endogenous entry and self selection in private value auctions an experimental study this paper presents the results of an experimental study of endogenous entry in first price independent private value auctions n potential bidders simultaneously decide whether to participate in an auction or receive a known outside option in the second stage entrants submit bids after learning their own private values and the number of entrants an equilibrium model of heterogeneous risk averse bidders implies a self selection effect where bidding in the auction is lower with endogenous entry because only less risk averse bidders enter this effect is confirmed by the experiment we also observe excessive entry relative to the theoretical model

reputation and impermanent types i consider a version of the chain store game where the incumbent firm s type evolves according to a markov process with two states a tough type who always fights entry and a weak type who prefers to accommodate there exists a minimal level of persistence necessary for the incumbent to be able to sustain any reputation for being tough above that level as the number of markets t increases in equilibrium play alternates between intervals of entry by competitors and intervals of deterrence when t is infinite then regardless of the discount factor there exists a sequential equilibrium in which the incumbent s payoff is bounded below her stackelberg payoff both results are in contrast to the outcome when the incumbent s type is fixed one interpretation is that reputation is not permanent but must be renewed occasionally

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

auctions with a stochastic number of bidders abstract auction theory is generalized by allowing the number of bidders to be stochastic in a first price sealed bid auction with bidders having constant absolute risk aversion the expected selling price is higher when the bidders do not know how many other bidders there are than when they do know this thus the seller should conceal the number of bidders if he can moreover a bidder s ex ante expected utility is the same whether or not there is a policy of concealing the number of bidders concealment therefore pareto dominates announcement with risk neutral bidders the optimal auction is the same whether or not the bidders know who their competitors are

new perspectives on the innovation strategies of multinational enterprises lessons for technology policy in europe abstract the aim of this contribution is to learn more about changes in the innovation strategies of large multinational corporations whereby one focus is on internationalization aspects as sources for our analyses we reviewed the main empirical studies and gathered information and insights from 21 corporations our results show firstly that the internationalization of research and technology is still characterized by triadization involving companies from the us the european union and japan secondly qualitative motives are increasingly driving r d location decisions like learning from technological excellence and lead markets and dynamic interactions within the value chain thirdly the process of internationalization in research and technology has been accompanied by an increasingly selective focus on a very few locations and the concentration of innovation activities on worldwide centers of excellence we conclude that these changes in the innovation strategies of large multinational companies put several topics on the agenda for technology policy in europe 1 a stronger focus on extra european collaboration and mobility 2 strengthening the attractiveness of the european union to foreign r d investment and 3 the absorptive capacities of r d organizations in europe 4 a stronger integration of different policy areas and of indirect policy measures 5 as well as the establishment of a transparent and global framework for policy coordination and priority setting worldwide

search strategy in product innovation process theory and evidence from the evolution of agrochemical lead discovery process this paper investigates different problem solving strategies herein called search strategies in the process of product innovation it takes issue with the basic assumption of current models of the product innovation process pip which unrealistically consider that the actors of product innovation the product innovators are all hyper rational homogeneous and non choice restricted actors in order to take into account the more realistic view of the product innovators as bounded rational heterogeneous and choice restricted actors this paper proposes an alternative model of pip based on cognitive psychology according to this framework the options of search strategy available to each product innovator depend on certain problem solving related capabilities that he or she is able or not to use to examine the validity of this theoretical framework this paper investigates the phenomenon of the evolution of discovery methods in the agrochemical lead discovery process data for this investigation have been gathered through chronological product innovation survey of an agrochemical product registration database as well as a patent and publications index database results from this investigation seem to confirm the above argument copyright 2003 oxford university press

optimal auctions revisited in symmetric privately known values oral auctions with costly entry for bidders the seller can do no better than by committing ex ante to a reservation price and entry fees or subsidies which result in no fewer and at most one more bidders than a reservation price equal to the seller s value would in the absence of entry fees or subsidies journal of economic literature classification numbers d44 c72

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

contests for experimentation we study contests for innovation with learning about the innovation s feasibility and opponents outcomes we characterize contests that maximize innovation when the designer chooses a prize sharing scheme and a disclosure policy a public winner takes all contest dominates public contests where any success is immediately disclosed with any other prize sharing scheme as well as winner takes all contests with any other disclosure policy yet jointly modifying prize sharing and disclosure can increase innovation in a broad class of mechanisms it is optimal to share the prize with disclosure following a certain number of successes under simple conditions a hidden equal sharing contest is optimal

equilibrium bid functions for auctions with an uncertain number of bidders abstract the number of rivals may be unknown when a bidding strategy is formulated in an auction in a symmetric model with risk neutral bidders holding independent information we obtain explicit equilibrium bidding functions for first price and second price auctions with uncertainty about the number of rivals five auctions are revenue equivalent first price and second price auctions each with the number of bidders known or uncertain and english auctions

discontinuities and senior management assessing the role of recognition in pharmaceutical firm response to biotechnology despite an increasing emphasis on the role of senior management cognition in shaping organizational action there have been few attempts to link top management mental models to strategic choice in the face of discontinuous innovation this paper uses 23 years of data covering 15 major pharmaceutical firms to explore the degree to which each firm s response to the revolution in biotechnology was shaped by the senior team s recognition of biotechnology s importance controlling for a number of important alternative explanations we show that recognition may be an important predictor of action suggesting that cognition at the most senior level can play a critical role in shaping established firms response to discontinuities copyright 2003 oxford university press

optimal search auctions with correlated bidder types abstract we study optimal auctions when contacting prospective bidders is costly and the bidders values are correlated although full surplus extraction is in general impossible we can construct a search mechanism that fully extracts the surplus with an arbitrarily high probability

understanding company r d strategies in agro biotechnology trajectories and blind spots companies innovating in agriculture related biotechnology currently confront a complicated and controversial policy environment using analytical frameworks of technological trajectories and paradigms this paper examines r d strategy in large companies a large research project found that r d related decisions taken by managers reflect company distinctiveness and can be characterised as cumulative in important respects economising and strategising strategies combine in different ways but in many instances managers did not sufficiently recognise the importance of complex interactions between public policy and public opinion and failed adequately to incorporate public policy into strategic r d decision making this blind spot compounded initial difficulties in bringing products to market and has had significant impact on the rate and direction of innovation in this area including contributing to the demise of the idea of an integration of agro and health sectors based on life sciences the paper raises important questions about the relationship between technological paradigms industry and sector level trajectories and decision making in firms

alternative common value auction procedures revenue comparisons with free entry the logic of revenue comparisons for different types of common value auctions is substantially altered if the number of participants rather than being fixed responds endogenously to the expected profitability from participating in a thoroughly symmetric model a seller may prefer that competition be indirect an auction procedure in which fewer participants are needed to drive the expected profitability from participating down to the level obtainable in other auctions in the economy can attain higher expected revenue if a sale is sufficiently likely this insight allows a complete revenue ranking of standard auction procedures with endogenous entry

truthful equilibria in dynamic bayesian games this paper characterizes an equilibrium payoff subset for markovian games with private information as discounting vanishes monitoring might be imperfect transitions depend on actions types correlated or not values private or interdependent it focuses on equilibria in which players report their information truthfully this characterization generalizes those for repeated games and reduces to a collection of one shot bayesian games with transfers with independent private values the restriction to truthful equilibria is shown to be without loss except for individual rationality in the case of correlated types results from static mechanism design can be applied resulting in a folk theorem

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

auctions with an inexpert bidder abstract we consider an auction in which the behavior of one potential bidder departs mildly from full rationality we show that the presence of such an inexpert bidder can be enough to discourage all of an infinitely large population of fully rational potential bidders from entering an auction furthermore this departure from full rationality does not reduce the inexpert bidder s payoff

mapping technological trajectories of the green revolution and the gene revolution from modernization to globalization abstract the dynamics of technology development along the technological trajectories of the green revolution and the gene revolution could be explicated by the social morphologies of modernization and globalization the green revolution was shaped by the exigencies of modernization while the gene revolution is being shaped by the imperatives of neo liberal economic globalization innovation development and diffusion of technologies followed different trajectories in these two realms because of being part of different innovation systems considerations of private gain and profit in the form of high returns to shareholders of agro biotech corporations of global reach largely determine the dynamics of technological innovation in the gene revolution technology transfer and local adaptive work in the green revolution was carried out in the international public domain with the objective of developing research capacity in post colonial third world agriculture to increase food production to avert hunger led political insurrection during the cold war differentiating these two trajectories is important not only due to the normative implications inherent in comparing the impacts of these two revolutions but also due to the important lessons we learn about how different contexts of innovation in the same technology cluster could evolve into contrasting research policy regimes

on optimal reservation prices in auctions the theory of auction design examines how various factors affect the outcome of an auction most of the existing literature focuses on how varying the amount of information available to each bidder affects the bid taker s expected revenue when all other factors remain constant this paper studies how the bid taker s expected revenue varies with changes in the auction format when such changes affect the number of bidders and in turn the bidders maximum value for the object being sold specifically we examine how varying the reservation price or screening level affects the bid taker s expected revenue though its effect on the number of bidders for two simple examples the losses associated with a reduced number of bidders outweighs any benefits that nontrivial reservation prices might have had in models with an exogonously set number of bidders

social exclusion and transgenic technology the case of brazilian agriculture many argue that transgenic technology will have wide ranging implications for farmers in developing nations a key concern is that competencies may be destroyed by predominantly foreign multinational transgenic technologies exacerbating problems of social exclusion in the case of subsistence farmers conversely those that fail to adopt the technology may become uncompetitive particularly in commodity based export markets drawing on interview data conducted in brazil and supporting data collected in north america europe and china we found that the impact of transgenic technology varies it has less impact on farmers that adapt the products to their crop systems and environment and greater negative implications for less formally educated subsistence farmers in consequence of both complexity and compatibility earlier attempts at industrializing agriculture through technological innovation led to vastly improved agricultural output and exports but the benefits of productivity was not equitably distributed d lee 2005 american journal of agricultural economics 87 5 1325 1334 nor was it designed to meet specific local environmental and socioeconomic farmer conditions exacerbating social exclusion multinationals attempting to introduce transgenic technology without considering the broader social and ethical implications will invite resistance we discuss the implications for policy makers multinationals and small scale farmers

optimal repeated purchases when sellers are learning about costs abstract a buyer repeatedly purchases some good suppliers privately learn their cost only upon producing at least once efficiency would imply sampling sellers until one is found with cost lower than a increasing with time reservation value then the good would be permanently purchased from the seller with lowest cost a sequence of second price auctions with participation premia and entry fees is shown to be both efficient and optimal for the buyer an alternative calls for price offers by informed sellers with compensations that increase in the offer in both cases the buyer subsidizes competition through participation premia or compensations journal of economic literature classification numbers d44 d83 l14

rational expectations information acquisition and competitive bidding most rational expectations market equilibrium models are not models of price formation and naive mechanisms leading to such equilibria can be severely manipulable in this paper a bidding model is developed which has the market like features that bidders act as price takers and that prices convey information higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices bidders can benefit from trading only if they have a transactions motive or if they have access to inside information apart from exceptional cases prices are not fully revealing a two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing resolving a well known paradox

efficiency in games with markovian private information we study repeated bayesian games with communication and observable actions in which the players privately known payoffs evolve according to an irreducible markov chain whose transitions are independent across players our main result implies that generically any pareto efficient payoff vector above a stationary minmax value can be approximated arbitrarily closely in a perfect bayesian equilibrium as the discount factor goes to 1 as an intermediate step we construct an approximately efficient dynamic mechanism for long finite horizons without assuming transferable utility publication abstract

long term contracting with markovian consumers to study how a firm can capitalize on a long term customer relationship we characterize the optimal contract between a monopolist and a consumer whose preferences follow a markov process the optimal contract is nonstationary and has infinite memory but is described by a simple state variable under general conditions supply converges to the efficient level for any degree of persistence of the types and along any history though convergence is history dependent in contrast as with constant types the optimal contract can be renegotiation proof even with highly persistent types these properties provide insights into the optimal ownership structure of the production technology

optimal search auctions abstract we study the design of profit maximizing single unit auctions under the assumption that the seller needs to incur costs to contact prospective bidders and inform them about the auction with independent bidders types and possibly interdependent valuations the seller s problem can be reduced to a search problem in which the surplus is measured in terms of virtual utilities minus search costs compared to the socially efficient mechanism the optimal mechanism features fewer participants longer search conditional on the same set of participants and inefficient sequence of entry

strategic ignorance in a second price auction abstract suppose that bidders may publicly choose not to learn their values prior to a second price auction with costly bidding all equilibria with truthful bidding exhibit bidder ignorance when the number of bidders is sufficiently small ignorance considerations also affect the optimal reserve price

on absolute auctions and secret reserve prices from a theory viewpoint the use of auctions with zero public reserve prices also called absolute auctions or of auctions with secret reserve prices is somewhat puzzling despite being common by allowing that buyers differ in their processing of past data regarding how the participation rate varies with the auction format and how reserve prices are distributed when secret we show in a competitive environment that these auction formats may endogenously emerge we also analyze how buyers with various sophistications and sellers with various costs sort into the different formats thereby offering a range of testable predictions alternative approaches are reviewed

auctions with heterogeneous entry costs it is well known that if bidders have independent private values and homogeneous entry costs a rst or second price auction with a reserve price equal to the seller s value maximizes social surplus and seller revenue and leaves bidders with no surplus further in mixed strategy entry equilibria social surplus and seller revenue decrease with the number of bidders we show that when entry costs are heterogeneous and private information the revenue maximizing reserve price is above the seller s value a positive inspection fee and a reserve price equal to the seller s value generates even more revenue and in either case bidders capture informational rents further seller revenue and social surplus may either increase or decrease with the number of bidders nevertheless seller revenue is asymptotically the same whether entry costs are homogeneous or heterogeneous our results are framed in terms of screening values rather than reserve prices and apply to any standard auction

public trust and government betrayal abstract this study presents a simple model of government reputation in which government type cannot be directly observed by households with the variation that government type rather than being permanent follows an exogenous markov process this formulation captures three characteristics of bad policy outcomes governments which betray public trust do so erratically public trust is regained only gradually after a betrayal and governments with recent betrayals betray with higher probability than other governments

who wants a good reputation we examine a market in which long lived firms face a short term incentive to exert low effort but could earn higher profits if it were possible to commit to high effort there are two types of firms inept firms who can only exert low effort and competent firms who have a choice between high and low effort there is occasional exit and competent and inept potential entrants compete for the right to inherit the departing firm s reputation consumers receive noisy signals of effort choice and so competent firms choose high effort in an attempt to distinguish themselves from inept firms a competent firm is most likely to enter the market by purchasing an average reputation in the hopes of building it into a good reputation than either a very low reputation or a very high reputation inept firms in contrast find it more profitable to either buy high reputations and deplete them or buy low reputations

dynamic supplier contracts under asymmetric inventory information in this paper we examine a supply chain in which a single supplier sells to a downstream retailer we consider a multiperiod model with the following sequence of events in period t the supplier offers a contract to the retailer and the retailer makes her purchasing decision in anticipation of the random demand the demand then unravels and the retailer carries over any excess inventory to the next period unmet demand is lost in period t 1 the supplier designs a new contract based on his belief of the retailer s inventory and the game is played dynamically we assume that short term contracts are used i e the contracting is dynamically conducted at the beginning of each period we also assume that the retailer s inventory before ordering is not observed by the supplier this setting describes scenarios in which the downstream retailer does not share inventory sales information with the supplier for instance it captures the phenomenon of retailers distorting past sales information to secure better contracting terms from their suppliers we cast our problem as a dynamic adverse selection problem and show that given relatively high production and holding costs the optimal contract can take the form of a batch order contract which minimizes the retailer s information advantage we then analyze the performance of this type of contract with respect to some useful benchmarks and quantify the value of prudent contract design and the value of inventory information to the supply chain markovian adverse selection models in which the state and action in a period affect the state in the subsequent period are recognized as theoretically challenging and are relatively less understood we take a nontrivial step towards a better understanding of such models under short term contracting

collusion with persistent cost shocks we consider a dynamic bertrand game in which prices are publicly observed and each firm receives a privately observed cost shock in each period although cost shocks are independent across firms within a firm costs follow a first order markov process we analyze the set of collusive equilibria available to firms emphasizing the best collusive scheme for the firms at the start of the game in general there is a trade off between productive efficiency whereby the low cost firm serves the market in a given period and high prices we show that when costs are perfectly correlated over time within a firm if the distribution of costs is log concave and firms are sufficiently patient then the optimal collusive scheme entails price rigidity firms set the same price and share the market equally regardless of their respective costs when serial correlation of costs is imperfect partial productive efficiency is optimal for the case of two cost types first best collusion is possible if the firms are patient relative to the persistence of cost shocks but not otherwise we present numerical examples of first best collusive schemes

full extraction of the surplus in bayesian and dominant strategy auctions we consider auctions for a single indivisible object in the case where the bidders have information about each other which is not available to the seller we show that the seller can use this information to his own benefit and we completely characterize the environ ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder s willingness to pay we provide this characterization for auctions in which the bidders have dominant strate gies and for those where the relevant equilibrium concept is bayesian nash in both set ups the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties we consider the situation in which an agent the seller possesses one indivisible unit of a good to which he attaches no value but the good has value to a number of potential buyers and its transfer to one of them would increase social welfare in particular the transfer to the buyer with the highest valuation maximizes social welfare in this paper we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay if the seller had full information about the reservation prices of potential buyers his optimal selling strategy would be very simple he would announce a price equal or very close to the highest reservation value the optimal strategy for the bidder with the highest evaluation would be to accept the offer note that we are treating a situation in which the seller can commit himself to a price as a result of the exchange the utility of the seller increases by the full amount of the increase in social welfare and he has been able to fully extract the surplus in many circumstances however a seller has only imperfect knowledge of the buyers willingnesses to pay in this case he must find some mechanism or auction which will enable him to maximize his benefit from the sale of the object the auction literature starts with this observation and shows how the seller can by an astute choice of auction extract the largest possible fraction of the surplus in general the literature has shown that this proportion is strictly less than one in some circumstances the bidders will have information about each other which is not available to the seller for instance in auctions for petroleum drilling rights bidders know the results of geological tests which they have

behavioral models for first price sealed bid auctions with the one shot decision theory abstract we build an auction model with the one shot decision theory which describes the process of a bidder deciding his her bidding price in first price sealed bid auctions the decision making procedure involves two steps first for each of his her possible bidding prices the bidder examines every possible highest bidding price provided by the other bidders and chooses one as a focus point of this bidding price of him her then the bidder determines such a bidding price as the optimal one that generates the best outcome when its focus point occurs the optimal bidding price can be obtained and two common phenomena in auction markets throwing away and overbidding are well explained

optimal dynamic information provision abstract we study a dynamic model of information provision a state of nature evolves according to a markov chain an advisor with commitment power decides how much information to provide to an uninformed decision maker so as to influence his short term decisions we deal with a stylized class of situations in which the decision maker has a risky action and a safe action and the payoff to the advisor only depends on the action chosen by the decision maker the greedy disclosure policy is the policy which at each stage minimizes the amount of information being disclosed in that stage under the constraint that it maximizes the current payoff of the advisor we prove that the greedy policy is optimal in many cases but not always