusion delegation and supervision with soft information this paper derives an equivalence principle between organizational forms of supervisory and productive activities we consider an organization with an agent privately informed on his productivity and a risk averse supervisor getting signals on the agent s type in a centralized organization the principal can communicate and contract with both the supervisor and the agent however these two agents can collude against the principal in a decentralized organization the principal only communicates and contracts with the supervisor who in turn sub contracts with the agent we show that the two organizations achieve the same outcome we discuss this equivalence and provide various comparative statics results to assess the e ciency of supervisory structures

hayek and socialism friedrich a hayek was a life long opponent of socialism three of his contributions are surveyed and placed within historical context his debates in the 1930s with the market socialists his political critique of socialism in the road to serfdom and his evolutionary arguments against rationalist constructivists recent discussions that use the economics of information to analyze the prospects for socialism are also reviewed it is argued that theorists working in the economics of information have not recognized just how far hayek s conceptualization of the appropriate theoretical constructs for economics deviates from those of mainstream economists as such they have misunderstood what may constitute an independent set of arguments against socialism

learning and the capital goods sector under free trade the case of hongkong abstract attention is focused on technological change and attendant learning processes in the more industrialized third world countries the importance of relatively simple learning processes is stressed and the conditions necessary for facilitating more complex forms of learning particularly protection and promotion are examined here it is shown that the capital goods sector is of central importance the case study material deals with the machine producing sector in hong kong chosen as the representative case of free trade and minimal government intervention and comparison is made with learning processes in a number of other more industrialized third world countries including india argentina and taiwan in the final section the implications of the discussion of learning for theories and techniques of investment allocation including social cost benefit analysis the effective rate of protection and the related domestic cost of foreign exchange are examined

the organization and scope of agents regulating multiproduct industries abstract a mechanism design problem with two dimensional uncertainty is solved to derive the optimal policy for regulating a monopolist with private information about the marginal cost of producing two different goods the paper establishes that informational economies of scope or incentive complementarities arise when one firm produces both goods the regulator should weigh these economies against the benefits of relative performance incentives when choosing between integrated and decentralized organizations unless the marginal costs of the two products are sufficiently positively correlated the optimal ex ante policy gives control of both markets to a single firm journal of economic literature classification number s d82 l22 l51

fostering the capital goods sector in ldcs abstract the conventional arguments in favour of the production of capital goods by ldcs are based on comparative advantage the possibility of designs appropriate to indigenous factor proportions and the externalities conferred on other sectors these and other arguments are inducing the governments of many middle income countries to more intensively foster the development of the machinery sector this paper examines the analytic and empirical bases of the conventional arguments and finds a considerably more complex picture than that contained in earlier studies

the value of information and optimal organization the paper addresses the issue of optimal organization of production i compare three organizational forms centralization one agent produces difierent inputs decentralization each of the two agents produces a difierent input and contracts directly with the principal and delegation two agents produce difierent inputs the principal contracts with one of them only the optimal organizational form depends on the degree of complementarity substitutability between the inputs in the flnal use the degree of complementarity substitutability also determines whether delegation is payofi equivalent to the two agent mechanism from the point of view of the principal in the context of delegation i consider which of the two agents should serve as the primary contractor i also address the issue of collusion between the agents in a decentralized organization and characterize the conditions under which a stake of collusion exists jel fields d2 d82 l23

the mainspring of economic growth lecture to the memory of alfred nobel april 27 1973 this abstract was borrowed from another version of this item

total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 1978 this article total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 78 was reprinted with permission from the december 1982 issue of the economic journal this article proposes a methodology that decomposes total factor productivity change into two distinct elements technological progress and changes in technical efficiency technological progress is defined as the change in the best practice production frontier all other productivity change is attributed to technical efficiency change the article provides a theoretical framework for decomposing total factor productivity growth as well as a specification and estimation of the deterministic frontier production function it employs a programming technique to estimate a flexible functional form of the production frontier the paper then applies this technique to empirical data from yugoslavia of the period from 1965 to 1978 it concludes that for yugoslavia improvements to technical efficiency comprise the dominant contribution to total factor productivity change this agrees with accumulating evidence that in many developing economies productivity gain due to technological mastery of imported technology is substantial

the organization of regulated production complementarities correlation and collusion we analyze the choice between vertical separation vs and vertical integration vi when two regulated firms produce complementary inputs with correlated costs and are protected by ex post break even constraints first in the absence of collusion the regulator prefers vi vs for negative and weak positive respectively strong positive correlation second if the firms can collude under vs and know all costs then vs is equivalent to vi however if firms collude under asymmetric information then collusion does not affect the choice between vs and vi since the regulator takes advantage of the transaction costs created by asymmetric information

the division of labour is limited by the rate of growth of the market the taiwan machine tool industry in the 1970s in 1974 i visited taiwan to make a study of its machine tool industry amsden 1977 late in 1981 i returned to visit the same factories i had visited seven years earlier in the interim taiwan was transformed from an amateurish supplier of machine tools to southeast asia into the fourth largest exporter of machine tools to the united states cremeans and dalton 1982 this paper analyses the remarkable changes which occurred in the machine tool industry in this short period the object is to study the process of capital accumulation in one industry in a newly industrialising country in order to gain a better understanding of the nature of the process generally between 1970 and 1980 machine tool production in taiwan rose by more than eleven times see table 1 one way to begin to understand the process of capital accumulation is to ask how such an extraordinarily rapid increase in demand alters the nature of production this is the focus adopted in what follows most historians acknowledge a phenomenon of cumulative causation in economic development or decline economies which begin to grow rapidly tend to grow even more rapidly but once growth falters there ensues a self reinforcing downward spiral most economists however recognise only one part of this cumulative process that which runs from technological progress typically taken as exogenous to increases in productivity to increases in output what tends to be ignored is that part which runs from increases in output to increases in productivity with technological change broadly defined sandwiched in between it is this which is examined below

multiproduct nonlinear pricing typically work on mechanism design has assumed that all private information can be captured in a single scalar variable this paper explores one way in which this assumption can be relaxed in the context of the multiproduct nonlinear pricing problem it is shown that the firm will choose to exclude some low value consumers from all markets a class of cases that allow explicit solution is derived by making use of a multivariate form of integration by parts in such cases the optimal tariff is cost based

on the workability of market socialism contrary to the claim of andrei shleifer and robert w vishny 1994 it is conceivable under market socialism to take firms out of the orbit of state control and that a less narrow theory of the state than theirs allows the possibility of democratic socialism mitigating problems of economic inefficiency better than capitalism

information incentives and organizational mode we examine the choice of organizational mode for a two stage production process wherein cost realizations at each stage are observed only by the producing party when these costs are positively correlated the principal prefers to undertake second stage production herself when the correlation is negative and sufficiently small she will prefer that the agent who performs the first stage also perform the second for large negative correlation either mode might be preferred when costs are uncorrelated the principal is indifferent between modes

the organization of supplier networks effects of delegation and intermediation in a one principal two agent model with adverse selection and collusion among agents we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting delegation to an intermediary is also not in the principal s interest if the agents supply substitutes it can be beneficial if the agents produce complements and the intermediary is well informed

regulating complementary products a comparative institutional analysis optimal regulation subject to informational constraints is analyzed for industries for which production requires complementary inputs an issue for regulatory policy is whether supply in these industries should be bundled or unbundled bundled supply calls for regulation of an integrated industry unbundled supply has each component regulated separately a main result is that unbundling introduces into regulation an additional component of information cost that is similar to double marginalization in the monopoly pricing of complementary products unbundling may be advantageous if it allows sufficient competition in nonmonopoly services but the information cost can exceed the benefits of competition

the duhem quine thesis lakatos and the appraisal of theories in macroeconomics the point of this paper is to outline the implications of the duhem quine thesis for the task of appraising theories in economics the duhem quine thesis dqfrom now on states that it is not possible to falsify single hypotheses because it is invariably conjunctions of hypotheses which are being tested thus if a particular hypothesis is found to be in conflict with some piece of empirical evidence all that we can say is that the conjunction of the particular hypothesis with a set of auxiliary hypotheses is false we can never be sure that it is not one or more of the auxiliary hypotheses which is responsible for the anomalous empirical evidence rather than the particular hypothesis in which we are most interested expressed in symbols this means that arguments of the form ho 0 0 ho are not justified where ho is a particular hypothesis o is the observational evidence and the symbols and mean imply conjoined with and not instead our arguments can only justifiably be phrased in the form g1 0 0 g1 where g1 is a conjunction of hypotheses which contains ho there could well be some different conjunction of hypotheses gn which contains ho which is consistent with the empirical evidence the contention of this paper is that many of the debates in macroeconomics have been misguided in that the jointness of hypothesis testing has been ignored by participants in the debates instead the focus of attention has been on the appraisal of single target hypotheses considered in isolation from supportive auxiliary hypotheses the implicit assumption being that it is possible to falsify single target hypotheses the latter assumption is wrong following the logic of the dq thesis we are obliged to conduct our appraisal at the level of groupings of hypotheses that is to appraise any target hypothesis in conjunction with its supportive auxiliary hypotheses the implications of this line of reasoning are perhaps best unravelled in the context of concrete examples from debates in macroeconomics over the last two decades before moving to this task we will in section i provide a brief outline of the history of the dq thesis section ii will then illustrate the misguidedness of appraising target hypotheses in isolation from their supportive auxiliary hypotheses with reference to the often heated and continuing debate regarding the stability of the demand for money function the question of how to appraise groupings of hypotheses is considered in section iii here we will centre the

the emergence of third world multinationals indian joint ventures overseas abstract the more industrialized ldcs are emerging increasingly as exporters of capital or of technology in several forms this paper draws on the recent experience of indian mncs to reexamine the factors which give rise to third world multinationals the author summarizes the current state of research in the analysis of ldcs mncs drawing upon specific mnc literature and other related literature on trade and technology he deals with the evidence on indian capital exports placing it in the broader context of technology exports discussing some examples of interest and drawing comparisons with foreign investment by some other ldcs he assesses the indian experience using the distinctions drawn by dunning s eclectic theory but concentrating on the processes of technical change that underline the growth of its mncs the final section draws some tentative conclusions

policies for industrial progress in developing countries this book is a collection of essays by a distinguished group of authors who have had practical experience with industrial policy in both developing and industrialized countries the essays analyze the principal policies that influence the course and pace of industrialization and identify the practical constraints on policy formulation the book is intended primarily for administrators and decisionmakers to assist them in choosing among policy alternatives it is accordingly organized along lines of govenmental administrative responsibility with chapters on trade finance labor and technology taxation licensing and other controls public enterprises infrastructure and the location of industry as well as industrial links with agriculture and the international environment the use of mathematics and sophisticated models has been avoided in this attempt to bridge the chasm between theoretical concepts and the practical formulation policy

market socialism a case for rejuvenation in this paper we will outline a feasible economic mechanism of competitive socialism our claim is that competitive markets are necessary to achieve an efficient and vigorous economy but that full scale private ownership is not necessary for the successful operation of competition and markets contrary to popular impression this claim has not yet been disproved by either history or economic theory it is the failure of both the political right and the left to disentangle the concepts of private ownership and the competitive market that has led to the premature obituaries for socialism in the second section we look at the question of the soft budget constraint as an agency problem under market socialism we then propose two variants of a bank centric system of insider monitoring as a viable solution to the agency problem the next section discusses the essential problem of political accountability and the difficulty of credible pre commitment in avoiding the soft budget constraint problem and suggests ways of minimizing this problem in our proposed system we then conclude by addressing some of the other standard objections to a proposal for market socialism

a note on the optimal structure of production abstract we analyze the advantages of centralization and decentralization in industries in which production takes place in several stages and the costs are privately observed by the agents in charge of production we demonstrate that informational diseconomies arise when uncorrelated information is concentrated in the hands of a single agent these diseconomies arise when the stages of production are different activities with different cost supports journal of economic literature classification numbers d82 l22 l51

technology creation in semi industrial economies abstract technological activities in the semi industrial economies of latin america leading to the adaptation of imported technologies as well as the development of new products and processes have been both an involuntary byproduct of manufacturing activities and the result of deliberate decisions to set up technological research facilities technological research reported by latin american firms is shown to be largely complementary to production and carried out to reap the extra benefits of protection external effects are thus disregarded since the benefits from industrial production suffice to induce the requisite adaptive research the paper suggests that the as yet not well understood interaction between industrial and technological development be studied by focusing on technology as information and engineers as its processors looking at the learning stages from using imports to the creation of new products and examining these processes in terms of a progression toward increasing technological complexity

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

exports of technology from semi industrial economies and local technological development abstract this paper analyzes technology exports from five of the most industrially advanced developing countries argentina brazil india korea and mexico it explores the nature of the exports and of the exporting firms identifies the competitive advantage underlying different types of technology exports and analyzes the comparative advantages of the five countries in these exports based on an analysis of different strategies toward the trade in the elements of technology it summarizes tentative lessons about relationships between trade in the elements of technology country and firm strategy and local technological development