time orientation and asset prices we analyze a general equilibrium asset pricing model where a small subset of the consumers investors have a short run urge to save that is their attitude toward consumption in the long run is a standard one f they do place zero weight on consumption far enough out in the future f but their short run effective rates of discount may be negative our model which is an elaboration on the framework proposed by faruk gul and wolfgang pesendorfer does not feature time inconsistencies thus we view consumers as fully rational but subject to specific internal frictions in the form of temptation and self control problems the model nests the mehra prescott model and we use it as a way of interpreting the wealth and asset pricing data some aspects of these data we argue can possibly be better understood using our model than the standard one r 2002 published by elsevier science b v

group reputations stereotypes and cooperation in a repeated labor market reputation effects and other regarding preferences have both been used to predict cooperative outcomes in markets with inefficient equilibria existing reputation building models require either infinite time horizons or publicly observed identities but cooperative outcomes have been observed in several moral hazard experiments with finite horizons and anonymous interactions this paper introduces a full reputation equilibrium fre with stereotyping perceived type correlation in which cooperation is predicted in early periods of a finitely repeated market with anonymous interactions new experiments generate results in line with the fre prediction including final period reversions to stage game equilibrium and non cooperative play under unfavorable payoff parameters

linking agricultural policies with obesity and noncommunicable diseases a new perspective for a globalising world abstract in light of the shift in policy paradigm in agriculture from state intervention to market liberalisation and globalisation this paper develops a series of hypotheses on the relationship between agricultural policies and consumer diets the first hypothesis is that the paradigm shift has led to greater specialisation of production so changing the ability and incentive for producers to supply certain foods relative to others second the shift has affected farmgate prices both up and down so creating opportunities for the industries which purchase farm commodities the food consuming industries fcis to substitute lower priced ingredients thereby influencing the nutritional quality and content of foods available in the marketplace third it has increased the ability of the fcis to add value through product innovation and marketing creating a market characterised by highly differentiated products targeted to individualised preferences thus increasing the acceptability of a wider variety and quantity of food products the changing agricultural policy paradigm has therefore altered the environment in which consumers make their food choices in the form of food availability affordability and acceptability nevertheless the paper finds no clear pattern when it comes to health the changes have affected both unhealthy and healthy foods and ingredients the key process of importance for health then is not whether the ingredients produced by agriculture are healthy or not but how they are substituted transformed distributed and marketed through the supply chain e g vegetable oils into transfats this leads to an important implication that policies to intervene directly in agricultural production to promote healthy eating are unlikely to be effective or efficient if they do not take into account how foods are processed distributed and marketed through the supply chain in practice this means that the potential for policy interventions in agriculture to improve diets is limited but nevertheless potentially important where it exists given the upstream nature of the change incentives could be created for the fcis to substitute healthier ingredients in their products and or to sell more of them in instances where these changes can be passed all the way to the consumer greater investment could also be made in fruit and vegetable production for local markets along with testing the hypotheses established in this paper the research priority should to identify the incentives that influence the products produced by the fcis with the objective of finding those most amenable to leveraging the supply chain towards healthier eating

retail pricing and clearance sales sellers of new products are faced with having to guess demand conditions to set price appropriately but sellers are able to adjustprice over time and to learn from past mistakes additionally it is not necessary that all goods be sold with certainty it is sometimes better to set a high price and to risk no sale this process is modeledto explain retail pricing behavior and the time distribution of transactions prices start high and fall as a function of time on theshelf the initial price and rate of decline can be predicted and depends on thinness of the market the proportion of customers who are window shoppers and other observable characteristics copyright 1986 by american economic association

nutrition agriculture and the global food system in low and middle income countries the entire food value chain and diet of low and middle income countries lmics are rapidly shifting many of the issues addressed by the nutrition community ignore some of the major underlying shifts in purchases of consumer packaged foods and beverages at the same time the drivers of the food system at the farm level might be changing there is a need for the agriculture and nutrition communities to understand these changes and focus on some of their implications for health this rapid growth of the retail sector will change the diets of the food insecure as much as that of the food secure across rural and urban lmic s this short commentary contents that current research programs and policies are ignoring these rapid dynamic shifts

capacity choice counters the coase conjecture the coase conjecture 1972 is the proposition that a durable goods monopolist who sells over time and can quickly reduce prices as sales are made will price at marginal cost subsequent work has shown that in some plausible cases that conjecture does not hold we show that the coase conjecture does not hold in any plausible case in particular we examine that conjecture in a model where there is a vanishingly small cost for production capacity and the seller may augment capacity in every period in the gap case any positive capacity cost ensures that in the limit as the size of the gap and the time between sales periods shrink the monopolist obtains profits identical to those that would prevail when she could commit ex ante to a fixed capacity given a standard condition on demand those profits are at least 29 8 of the full static monopoly optimum

dynamic price competition with discrete customer choices abstract for many years dynamic pricing has proven to be an effective tool to increase revenue in the airline and other service industries most studies however focused on monopolistic models and ignored the fact that nowadays consumers can easily compare prices on the internet in this paper we develop a game theoretic model to describe real time dynamic price competition between firms that sell substitutable products by assuming the real time inventory levels of all firms are public information we show the existence of nash equilibrium we then discuss how a firm can adapt if it knows only the initial but not the real time inventory levels of its competitors we compare a firm s expected revenue under different information structures through numerical experiments

fair wages and effort provision combining evidence from a choice experiment and a field experiment the presence of workers who reciprocate higher wages with greater effort can have important consequences for firms and labor markets knowledge about the extent and determinants of reciprocal effort choices is however incomplete we investigate the role of fairness perceptions and social preferences in a field experiment in which workers were hired for a one time job we show that workers who perceive being underpaid at the base wage increase their performance if the hourly wage increases whereas those who feel adequately paid or overpaid at the base wage do not change their performance moreover we find that only the workers who display reciprocity in a choice experiment show reciprocal effort responses in the field the workers who lack reciprocity in the choice experiment do not respond to the wage increase even if they feel underpaid at the base wage our findings suggest that fairness perceptions and social preferences are key in workers performance response to wage increases in our study the wage increase affects effort mainly through the removal of perceived unfairness i e the elimination of negative reciprocity toward the firm rather than positive reciprocity these results are the first direct evidence of the fair wage effort hypothesis in the field and also help interpret previous contradictory findings in the literature data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1970 this paper was accepted by uri gneezy behavioral economics

efficiency wage models of unemployment one view h lorne carmichael persistent wage rigidity and involuntary unemployment appear to be recurrent problems in most economies what could be preventing the wage adjustment necessary to clear the labor market many recent papers claim to have found the answer in efficiency wage models this paper surveys this literature and attempts to evaluate its accomplishments it concludes that the efficiency wage models fail to explain wage rigidity or persistent involuntary unemployment persistent involuntary unemployment of workers is a recurrent problem in labor markets all over the world unemployed workers seem unable to find work even though they are willing to accept lower wages than those being paid employed workers with similar skills what could be preventing wages from adjusting to clear these markets many recent papers known collectively as the efficiency wage literature now claim to have the answer this paper will survey the efficiency wage literature and critically evaluate some of its accomplishments efficiency wage models have already been examined by yellen 1984 katz 1986 and stiglitz 1987 and have received generally favorable reviews this paper is more critical its overall conclusion is that efficiency wage models provide some useful insights into the workings of the labor market but they do not provide a satisfactory account of wage rigidity or involuntary unemployment there are at least five separate versions of the efficiency wage model they share a common structure however and this is outlined in the first section of the paper this section also attempts to relate efficiency wage models to other recent models of unemployment section ii examines and criticizes the different approaches in detail section iii evaluates the achievements of this approach and suggests some directions for future work i a general efficiency wage model efficiency wage models as the name suggests are first of all models of wages they generate unemployment by showing that firms will sometimes want to set wages at non market clearing levels it is useful to begin therefore by reviewing how wages and employment are determined in some related models in a perfectly competitive labor market the wage for each type of labor is adjusted constantly to maintain equality of supply and demand overall employment fluctuates in response to demand changes as workers move up and down their labor supply curves unemployment is voluntary in that anyone who is not working prefers that state to employment at the going wage for people of his skills as well the value of a worker s marginal product is equal to the marginal value of his leisure so there are no unexploited wage bargains between unemployed workers and firms this model is successful in predicting the long term response of wages to shifts in demand and supply but it is clear that in the short run its depiction of voluntary unemployment and flexible wages is unrealistic a natural way to generate more realism is to assume that wages are inflexible in the short run in this case a reduction in demand away from a long run equilibrium will lead to rationing of jobs by employers as they attempt to stay on their labor demand curves the unemployment here is involuntary in that the unemployed would prefer to be working at the going wage and is inefficient in that there are lost gains from trade between these workers and firms the weakness of this model is that it is silent about the mechanism that keeps wages rigid unemployed workers who offer to work for less than the fixed wage ought to find work the early implicit contract models of azariadis 1975 baily 1974 and gordon 1974 provide one explanation for wage rigidity these models introduced the idea that wages can do more than just clear the market for labor wages in an implicit contract model are used to shift the risk generated by uncertain output market conditions from risk averse workers to the risk neutral firm

the dispersion of employees wage increases and firm performance previous studies examining intra firm wage dispersion and firm performance have focused on wage levels the authors of this study argue that for purposes of comparing wage dispersion s positive inc

the role of career and wage incentives in labor productivity evidence from a two stage field experiment in malawi we study how career and wage incentives affect labor productivity through self selection and incentive effect channels using a two stage field experiment in malawi first recent secondary school g

efficiency wages and industry wage differentials a comparison across methods of pay efficiency wage considerations should be less important for piece rate pay than for time wages therefore if industry wage differentials reflect efficiency wage factors then these pay differences should be less sizable and have less explanatory power for piecework than for timework we test this proposition using wage data for male production workers employed in the swedish metalworking industries in 1985 the data are partitioned into two groups of workers in our preferred sub sample of workers who received pay under both piece rates and time wages our results are uniformly consistent with efficiency wage implications for industry wage differentials for the subsample of workers who received pay under either piece rates or time wages industry wage differentials are of equal importance under either pay scheme these latter results however may also be influenced by unaccounted for sorting of workers and employers across methods of pay overall our examination of industry wage differentials across m

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

rational addiction with learning and regret we present a theory of rational behavior in which individuals maximize a set of stable preferences over goods with unknown addictive power the theory is based on three fundamental postulates that consumption of the addictive good is not equally harmful to all that individuals possess subjective beliefs concerning this harm and that beliefs are optimally undated with information gained through consumption although individual actions are optimal and dynamically consistent addicts regret their past consumption decisions and regret their initial assessment of the potential harm of the good addict prone individuals who believe it could not happen to them are most likely to be drawn into a harmful addiction

gift giving and worker productivity evidence from a firm level experiment abstract we present results from a field experiment designed to measure worker response to a monetary gift from their employer the experiment took place inside a tree planting firm paying its workforce incentive contracts firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity we compare planter productivity the number of trees planted per day on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block and thus under similar planting conditions we find direct evidence that the gift had a significant and positive effect on daily planter productivity controlling for planter fixed effects weather conditions and other random daily shocks

rational irrationality some economics of self management abstract the paper first reviews some of the main challenges posed to our received economic paradigm by a variety of behaviors documented by psychologists and discusses possible responses to this challenge it then describes a specific attempt at unifying a number of themes in social psychology using a parsimonious modeling of human behavior

managerial incentive problems a dynamic perspective the paper studies how a person s concern for a future career may influence his or her incentives to put in effort or make decisions on the job in the model the person s productive abilities are revealed over time through observations of performance there are no explicit output contingent contracts but since the wage in each period is based on expected output and expected output depends on assessed ability an implicit contract links today s performance to future wages an incentive problem arises from the person s ability and desire to influence the learning process and therefore the wage process by taking unobserved actions that affect today s performance the fundamental incongruity in preferences is between the individual s concern for human capital returns and the firm s concern for financial returns the two need be only weakly related it is shown that career motives can be beneficial as well as detrimental depending on how well the two kinds of capital returns are aligned it is well understood by now that informational externalities may place special demands on the organization of economic exchange simple price mediated markets will frequently fail in the presence of asymmetric information in that case more elaborate contractual arrangements have to be used as substitutes for the price system lately considerable effort has been devoted to the analysis of contracting under incomplete information with the objective to understand the range of economic institutions that emerge in response to the failure of the price system the analysis of moral hazard has played a prominent role in this development moral hazard problems arise when for some reason or another transacting parties cannot contract contingent on the delivery of the good for instance in buying labour services it may be that the amount of labour supplied is not directly observable precluding a simple exchange of wage for labour as a partial remedy to this problem an imperfect mutually observed signal about the supply of labour can be used as a proxy in the contract frequently output is taken as such a proxy the drawback is that output is often influenced by other factors than labour input which induce undesirable risk into the contract one is therefore faced with a tradeoff between allocating risk associated with incomplete observability and providing incentives for a proper supply of labour gaining insight into this tradeoff is important not only for understanding contracting in the small e g managerial incentive schemes but also because it is closely related to the fundamental tension between equity and efficiency in the society as a whole while our understanding of moral hazard has advanced a lot in past years it is clear that much work remains an important question that has received little attention until

dynamic pricing in the presence of strategic consumers and oligopolistic competition we present a dynamic pricing model for oligopolistic firms selling differentiated perishable goods to multiple finite segments of strategic consumers who are aware that pricing is dynamic and may time their purchases accordingly this model encompasses strategic behavior by both firms and consumers in a unified stochastic dynamic game in which each firm s objective is to maximize its total expected revenues and each consumer responds according to a shopping intensity allocation consumer choice model we prove the existence of a unique subgame perfect equilibrium provide equilibrium optimality conditions and prove monotonicity results for special cases the model provides insights about equilibrium price dynamics under different levels of competition asymmetry between firms and multiple market segments with varying properties we demonstrate that strategic behavior by consumers can have serious impacts on revenues if firms ignore that behavior in their dynamic pricing policies moreover ideal equilibrium responses to consumer strategic behavior can recover only a portion of the lost revenues a key conclusion is that firms may benefit more from limiting the information available to consumers than from allowing full information and responding to the resulting strategic behavior in an optimal fashion

allocation under dictatorship research in stalin s archives we survey recent research on the soviet economy in the state party and military archives of the stalin era the archives have provided rich new evidence on the economic arrangements of a command system under a powerful dictator including stalin s role in the making of the economic system and economic policy stalin s accumulation objectives and the constraints that limited his power to achieve them the limits to administrative allocation the information flows and incentives that governed the behavior of economic managers the scope and significance of corruption and market oriented behavior and the prospects for economic reform

a theory of clearance sales clearance sales are widely used by firms as an intertemporal selling policy in particular in markets where firms face demand uncertainty and need to choose capacity in advance clearance sales consist in charging a high price initially but then lowering the price in the sales period high valuation consumers purchase the good at the high initial price so as to avoid rationing at the low price while low valuation consumers wait for the price to drop we develop a simple model of intertemporal monopoly pricing under demand uncertainty and show that clearance sales may be the optimal intertemporal selling policy

reputation in bargaining and durable goods monopoly this paper analyzes durable goods monopoly in an infinite horizon discrete time game we prove that as the time interval between successive offers approaches zero all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria this reverses a well known conjecture of coase alternatively one can interpret the model as a sequential bargaining game with one sided incomplete information in which an uninformed seller makes all the offers our folk theorem for seller payoffs equally applies to the set of sequential equilibria of this bargaining game

pricing strategies in a dynamic duopoly a differential game model we formulate a differential game model for dynamic pricing in a duopolistic market firms demand functions are derived from utility maximizing behavior of consumers with the demand for a brand given by the logit model preferences for brands are assumed to evolve over time in the market in a manner akin to learning models postulated in the marketing literature we derive the differential equations governing the equilibrium open loop price paths over time and show that in steady state the brand with the higher preference level charges the higher price the formulation is extended to include the effects of consumer heterogeneity and equilibrium steady state prices are compared with those obtained when heterogeneity is ignored a comparison of steady state dynamic prices with myopic prices is provided an empirical example is discussed to show how steady state model predictions may be obtained from actual longitudinal purchase data

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

reducing public private sector pay differentials the single spine pay policy as a natural experiment in ghana empirical studies have documented the existence of the public private pay differentials in both developed and developing countries the implementation of policies aiming to reduce this gap has however been mitigated or inconclusive this paper exploits the single spine pay policy sspp in ghana as a natural experiment to examine the effectiveness of wage policies in developing countries the sspp was implemented in 2010 by the government of ghana to address the public private sector wage gap and improve productivity in the public sector using a quantile treatment effect approach based on a difference in difference did estimation we show that the sspp has yet to reduce the wage gap between the public and private sectors across the entire distribution of earnings in ghana the improvement observed is only at the lower tail of the distribution of earnings however the sspp has a larger effect on the earnings of female workers than that of males in the education and health services sector suggesting that the policy was successful in reducing the gender wage gap in that sector moreover the sspp has decreased the productivity of workers across the distribution of earnings mainly due to a decrease in the effort of female public sector workers nevertheless the sspp has had some successes and could be improved by putting in place a good managerial quality in the government agencies in addition it is important that the government pays much attention to various macroeconomic factors that have challenged the success of the sspp

moral hazard as an entry barrier in an experience goods industry an entrant who could make positive profits by providing a better deal to buyers than do incumbents may cheat buyers by providing goods of low quality to make even greater profits if buyers foresee this possibility they will be unwilling to buy from an entrant as a result moral hazard in a seller s choice of the quality of an experience good can lead to a barrier to entry in particular since hit and run entry is likely to lead to low quality choice the threat of such entry may not discipline the pricing of incumbents we also show that the temptation to dishonest entry the moral hazard problem is stronger if buyers are already receiving some consumer surplus as a result there is a first entrant advantage because the first entrant faces less temptation to provide inefficiently low quality than do subsequent entrants and with rational buyers this works to his advantage the scale of entry may affect quality incentives and therefore introductory offers may assure buyers of an entrant s quality but this cannot happen under a suitable definition of constant returns

a reputational model of authority abstract the paper provides a model where authority relaionships are founded on reputation the viability of authority is the result of subordinates free riding on each other s challenges reducing the frequency of challenges and making reputation worth defending the party with authority secures subordinates compliance through the payment of rents to influence the extent of their failure to act collectively and exacerbate the free rider problem they face the model provides a framework to explain how the magnitude and form of these rents depend on the primitives of the environment and on the authority s design of its reputation applications to employment relationships dictatorships and the notion of legitimacy are considered

consumer behaviour with environmental and social externalities implications for analysis and policy in this paper we summarise some of our recent work on consumer behaviour drawing on recent developments in behavioural economics particularly linked to sociol ogy as much as psychology in which consumers are embedded in a social context so their behaviour is shaped by their interactions with other consumers for the purpose of this paper we also allow consumption to cause environmental damage analysing the social context of consumption naturally lends itself to the use of game theoretic tools we shall be con cernedwithtwowaysinwhichsocialinteractionsaffectconsumerpreferencesandbehaviour socially embeddedpreferences wherethebehaviourofotherconsumersaffectanindividual s preferences and hence consumption we consider two examples conspicuous consumption and consumption norms and socially directed preferences where people display altruistic behaviour our aim is to show that building links between sociological and behavioural eco nomic approaches to the study of consumer behaviour can lead to significant and surprising implications for conventional economic analysis and policy prescriptions especially with respect to environmental policy

a cue theory of consumption psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue based complementarities the presence of the cue raises the marginal utility derived from consumption in this paper such dynamic preferences are embedded in a rational choice model behavior that arises from this model is characterized by endogenous cue sensitivities costly cue management commitment and cue based spikes in impatience the model is used to understand addictive habit forming behaviors and marketing the model explains why preferences change rapidly from moment to moment why temptations should sometimes be avoided and how firms package and position goods

is work special justice and the distribution of employment i investigate from an egalitarian welfarist standpoint the issue of whether state guaranteed employment should be offered as a matter of right to able bodied poor citizens who suffer chronic or persistent unemployment an affirmative answer is defended one consideration supporting this right to work is that provision of transfer aid in the form of jobs rather than cash screens nonneedy bohemians from the class of beneficiaries the main conclusion of the essay is defended from one objection based on efficiency wage models of the labor market and from another based on the alleged impossibility of maintaining the self respect and self esteem of able bodied individuals who fail to earn their own keep independently in a market economy

a monopolistic and oligopolistic stochastic flow revenue management model this paper studies a one shot inventory replenishment problem with dynamic pricing the customer arrival rate is assumed to follow a geometric brownian motion homogeneous customers have an isoelastic demand function and do not behave strategically we find a closed form optimal pricing policy which utilizes current demand information under this pricing policy the inventory trajectory is deterministic and a retailer sells all inventory we show that dynamic pricing coordinated with the inventory decision achieves significantly higher profits than does static pricing furthermore under oligopolistic competition we establish a weak perfect bayesian equilibrium for the price and inventory replenishment game we find the pricing equilibrium to be cooperative even in a noncooperative environment but that inventory competition results in overstock and damages profits finally we examine the trade off between dynamic pricing and price precommitment and find that flexible pricing is still beneficial provided competition is not too intense

unions and interindustry wage differentials abstract we investigate the importance of trade unions in collective bargaining in the context of a developing country manufacturing labor market the methodology we adopt to estimate wage differentials follows the method proposed by haisken denew j p and schmidt c m 1997 review of economics and statistics 79 516 521 since it improves on the standard procedure popularized by krueger a b and summers l h 1988 econometrica 56 193 259 our findings indicate that wage dispersion is far greater in the unionized sector of brazilian manufacturing in contrast to evidence from other countries

information and economic analysis a perspective ten years ago i delivered a paper before this group with the title information and economic analysis i chose the title deliberately i did not call the subject on which i was speaking the economics of information because to do so would have been to suggest that my topic like the economics of agriculture or the economics of industry or the economics of labour represented another branch of specialisation within economics i wanted to suggest that informational considerations were in fact central to the analysis of a wide variety of phenomena that they constituted a central part of the foundations of economic analysis at the time though economists had long paid lip service to the importance of information there was little formal literature the last decade has seen a burgeoning of the literature it has become to the late 7o s and early 8o s what growth theory was to the early 6o s and it has been greeted with some of the same scepticism there seems to be a myriad ofspecial cases and few general principles the little examples are often contrasted unfavourably with the generality of general equilibrium theory what have we learned have diminishing returns set in are there fruitful directions for future research and if so what are they these are the questions which i wish to address here the work of the past decade has made i think a fundamental and lasting contribution to economic analysis the contributions have been both negative and positive we have learned that much of what we believed before is of only limited validity that the traditional competitive equilibrium analysis though having the superficial appearance of generality in terms of superscripts and subscripts is indeed not very general the theory is not robust to slight alterations in the informational assumptions it is but a special and not very plausible example among the possible set of informational assumptions which can be employed to characterise an economy at the same time the theory has been able to provide insights into phenomena about which the traditional model had nothing to say or which seemed inconsistent or inexplicable within the competitive paradigm it has provided some of the micro foundations for macro economics it has provided the basis of a new theory of the firm of a new new welfare economics and of a theory of economic organisation including a comparison of economic

competitive dynamic pricing with alternating offers theory and experiment abstract we propose an equilibrium model of duopolistic dynamic pricing in which a buyer alternates between two sellers for price offers over a finite time horizon the game ends when the buyer accepts a price offer or the selling season is over whichever comes first previous research granot et al 2007 shows that there are successive markdowns in equilibrium when the buyer is commonly known to be myopic our analysis suggests that when she is known to be strategic price offers over the entire selling season are constant moreover lengthening the season increases generally decreases both sellers profits when the buyer is myopic strategic an experimental study largely supports the equilibrium predictions when the buyer is myopic but not when she is strategic in the latter case early in the season sellers overprice the good arguably in an attempt to effectively shorten the season and thereby increase their profits

why do members of congress support agricultural protection it seems paradoxical that until recently developed countries have continued subsidizing agriculture even though their agricultural sectors had been declining in relative importance since the middle of the 20th century what drives support for agricultural protection the broad array of subsidies to farmers and taxes and quotas imposed on agricultural imports in developed countries we answer this question by testing three competing hypotheses about what drives support for agricultural protection in the us i legislator preferences ii electoral incentives or iii lobbying using data on the roll call votes of the members of the 106th through the 110th congresses 1999 2009 and the scores given to each legislator by the farm bureau our findings suggest that electoral incentives explain a great deal of the variation in support for agricultural protection but that legislator preferences and lobbying might play a role too moreover legislator preferences and electoral incentives appear to be substitutes for one another why does congress support agricultural protection because many members have electoral incentives to and because many of those who do not still have other personal or strategic interests at stake

psychological expected utility theory and anticipatory feelings we extend expected utility theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty we show how these anticipatory feelings may result in time inconsistency we provide an example from portfolio theory to illustrate the potential impact of anticipation on asset prices

interindustry wage differentials and the gender wage gap using data from the march 1988 current population survey the authors find that the wages of female workers differ significantly by industry even when the analysis controls for workers productivity related characteristics although these interindustry wage differentials are at least as large as men s and are highly correlated with them as well there are statistically significant differences between the two of the overall gender wage gap the average female worker earns about 65 as much as the average male worker 12 22 can be explained by differences between the patterns of interindustry wage differentials of men and women and 15 19 by differences in the distribution of male and female workers across industries thus the combined industry effects explain about one third of the overall gender wage gap

industry wage premia evidence from the wage distribution abstract we argue that under the unobserved quality explanation of industry wage differentials industries with high average premia will have even higher premia among high wage workers we find however that the ols premia correctly illustrate the industry impact across the distribution

theoretical foundations for sticky wages abstract the paper compares three different types of theoretical explanation of sticky wages they are implicit contracts efficiency wage models and insider outsider models it then reconsiders keynes rationale for sticky wages which focuses on relative wage issues finally the paper considers possible directions for future research

social learning and delay in a dynamic model of price competition abstract this paper studies dynamic price competition between two firms selling differentiated durable goods to two buyers whose valuations of the two goods depend on their own private type as well as that of the other buyer we derive a key intertemporal property of the equilibrium prices and construct an equilibrium based on this property we show that social learning reduces the equilibrium prices in the sense that when the buyers are more interdependent and hence have a stronger incentive to wait and see the firms respond by lowering their period 1 prices interestingly we find that this response by the firms along with the intertemporal property of the equilibrium prices implies that buyers delay their decisions less often when they become more interdependent

inducing political action by workers a firm aiming to influence a governmental policy may benefit from political action by its stakeholders such as workers this article studies the behavior of such a firm showing that workers will have a greater incentive to engage in costly political activity against the governmental policy the greater their number and the higher the wage the firm may therefore profit from paying above market wages and from hiring what might appear to be an inefficiently large number of workers and because unions may overcome free rider problems of uncoordinated political effort a firm may favor unionization or be less opposed to unionization than it would otherwise be the results of this article can also explain why firms may little reduce wages in a recession and why the higher wages paid by unionized firms do not reduce survival rates of these firms

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

advance purchase discounts and monopoly allocation of capacity optimal pricing by a monopoly airline that faces capacity constraints during the peak demand period is studied the existence of capacity constraints means that in order to expand output the airline must divert demand from the peak period to the off peak period a particular advance purchase discount policy is shown to be the profit maximizing method of selling tickets if the advance purchase requirement were infeasible output and total surplus would both be lower jel l12 substantial discounts for air travel are generally available to travelers who are willing to purchase tickets a week or more in advance of the departure date this paper demonstrates why the imposition of an advance purchase requirement may be a profit maximizing strategy for a monopoly airline facing capacity constraints during times of peak demand 1 the practice of imposing an advance purchase requirement on discount tickets is also placed in a favorable light in terms of its impact on social

how much priority is given to nutrition and health in the eu common agricultural policy agriculture in the european union eu is strongly influenced by the common agricultural policy cap there have been repeated calls for cap to address nutrition related health particularly obesity and non communicable disease ncd in the eu however aligning agricultural policy such as cap with nutrition is complex not least because the aims of agricultural policy are predominantly economic presenting a challenge for developing coherence between agricultural trade and health policy this research examined the political priority given to nutrition related health concerns within cap to date and the solutions suggested by agricultural trade and health policy makers and public health nutrition advocates via interviews of 20 high level participants from respective sectors the participants provided diverse perspectives often varying by sector and institution on the connections between agricultural policy and nutrition related health the extent to which nutrition concerns have been addressed via cap and whether cap is an appropriate and effective policy approach to improve nutrition related health in the eu in the future the key findings suggest the need for communication and agreement of clear high level nutrition guidelines clarity on the eu mandate to address nutrition related health concerns via policy and stronger engagement of civil society in the issues if cap is to address nutrition more than it is doing currently the difference in worldviews between agricultural trade representatives and those from public health also needs to be addressed

the brain as a hierarchical organization based on recent neuroscience evidence we model the brain as a dual system organization subject to three conflicts asymmetric information temporal hori zon and incentive salience under the first and second conflicts we show that the uninformed system imposes a positive link between consumption and labor at every period furthermore decreasing impatience endogenously emerges as a consequence of these two conflicts under the first and third conflicts it becomes optimal to set a consumption cap finally we discuss the behavioral implications of these rules for choice bracketing and expense tracking and for consumption over the life cycle jel dil d74 d82 d87 d91

markets in hierarchies organizational and market influences on gender inequality in a state pay system a pivotal issue in sociological theories of labor markets as well as legal and policy debates on pay equity is the relative importance of market and organizational forces in determining pay differences between jobs held predominantly by men and those held predominantly by women this article develops two models of the market organization relationship an administered efficiency model and a bureaucratic politics model quantitative analyses of individual and job level data in a state government pay system indicate that the administered efficiency model does not adequately explain malefemale earnings differences documentary testimonial and interview data strongly suggest the significance of bureaucratic politics in the pay determination process we conclude that market forces influence wage rates but are heavily mediated by organizational factors unrelated to efficiency considerations in the type of organization studied here

anticipation and the valuation of delayed consumption this paper presents a model of intertemporal choice that incorporates savoring and dread i e utility from anticipat ion of delayed consumption the model explains why an individual with positive time preference may delay desirable outcomes or get unpleas ant outcomes over with quickly contrary to the prediction of convent ional formulations of intertemporal choice implications of savoring and dread for savings behavior empirical estimation of discount rate s and public policy efforts to combat myopic behavior are explored the model provides an explanation for common violations of the indepe ndence axiom as applied to intertemporal choice copyright 1987 by royal economic society

optimal price skimming by a monopolist facing rational consumers this paper considers the intertemporal pricing problem for a monopolist marketing a new product the key feature differentiating this paper from the extant management science literature on intertemporal pricing is the assumption that consumers are intertemporal utility maximizers a subgame perfect nash equilibrium pricing policy is characterized and shown to involve intertemporal price discrimination we compare this policy to the optimal policy for a monopolist facing myopic consumers and find that for any given state prices are always lower with rational consumers than with myopic consumers for plausible parameter values the assumption of consumer rationality can be shown to lead to large differences in optimal prices moreover if a monopolist facing rational consumers implements the optimal myopic consumer pricing policy profits can be significantly less than if the monopolist follows the equilibrium pricing policy for rational consumers

limits to environmental bonds abstract bonds have recently been promoted as an alternative tool to control environmental damages particularly in those instances when the innovative activities of a firm have uncertain future impacts under this mechanism a firm would post a bond ex ante forfeiting all or a portion of the bond if its activities harmed environmental resources while the benefits of bonds have been developed there has been little systematic effort to explore their limitations in contrast the labor literature has extensively studied the limits of bonds as a mechanism to prevent worker shirking using insights from this parallel problem this paper explores the limits to environmental bonds focusing on the problems of moral hazard liquidity constraints and legal restrictions each limit offers a challenge to the success of environmental bonds we explore the use of bonds in surface mining and agricultural nonpoint pollution as motivating examples we also consider how other incentive schemes suggested by the labor literature might prove useful in the context of environmental management we consider the labor mechanisms of efficiency wages increasing wage profiles trust funds and rank order tournaments

durable goods monopoly with entry of new consumers this paper analyzes a model of a dynamic monopolist who produces at constant unit cost each period a new cohort of consumers enters the market each entering cohort is identical consumers within a cohort have different tastes for the good my main results are if players are sufficiently patient any positive average profit less than the maximum feasible level can be attained in a subgame perfect equilibrium in the subset of subgame perfect equilibria in which players use stationary strategies the seller cannot make sales at prices significantly greater than the lowest willingness to pay when period length goes to zero and the seller attains the maximum profit when commitment is feasible by charging the same static monopoly price in every period this paper analyzes a model of a dynamic monopolist who operates in a market in which there is a regular flow of new consumers the seller produces a durable good at constant unit cost each period a new cohort of consumers enters the market consumers wish to buy exactly one unit of the item but are willing to wait resales are not allowed each entering cohort is identical

incentives for procrastinators we examine how principals should design incentives to induce time inconsistent procrastinating agents to complete tasks efficiently delay is costly to the principal but the agent faces stochastic costs of completing the task and efficiency requires waiting when costs are high if the principal knows the task cost distribution she can always achieve first best efficiency if the agent has private information the principal can induce first best efficiency for time consistent agents but often cannot for procrastinators we show that second best optimal incentives for procrastinators typically involve an increasing punishment for delay as time passes

inter industry and occupational wage differentials in italy the vast literture on wage determination in the post war era extensively documents the existence of large and persistent wage differentials among industries and workers of comparable skills this paper addresses the issue of wage dispersion in the context of the italian economy the stability over time of industry relative wages confirme previous results obtained for the other countries a wide class of earings equations is estimated using microdata for the italian manufacturing industry the results provide little evidence in support of the view that wage dispersion can be explained by either unmeasured workers charcteristics or by compensating wage differentials conversely the estimated pattern of industry occupation wage differentials is consistent with the existence of rent sharing mechanisms and fairness considerations

changing eu agricultural policy discourses the discourse analysis of commissioner s speeches 2000 2007 this paper is a combination of political economy and critical discourse analysis of public texts about the common agricultural policy cap by concerned agents and the eu s agricultural commissioner in the period of november 2004 until october 2007 the analysis reveals how concerned agents articulated three competing discourses neomercantilism multifunctionality and neoliberalism it also shows that elements of the discourse of neoliberalism in the commissioner s speeches despite her use of different discourses for different audiences are becoming more and more important in order to facilitate further reforms and liberalisation of the cap

strategic ignorance as a self disciplining device we analyse the decision of an agent with time inconsistent preferences to consume a good that exerts an externality on future welfare the extent of the externality is initially unknown but may be learned via a costless sampling procedure we show that when the agent cannot commit to future consumption and learning decisions incomplete learning may occur on a markov perfect equilibrium path of the resulting intra personal game in such a case each agent s incarnation stops learning for some values of the posterior distribution of beliefs and acts under self restricted information this conduct is interpreted as strategic ignorance all equilibria featuring this property strictly pareto dominate the complete learning equilibrium for any posterior distribution of beliefs

local pollution in federal systems it is widely accepted that decentralized control of local pollution is inefficient if the central and the local authorities are imperfectly informed this paper shows how the central authority can introduce a flexible grant in aid system that induces the local authority to use a weighted combination of local and central information when the local authority suffers from confirmatory bias if the central authority is highly uncertain about the environmental effects of a specific pollutant the tax subsidy scheme can be designed to allow local information to play an essential role in the environmental policy if the central authority is certain that a pollutant must not exceed a specific limit the tax subsidy scheme can be designed to allow local information little influence on the environmental policy

a multistage model of bargaining this paper presents a simple multistage model of bargaining wherein a seller makes an offer that can be either accepted or refused if rejected the process continues how the seller s ability to make commitments affects bargaining outcomes is analysed by comparing the commitment equilibria to those arising when commitment is impossible the effects of increasing uncertainty about preferences and varying the length of the bargaining horizon are analysed the ways in which the bargaining environment can be changed to improve outcomes are discussed

reserve prices in auctions as reference points we consider second price and first price auctions in the symmetric independentprivate values framework we modify the standard model by theassumption that the bidders have reference based utility where the reserveprice minimum bid plays the role of the reference point in contrast to theusual result the seller s optimal reserve price is increasing in the number ofbidders even if an individual bidder perceives only a very small utility losswhen he has to pay more than the reserve price the impact on the optimalreserve price can be strong when there are many bidders

dynamic pricing in the presence of inventory considerations research overview current practices and future directions the benefits of dynamic pricing methods have long been known in industries such as airlines hotels and electric utilities where the capacity is fixed in the short term and perishable in recent years there has been an increasing adoption of dynamic pricing policies in retail and other industries where the sellers have the ability to store inventory three factors contributed to this phenomenon 1 the increased availability of demand data 2 the ease of changing prices due to new technologies and 3 the availability of decision support tools for analyzing demand data and for dynamic pricing this paper constitutes a review of the literature and current practices in dynamic pricing given its applicability in most markets and its increasing adoption in practice our focus is on dynamic intertemporal pricing in the presence of inventory considerations

evidence on the impact of minimum wage laws in an informal sector domestic workers in south africa what happens when a previously uncovered labor market is regulated we exploit the introduction of a minimum wage in south africa and variation in the intensity of this law to identify increases in wages for domestic workers and no statistically significant effects on employment on the intensive or extensive margins these large partial responses to the law are somewhat surprising given the lack of monitoring and enforcement in this informal sector we interpret these changes as evidence that strong external sanctions are not necessary for new labor legislation to have a significant impact on informal sectors of developing countries at least in the short run

balancing acquisition and retention spending for firms with limited capacity this paper discusses the interaction between revenue management and customer relationship management for a firm that operates in a customer retention situation but faces limited capacity we present a dynamic programming model for how the firm balances investments in customer acquisition and retention as well as retention across multiple customer types we characterize the optimal policy and discuss how the policy changes depending on capacity limitations we then contrast the modeling results with those of a behavioral experiment in which subjects acted as managers making acquisition and retention decisions in the modeling part of the paper we introduce a concept of the value of an incremental customer vic and show that when capacity is unlimited vic equals customer lifetime value clv but when capacity is limited vic is much smaller and changes dynamically depending on the number of customers and their mix as a result the optimal spending is constant and depends on clv for the firms with unlimited capacity but changes dynamically and is generally unrelated to clv when capacity is limited in the experimental part we introduce a concept of conditional optimality for the analysis of state dependent decisions applying this concept to our data we document a number of decision biases specifically the subjects tendency to overspend on retaining high value customers and underspend on lower value customers retention and acquisition we show that providing clv information exacerbates these biases and leads to a loss of net revenue when capacity is limited but providing information about the marginal costs of acquisition and retention eliminated these biases and increases net revenue data as supplemental material are available at http dx doi org 10 1287 mnsc 2013 1842 this paper was accepted by yossi aviv operations management

purchasing pricing and quick response in the presence of strategic consumers we consider a retailer that sells a product with uncertain demand over a finite selling season the retailer sets an initial stocking quantity and at some predetermined point in the season optimally marks down remaining inventory we modify this classic setting by introducing three types of consumers myopic consumers who always purchase at the initial full price bargain hunting consumers who purchase only if the discounted price is sufficiently low and strategic consumers who strategically choose when to make their purchase a strategic consumer chooses between a purchase at the initial full price and a later purchase at an uncertain markdown price in equilibrium strategic consumers and the retailer make optimal decisions given their rational expectations regarding future prices availability of inventory and the behavior of other consumers we find that the retailer stocks less takes smaller price discounts and earns lower profit if strategic consumers are present than if there are no strategic consumers we find that a retailer should generally avoid committing to a price path over the season assuming such commitment is feasible committing to a markdown price or to not mark down at all is often too costly inventory may remain unsold even in the presence of strategic consumers the better approach is to be cautious with the initial quantity and then mark down optimally furthermore we discuss the value of quick response the ability to procure additional inventory after obtaining updated demand information albeit at a higher unit cost than the initial order we find that the value of quick response to a retailer is generally much greater in the presence of strategic consumers than without them on average 67 more valuable and as much as 558 more valuable in our sample in other words although it is well established in the literature that quick response provides value by allowing better matching of supply with demand it provides more value often substantially more value by allowing a retailer to control the negative consequences of strategic consumer behavior