bid caps in large contests abstract we study the effect of rigid and flexible bid caps on contestants aggregate costs and aggregate bids in all pay contests with a large number of heterogeneous contestants and prizes we show that rigid caps always decrease aggregate costs whereas flexible caps have essentially no effect on aggregate costs rigid caps decrease aggregate bids when costs are linear or concave but increase aggregate bids under some conditions when costs are convex flexible caps always decrease aggregate bids

on the existence of cournot equilibrium this paper examines the existence of n firm cournot equilibrium in a market for a single homogeneous commodity it proves that if each firm s marginal revenue declines as the aggregate output of other firms increases which is implied by concave inverse demand then a cournot equilibrium exists without assuming that firms have nondecreasing marginal cost or identical technologies also if the marginal revenue condition fails at a potential optimal point there is a set of firms such that no cournot equilibrium exists the paper also contains an example of nonexistence with two nonidentical firms each with constant returns to scale production

a strategic approach to multiple estate division problems abstract the classical bankruptcy problem is extended by assuming that there are multiple estates in the finite estate case the agents have homogeneous preferences per estate which may differ across estates in the more general infinite estate problem players have arbitrary preferences over an interval of real numbers each of which is regarded as an estate a strategic estate game is formulated in which each agent distributes his legal entitlement over the estates resulting in individual claims per estate each estate is then divided according to some allocation rule the paper focuses on existence and on computational aspects of nash equilibria in finite and infinite estate games with some focus on the proportional allocation rule for this rule it also studies pareto optimality and envy freeness of equilibrium allocations

the dual illusion of grants in aid on central and local expenditures the purpose of this paper is to clarify some misspecificationsthat prevail in the dual illusion hypothesis which is animportant influential theory in fiscal illusion studies avoter s behavior can hence be self fulfilling and the dual illusion will not contradict each other our findings alsosupport what the dual illusion hypothesis expects that aidraises the demand for recipient government output and reducesthe demand for grantor government output the intergovernmentgrants therefore do appear to be a common source of fiscalillusion

multi unit pay your bid auctions with variable awards abstract multi unit auctions in which bidders can win a variable number of units differ significantly from multi unit auctions in which bidders can only win one unit in an independent private values pay your bid auction where bidders may win up to two units we show that first order conditions imply separating and pooling of bids must both occur with positive probability this behavior is not found in multi unit uniform price auctions it also contrasts with asymmetric first price auctions of a single good whose first order conditions are superficially similar a uniform distribution example is analyzed numerically journal of economic literature classification numbers d44 d82 c72

fiscal illusion and the grantor government in canada recent work on the u s concludes that one or more illusions are responsible for the empirically observed flypaper effect using annual canadian data for the period 1962 84 we test the single illusion and dual illusion specifications currently in the literature while the empirical results support the dual illusion specification it is not the unambiguous choice over single illusion specifications as previously found further the nature of the grant system in canada raises questions about whether illusions or real factors produce the empirical results

approaches for estimating noncompliance examples from federal taxation in the united states crime and underground economic activity are a fact of life around the world most societies attempt to control these activities through the expenditure of resources on monitoring prosecution punishment and educational programmes gathering statistics about who is engaging in illegal or underground activity the frequencies with which various crimes or underground transactions are occurring and the severity or magnitude of these acts is crucial for making good decisions regarding our allocation of resources in this area unfortunately in general it is very difficult to obtain accurate information about these issues this is partly because the individuals engaged in such activities wish not to be identified and often take actions to avoid detection and partly because by their very nature the activities tend not to generate economic accounting legal demographic or other cultural records the fact that it is difficult to obtain accurate information about the activities however does not in any way imply that we should not make a concerted effort to try to obtain the best information we can i believe the cost associated with attempting to determine the extent and nature of these activities is in most circumstances well below the expected benefit which includes the likelihood of improved decisionmaking by relevant government personnel and the general public as a result i also believe the debate about developing estimates of illegal or underground economic activity should primarily focus on practical issues related to how best to go about developing estimates that are as reliable as possible in this short article i shall discuss the measurement of noncompliance with laws and regulations my particular area of expertise and shall not discuss the measurement of other kinds of hidden economic behaviours such as informal contracting unmeasured home production and grey market activities in particular i shall discuss three approaches for estimating the aggregate amount of noncompliance with respect to a specific law or regulation i intensive data collection for a focused subsample of the population ii detection controlled estimation and iii the comparision of estimates generated by distinct datasets and models for each i shall describe in general terms what the approach is and how it is implemented review limitations of the approach and present an example of the application of the approach to the measurement of tax noncompliance in the united states my discussion shall necessarily be short and i refer the interested reader to a variety of original research publications for more details especially about the specific examples

some evidence on the effect of the separation of spending and taxing decisions it is often argued that separation of public spending and taxing decisions engenders in the voter overoptimistic hopes that someone else will bear the cost of public services thereby inducing an increase in the size of government but are perceived tax prices systematically and persistently reduced by separation although in stock markets all agents expectations may be unbiased they may or may not be unbiased in political markets this paper analyzes the separation created in federal states when the central government finances local expenditures evidence from a dynamic decisive voter model is presented that indicates that the separation introduced by federal grants to canadian provinces did in fact reduce the perceived tax price of provincial public services and raise provincial expenditures the results suggest also that the effect of separation diminished over time

multiunit pay your bid auction with one dimensional multiunit demands an arbitrary number of units of a good is sold to two bidders through a discriminatory auction the bidders are homogeneous ex ante and their demand functions are two step functions that depend on a single parameter we characterize the symmetric bayesian equilibrium and prove its existence and uniqueness we compare this equilibrium with the equilibrium of the multiunit vickrey auction and with the equilibria of the single unit first price and second price auctions we examine the consequences of bundling all units into one package we study the impacts that variations of the relative supply have on the equilibrium on the bidders average payoffs per unit and on the efficiency of the equilibrium allocation

the political determination of intergovernmental grants in australia intergovernmental grants have been conventionally explained on the basis of either equity efficiency and or institutional considerations this paper seeks to model australian intergovernmental grants by including both traditional public finance variables and public choice influences that is grants are used by federal government politicians to purchase political capital thereby enhancing their own chances of reelection the models employed in this paper are tested for six australian states for the period 1981 82 to 1991 92 using unsystematic grant transfers the results provide support for these public choice considerations and highlight the importance of incorporating institutional factors and controlling for misspecification in the error structure in estimates of this type

bertrand competition with cost uncertainty abstract we analyze the classical model of bertrand competition in a homogeneous good market with constant marginal costs and uncertainty regarding rivals costs first we show that there exists a mixed strategy nash equilibrium under the conventional equal sharing rule second we illustrate the result for the case of piecewise affine market demand

the tax versus debt controversy in a multivariate cointegrating system the empirical literature is replete with evidence that budget deficits and government debt affect traditional view or do not appreciably affect ricardian equivalence private consumption however the validity of the relative empirical estimates can be questioned to the extent that they do not adequately distinguish among countries with varying levels of indebtedness the present paper attempts to address this problem by using johansen s cointegration technique and by sorting the sample countries into groups according to the ratio of debt to gdp the empirical evidence generated finds support for the debt illusion hypothesis as a means of expounding variations in consumers behaviour among countries with varying degrees of indebtedness

banks as coordinators of economic growth and stability microfoundation for macroeconomy with externality abstract competition among banks promotes growth and stability for an economy with production externality following arrow and debreu 1954 6 i formulate a standard growth model with externality a two period version of romer 1986 39 as a game among consumers firms and intermediaries the walrasian equilibrium with an auctioneer does not achieve the social optimum without an auctioneer or intermediaries i show that no nash equilibrium exists with several banks strategically intermediating capital a nash equilibrium emerges with a realistic institution i e an interbank market with a negotiation process in the loan market the equilibrium outcome is uniquely determined and socially optimal

the existence of equilibrium in discontinuous economic games i theory the article presents information about the existence of equilibrium in discontinuous economic games in this paper and its sequel presents study the existence of nash equilibrium in games where agents payoff functions are discontinuous the enquiry is motivated by a number of recent studies that have uncovered serious existence problems in seemingly innocuous economic games in the sequel to this paper authors have explained the utility function in the economic games referred to earlier are neither continuous nor quasi concave however they demonstrate that the payoff functions in mildly modified versions of these constructs exhibit two weaker forms of continuity which together with the requirement of quasi concavity suffice for the existence of an equilibrium from this one may conclude that at least in the modified versions of these models discontinuities in the payoff functions are not the real source of the problem rather it is the failure of the payoff functions to the quasi concave which is responsible for the non existence of equilibrium these observations bear on the existence of nash equilibrium in pure strategies

fiscal illusion and the grantor government empirical studies indicate that unconditional intergovernmental grants have a flypaper effect several authors have modeled recipient government spending under fiscal illusion to explain this phenomenon in short grants reduce the perceived marginal cost of recipient government output this paper develops a more general model of illusion that incorporates the grantor government thereby eliminating inconsistencies encountered in previous models the more general model implies that grant finance increases the perceived marginal cost of grantor government output thus grant induced illusion should have two effects an increase in recipient output and a decrease in grantor output the empirical work supports this hypothesis

price matching guarantees as a direct signal of low prices if consumers believe that stores offering price matching guarantees pmgs charge low prices high search cost consumers will purchase from pmg stores this leads pmg stores demand to be less pric

continuous time games of timing abstract we address the question of existence of equilibrium in general timing games with complete information under weak assumptions any two player timing game has a markov subgame perfect e equilibrium for each e 0 this result is tight for some classes of games symmetric games games with cumulative payoffs stronger existence results are established

all equilibria in a class of bidding games abstract we consider a class of bidding games under complete information and construct a continuum of pure and mixed strategy equilibria as corollaries of our results we obtain a continuum of equilibria for the n bidder first price auction and the n firm bertrand game

discontinuous stable games and efficient nash equilibria abstract in the recent paper by the author scalzo v 2010 pareto efficient nash equilibria in discontinuous games economics letters 107 364 365 a class of discontinuous games where efficient nash equilibria exist has been defined in the present paper we complete the previous investigation and recognize a class of discontinuous games where the efficient nash equilibria are stable with respect to perturbations of the characteristics of players

distributive politics and electoral competition abstract within the framework of pure redistribution dividing one unit of a homo geneous good among identical individuals the paper analyses the redistribution that arises from downsian two party electoral competition it appears that the strategic behavior of vote maximizing parties leads them to propose divisions which are not far from the egalitarian one journal of economic literature classification numbers c72 d63 d72

strategic uncertainty and equilibrium selection in discontinuous games abstract we introduce the new concept of prudent equilibrium to model strategic uncertainty and prove it exists in large classes of discontinuous games when the game is better reply secure we show that prudent equilibrium refines nash equilibrium in contrast with the current literature we don t use probabilities to model players strategies and beliefs about other players strategies we provide examples first price auctions location game nash demand game etc where prudent equilibrium concept removes most non intuitive solutions of the game

an informationally robust equilibrium for two person nonzero sum games abstract this paper considers the implications of explicit slight uncertainty about the strategic sequence of moves that is about the informational structure for a two person nonzero sum game it is shown that the set of associated informationally robust equilibria must be nonempty and must be a subset of the set of nash equilibria although the present approach is conceptually reminiscent of that underlying perfectness the two concepts are shown to be logically unrelated there may exist no equilibrium which is both perfect and informationally robust journal of economic literature classification number c72

bidding behavior in asymmetric auctions an experimental study abstract we review an asymmetric auction experiment based on plum int j game theory 20 1992 393 private valuations of the two bidders are independently drawn from distinct but commonly known distributions one of which first order stochastically dominates the other we test the qualitative properties of that model of asymmetric auctions in particular whether the weak bidder behaves more aggressively than the strong and then test bidders preference for first vs second price auctions

certification and minimum quality standards when some consumers are uninformed we compare certification to a minimum quality standard mqs policy in a duopolistic industry where firms incur quality dependent fixed costs and only a fraction of consumers observe the quality of the offered goods compared to the unregulated outcome both profits and social welfare would increase if firms could commit to producing a higher quality an mqs restricts the firms quality choice and leads to less differentiated goods this fuels competition and may therefore deter entry a certification policy which awards firms with a certificate if the quality of their products exceeds some threshold does not restrict the firms quality choice in contrast to an mqs certification may lead to more differentiated goods and higher profits we find that firms are willing to comply with an ambitious certification standard if the share of informed consumers is small in that case certification is more effective from a welfare perspective than a minimum quality standard because it is less detrimental to entry

on the existence of pure and mixed strategy nash equilibria in discontinuous games a game is better reply secure if for every nonequilibrium strategy x and every payoff vector limit u resulting from strategies approaching x some player i has a strategy yielding a payoff strictly above u i even if the others deviate slightly from x if strategy spaces are compact and convex payoffs are quasiconcave in the owner s strategy and the game is better reply secure then a pure strategy nash equilibrium exists better reply security holds in many economic games it also permits new results on the existence of symmetric and mixed strategy nash equilibria

fiscal decentralization and government size an extension this paper analyzes one method governments employ to circumvent the discipline of a competitive system of fiscal federalism intergovernmental collusion in the form of intergovernmental grants grants it is argued serve to encourage the expansion of the public sector by concentrating taxing powers in the hands of the central government and by weakening the fiscal discipline imposed on governments forced to self finance their expenditures the results reported suggest that intergovernmental grants do encourage growth in the public sector the results offer further support for the use of monopoly government assumptions in public sector modeling

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

the empirical analysis of fiscal illusion this paper examines the empirical analysis of the five main hypotheses subsumed under the generic term fiscal illusion after placing these hypotheses within a common theoretical framework the paper attempts to evaluate empirical research into the revenue complexity hypothesis the revenue elasticity hypothesis the flypaper effect renter illusion and debt illusion

symmetric games with only asymmetric equilibria abstract it is known that not every symmetric game has a symmetric equilibrium because there are examples of symmetric games that fail to have any equilibria at all but this leads to the following question if a symmetric game has a nash equilibrium does it have a symmetric nash equilibrium in this note we show that the answer to this question is no by providing two examples of symmetric games that have only asymmetric equilibria

fiscal illusion and the australian local government grants process how sticky is the flypaper effect it has been argued that evidence supporting the widely documented flypaper effect is a statistical artefact more specifically that previous studies are compromised by the use of inappropriate functional forms and the endogeneity of intergovernmental grant programs whilst the first issue may be resolved with careful econometric testing the second requires the incorporation of institutional constraints into governmental expenditure equations combining australian local government expenditure equations and intergovernmental grant parameters the flypaper controversy is analysed empirical results confirm the sensitivity of the flypaper effect to specification and tests of fit unambiguously favour one functional form that specification yields no evidence of a flypaper effect in the australian institutional milieu

characterizations of the existence of equilibria in games with discontinuous and non quasiconcave payoffs this paper characterizes pure strategy and dominant strategy nash equilibrium in non cooperative games which may have discontinuous and or non quasiconcave payoffs conditions called diagonal transfer quasiconcavity and uniform transfer quasiconcavity are shown to be necessary and with conditions called diagonal transfer continuity and transfer upper semicontinuity sufficient for the existence of pure strategy and dominant strategy nash equilibrium respectively the results are used to examine the existence or non existence of equilibrium in some well known economic games with discontinuous and or non quasiconcave payoffs for example we show that the failure of the existence of a pure strategy nash equilibrium in the hotelling model is due to the failure of an aggregator function to be diagonal transfer quasiconcave not the failure of payoffs to be quasiconcave as has been elsewhere conjectured

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