consumer demand for food diversity evidence for germany abstract whereas a large number of empirical studies have been devoted to analysing consumer demand for specific products much less attention has been paid to the household s demand for product variety the number of different products consumed in a specific time period this paper analyses consumer demand for food variety in germany the econometric analysis of 4632 households suggests that variety significantly increases with income and the number of children aged between 7 and 17 years and is significantly higher if the family lives in larger cities in east germany and the housekeeping person is not additionally working full time a single male household consumes a significantly smaller number of different food products the significant and positive impact of household income on food variety is in line with the hypothesis that consumption evolves along a hierarchical order as income increases

walrasian equilibrium with gross substitutes in this paper we study the problem of efficient production and allocation of indivisible objects among a set of consumers we assume that the agents preferences depend on the bundle of objects and the quantity of money they consume furthermore we assume that preferences are quasilinear in money and that agents have a large endowment of money with indivisibilities it is well known that many familiar properties of the utility functions fail to ensure existence in their striking analysis of the matching problem kelso and crawford 5 introduce the gross substitutes gs condition which ensures the non emptiness of the core we propose two new conditions and show that with quasilinearity they are equivalent article id jeth 1999 2531 available online at http www idealibrary com on

building the family nest premarital investments marriage markets and spousal allocations we develop a model of the household in which spousal incomes are determined by premarital investments the marriage market is characterized by assortative matching and endogenously determined sharing rules form the basis of intra household allocations by incorporating pre marital investments and spousal matching into the collective household model we are able to identify the fundamental determinants of endogenously determined and maritally sustainable intra marital sharing rules in particular we find that all sharing rules along the assortative order support unconditionally efficient outcomes where both pre marital investments and intra household allocations are efficient the efficiency of both pre marital choices and household allocations then enables us to show that for each couple the marriage market generates a unique and maritally sustainable sharing rule that is a function of the distribution of pre marital endowments and the sex ratios in the market

competitive pricing and the core with reference to matching abstract lloyd shapley s contributions with respect to the core are interpreted as subdifferentiability characterizations of the pricing of individuals that is similar to the pricing of commodities in economic models of exchange with transferable utility differentiability of the core is interpreted as perfect substitutability with respect to the pricing of individuals differentiability implies but is not implied by equivalence of the core and walrasian equilibria differentiability eliminates opportunities for strategic misrepresentation of utilities the assignment model with transferable utility is framed in the setting of exchange economies and its individual and commodity pricing is extended to non transferable utility

bidimensional matching with heterogeneous preferences education and smoking in the marriage market we develop a frictionless matching model under transferable utility where individuals are characterized by a continuous trait and a binary attribute the model incorporates attributes for which there are heterogeneous preferences in the population regarding their desirability that is the impact of the traits cannot be summarized by a one dimensional attractiveness index we present a general resolution strategy based on optimal control theory and characterize the stable matching we then consider education and smoking status further specify the model by observing that there are more male than female smokers above each education level and derive additional predictions about equilibrium matching patterns and how individuals with different smoking habits marry down or marry up by education using the cps march and tobacco use supplements for the period 1996 to 2003 we find that the hypotheses based on our model predictions are borne out in the data

pricing the strategic value of putable securities in liquidity crises putable security holders have a de facto rst claim on the rm s liquid assets and can threaten to force solvent issuers to bear nancial distress costs their threatening power implies that the puts have a strategic value larger than their intrinsic value strategic value depends on the issuer s size potential distress costs and the distribution of put ownership relative to the rm s liquidity position the analysis of kmart s put induced crisis in 1995 and a calibration to observed secondary market yield reductions on poison put bonds shows that strategic value is an important determinant of payouts received by bondholders 2001 elsevier science s a all rights reserved

auctions of heterogeneous objects abstract simultaneous sealed bid auctions of heterogeneous objects are analyzed each bidder s reservation value for an object depends upon the other objects he obtains bidders reservation values are common knowledge in simultaneous first price auctions the set of walrasian equilibrium allocations contains the set of pure strategy nash equilibrium allocations which in turn contains the set of strict walrasian equilibrium allocations hence pure strategy nash equilibria when they exist are efficient mixed strategy nash equilibria may be inefficient in simultaneous second price auctions any efficient allocation can be implemented as a pure strategy nash equilibrium outcome if a walrasian equilibrium exists journal of economic literature classification numbers d44 d51

monopolistic competition in the spirit of chamberlin a general model this paper develops a model of large group chamberlinian monopolistic competition in which 1 there are many firms producing differentiated commodities 2 each firm is negligible in that it can ignore its impact on and hence reactions from other firms 3 free entry leads to zero profit of operating firms but 4 each firm faces a downward sloping demand curve the existence of a monopolistically competitive equilibrium is established in a companion paper more particular questions such as whether the market provides too many or too few products are addressed for a special case of the model

strategy proof exchange we consider the allocation of goods in exchange economies with a finite number of agents who may have private information about their preferences in such a setting standard allocation rules such as walrasian equilibria or rational expectations equilibria are not compatible with individual incentives we characterize the set of allocation rules which are incentive compatible or in other words the set of strategy proof social choice functions social choice functions which are strategy proof are those which can be obtained from trading according to a finite number of pre specified proportions the number of proportions which can be accommodated is proportional to the number of agents such rules are necessarily inefficient even in the limit as the economy grows

evaluating income streams a decision analysis approach most important decision problems virtually all capital investiments and planning situations involve risky cash flows with uncertainties that are resolved over time in most of these problems the decision maker has access to financial markets and may borrow and lend to smooth consumption over time yet because of the difficulty of incorporating these borrowing and lending decisions into the evaluation models these opportunities are rarely explicitly modeled in decision and risk analyses of these investments in this paper we study the errors induced by failing to account for these borrowing and lending decisions and we develop extensions to the standard decision and risk analysis procedures that given certain market and preference assumptions take these borrowing and lending opportunities into account without overburdening the evaluation models

valuing interdependent multi stage it investments a real options approach in this paper we use the market asset disclaimer assumption and develop a binomial lattice based real options model to include cash flow interdependencies between multi stage information technology it investments using a simple two stage it investment problem with interdependent cash flows we apply the binomial lattice based real options model to obtain combined valuation of the two stage it investment in addition to investment valuation our experience with the two stage it investment valuation suggests that the binomial lattice based real options model provides a powerful decision aid tool for appropriate timing delaying and abandoning of the second stage it investment

arbitrage and the flattening effect of large numbers abstract in a model of an exchange economy with a continuum of individuals we show that competitive equilibrium can be regarded as resulting from the elimination of arbitrage opportunities generically the elimination of such opportunities results in a phenomenon we call the flattening effect of large numbers the flattening effect provides a precise meaning to the statement that under perfect competition individuals cannot influence prices they face perfectly elastic demands and supplies the attractive geometry associated with arbitrage and the flattening effect is highlighted in several figures we also link the demonstration of equilibrium through arbitrage with the logic of marginalism journal of economic literature classification number d51

the strategy structure of some coalition formation games in coalitional games with side payments the core predicts which coalitions form and how benefits are shared the predictions however run into difficulties if the core is empty or if some coalitions benefit from not blocking truthfully these difficulties are analyzed in games in which an a priori given collection of coalitions can form as the collection of pairs of buyer seller in an assignment game the incentive properties of the core and of its selections are investigated in function of the collection furthermore the relationships with vickrey clarke groves mechanisms are drawn

real options valuation of forest plantation investments in brazil abstract in this paper we consider investments in eucalyptus plantations in brazil for such projects we discuss real options valuation in the place conventional methods such as irr or npv possibly with capm traditionally real options valuation assumes complete markets and neglects market imperfections yet market frictions such as transaction costs interest rate spreads and restricted short positions can play an important role we extend real options valuation to allow incomplete and imperfect markets the value is obtained as a competitive price given markets of competing investment opportunities such as real and financial assets under perfect and complete markets such valuation method is consistent with conventional real options theory stochastic programming and standard software is used for valuation of eucalyptus plantations we estimate the underlying interdependent diffusion processes of stock market interest rates exchange rates and pulpwood price and derive novel expressions of stochastic integrals to be employed in scenario generation for discrete time stochastic programming

outsourcing and capacity planning in an uncertain global environment firms employing offshore outsourcing strategies may face both exchange rate and demand uncertainties in this paper we show that the firms may benefit from operational option to switch production by keeping capacities with both domestic and foreign suppliers the value of the operational option increases as the exchange rate uncertainty or demand uncertainty increases in addition when the firms become risk averse they may use domestic capacity to hedge against offshore capacity as a result the firms may choose to hold local capacity even if it exhibits negative marginal contribution to the profit furthermore risk averse firms may keep more total capacity than risk neutral firms

elicitation of honest preferences for the assignment of individuals to positions the problem of eliciting honest preferences from individuals who must be assigned to a set of positions is considered individuals know that they will be charged for the positions to which they are assigned a set of prices that provide no incentive for the individual to misrepresent his preferences is suggested it is shown that these prices constitute an element of the optimal solution to the dual of a linear programming assignment problem both the optimal allocation and the prices to be charged can be derived by solving two linear programming problems once preferences have been elicited the procedure can usefully be viewed as a simulation of a competitive market under conditions where such a market cannot be expected to function well it results in an efficient allocation where all resources are valued at their opportunity costs and consumer surplus is maximized its outcome thus has the desirable properties of competitive market equilibria

nonatomic economies and the boundaries of perfect competition this paper explores the distinction between nonatomicity and thick markets as the source of perfect competition the focus of the paper is the construction of a model of an imperfectly competitive economy with a nonatomic continuum of traders and a continuum of differentiated commodities for which walrasian equilibria exist the failure of perfect competition in this instance can be identified in two ways individuals can affect prices and the core is strictly larger than the set of walrasian allocations by contrast it is shown that when markets are physically or economically thick or both then individuals cannot typically affect prices and the core always coincides with the set of walrasian allocations

a reformulation of the marginal productivity theory of distribution reformulating marginal productivity theory by replacing productivity with respect to commodities with productivity with respect to persons and then defining perfectly competitive equilibrium as an allocation at which each person receives the marginal product of his her contribution called a no surplus allocation there emerges a competitive theory of price determination characterizations of no surplus allocations are given in models with a nonatomic continuum of agents and an infinite dimensional commodity space comparisons between the no surplus and walrasian equilibrium definitions of competitive equilibrium are made and some sufficient conditions are obtained for the existence of a no surplus allocation

options in the real world lessons learned in evaluating oil and gas investments many firms in the oil and gas business have long used decision analysis techniques to evaluate exploration and development opportunities and have looked at recent development in option pricing theory as potentially offering improvements over the decision analysis approach unfortunately it is difficult to discern the benefits of the options approach from the literature on the topic most of the published examples greatly oversimplify the kinds of projects encountered in practice and comparisons are typically made to traditional discounted cash flow analysis which unlike the option pricing and decision analytic approaches does not explicitly consider the uncertainty in project cash flows in this paper we provide a tutorial introduction to option pricing methods focusing on how they relate to and can be integrated with decision analysis methods and describe some lessons learned in using these methods to evaluate some real oil and gas investments

competitivity in auction markets an experimental and theoretical investigation the authors report successive rounds of theory and laboratory experiments investigating price taking behavior and market efficiency they focus on the impact of structural parameters as well as trading institution the structural parameters involve noncompetitive supply and demand and a new odd lot trading procedure for divisible goods the trading institutions include the continuous double auction and the one shot clearinghouse as well as a new quantities only clearinghouse institution the authors present and justify an as if complete information theory that explains the competitive outcomes and that correctly predicts highly noncompetitive outcomes in quantities only clearinghouse markets copyright 1995 by royal economic society

ascending price vickrey auctions abstract we show that an ascending price auction for multiple units of a homogeneous object proposed by ausubel i raises prices for packages until they reach those nonlinear and non anonymous market clearing prices at which bidders get their marginal products and ii the auction is a primal dual algorithm applied to an appropriate linear programming formulation in which the dual solution yields those same market clearing prices we emphasize the similarities with efficient incentive compatible ascending price auctions to implement vickrey payments when there is a single object or when objects are heterogeneous but each buyer does not desire more than one unit a potential benefit of these common threads is that it helps to establish the principles upon which vickrey payments may be implemented through decentralized incentive compatible procedures

continuous time methods in finance a review and an assessment i survey and assess the development of continuous time methods in finance during the last 30 years the subperiod 1969 to 1980 saw a dizzying pace of development with seminal ideas in derivatives securities pricing term structure theory asset pricing and optimal consumption and portfolio choices during the period 1981 to 1999 the theory has been extended and modified to better explain empirical regularities in various subfields of finance this latter subperiod has seen significant progress in econometric theory computational and estimation methods to test and implement continuous time models capital market frictions and bargaining issues are being increasingly incorporated in continuous time theory the roots of modern continuous time methods in finance can be traced back to the seminal contributions of merton 1969 1971 1973b in the late 1960s and early 1970s merton 1969 pioneered the use of continuous time modeling in financial economics by formulating the intertemporal consumption and portfolio choice problem of an investor in a stochastic dynamic programming setting merton 1973b also showed how such a framework can be used to develop equilibrium asset pricing implications thereby significantly extending the asset pricing theory to richer dynamic settings and expanding the scope of applications of continuous time methods to study problems in financial economics 1 within a span of about 30 years from the publication of merton s inf luential papers continuous time methods have become an integral part of financial economics indeed in certain core areas in finance such as e g asset pricing derivatives valuation term structure theory and portfolio selection continuoustime methods have proved to be the most attractive way to conduct research and gain economic intuition the continuous time approach in these areas has produced models with a rich variety of testable implications the econometric theory for testing continuous time models has made rapid strides in the last decade and has thus kept pace with the impressive progress on the theoretical front one hopes that the actual empirical investigations and estimation using the new procedures will follow suit soon

increasing returns and perfect competition the role of land abstract the classical inconsistency between increasing returns and perfect competition is studied for example if firms must pay a fixed cost of entry but then can produce using a constant returns to scale technology they will generally operate at a loss necessitating a government subsidy in order to attain an efficient allocation here we provide examples demonstrating that perfect competition and increasing returns can be consistent by extending the alonso model to include production the key is that producers use intervals of land and the price they pay for land interior to the parcels can be adjusted to provide an implicit subsidy

appropriation and efficiency a revision of the first theorem of welfare economics the first theorem of welfare economics rests on the assumption that individuals have neither price making nor market making capacities we offer a revision in which individuals have such capacities the revision emphasizes two keys for market efficiency i the need to align private rewards with social contributions called full appropriation and ii the need for an assumption to counter the possibility of coordination failures in the choice of produced commodities called noncomplementarity we also emphasize that information about prices of unmarketed commodities involves decentralized knowledge available only to product innovators and that pecuniary extemalities are important potential sources of market failure jel d51 d60 d62

weather shocks agricultural production and migration evidence from tanzania abstractwe analyse whether tanzanian rural households engage in internal migration as a response to weather related shocks we hypothesise that when exposed to such shocks and a consecutive crop yield reduction rural households use migration as a risk management strategy our findings confirm that for an average household a 1 per cent reduction in agricultural income induced by weather shock increases the probability of migration by 13 percentage points on average within the following year however this effect is significant only for households in the middle of wealth distribution suggesting that the choice of migration as an adaptation strategy depends on initial endowment what is more the proposed mechanism applies to households whose income is highly dependent on agriculture but is not important for diversified livelihoods

on the generic nonoptimality of dominant strategy allocation mechanisms a general theorem that includes pure exchange economies it is shown that if an economy s participants cannot be separated into groups across which there are no potentially conflicting interests i e if the economy is indecomposable then every continuous truth dominant allocation mechanism will attain nonoptimal allocations on an open dense set of preference profiles classical edgeworth box exchange economies economies with no externalities and no production but with arbitrary numbers of consumers and goods as well as economies with public goods and economies with other kinds of externalities are all shown via simple arguments to be indecomposable the results are extended to cover nonrevelation mechanisms copyright 1990 by the econometric society

competitive equilibria in production economies with an infinite dimensional commodity space the existence of competitive equilibrium is established for economies with a produc tion sector and an infinite dimensional space of commodities the cru cial assumptions which are required beyond those required in the fin ite dimensional setting are bounds on marginal rates of substitution and marginal rates of transformation copyright 1987 by the econometric society

the package assignment model we study assignment problems where individuals trade packages consisting of several rather than single objects although buyers reservations values are non additive efficient assignments can be formulated as a linear programming problem in which the pricing functions expressing duality may be non linear in the objects constituting the packages the interconnections among the linear programming formulation walrasian equilibrium and the core are established in the single seller auction version a necessary and sufficient condition is given for the vickrey payoff point to be implementable by a pricing equilibrium journal of economic literature classification numbers c62 d44 d51

perfect competition and the creativity of the market from the perspective of the walrasian general equilibrium model entrepreneurial and opportunistic behavior seems foreign can the model be refashioned so that it can accommodate such behavior many would say no but we argue the contrary indeed we present a reformulation of the model that serves as a gateway to rather than a detour from such contemporary issues as innovation and incentives the trick is to reexamine what perfect competition means starting with an historical summary of general equilibrium we sketch an image of the perfect competitor as an active market opportunist seeking out profit potentials wherever he can

blocking efficacy of small coalitions in myopic economies abstract we consider a continuum economy with infinitely many commodities and show that for any positive e the core of the economy coincides with the set of allocations which are not blocked by any coalition with measure less than e actually our main result is an extension of grodal s 1972 econometrica40 581 583 result and therefore schmeidler s 1972 econometrica40 579 580 result to economies whose commodity space is l for myopic preferences journal of economic literature classification numbers c71 d51

harsanyi values of large economies nonequivalence to competitive equilibria abstract we consider economies with many agents and compare the competitive equilibria and the value allocations of the resulting coalitional games in particular we provide a smooth and robust example where the value principle does not hold for the harsanyi ntu value there is a unique competitive equilibrium which however does not belong to the nonempty set of harsanyi value allocations journal of economic literature classification numbers c71 d51

a dual characterization of incentive efficiency we show that incentive efficient allocations in economies with adverse selection and moral hazard problems can be determined as optimal solutions to a linear programming problem and we use duality theory to obtain a complete characterization of the optima our dual analysis identifies welfare effects associated with the incentives of the agents to truthfully reveal their private information because these welfare effects may generate non convexities incentive efficient allocations may involve randomization other properties of incentive efficient allocations are also derived

sorting through search and matching models in economics toward understanding assortative matching this is a self contained introduction to research on search and matching we first explore the nontransferable and perfectly transferable utility matching paradigms and then a unifying imperfectly transferable utility matching model motivated by some unrealistic predictions of frictionless matching we flesh out the foundational economics of search theory we then revisit the original matching paradigms with search frictions we finally allow informational frictions that often arise such as in college student sorting

perfect competition in the continuous assignment model abstract this paper provides a rigorous formalization in the context of the transferable utility assignment model of perfect competition as the inability of individuals to favorably influence prices the central tool for the analysis is the social gains function the central issue is differentiability of the gains function with respect to the population seven conditions are shown to be equivalent to perfect competition perfect competition and imperfect competition are possible for both finite and continuum assignment economies but most finite economies are imperfectly competitive while most continuum economies are perfectly competitive however most large finite assignment economies are approximately perfectly competitive journal of economic literature classification numbers c61 c62 c78

an ascending vickrey auction for selling bases of a matroid consider selling bundles of indivisible goods to buyers with concave utilities that are additively separable in money and goods we propose an ascending auction for the case when the seller is constrained to sell bundles whose elements form a basis of a matroid it extends easily to polymatroids applications include scheduling allocation of homogeneous goods and spatially distributed markets among others our ascending auction induces buyers to bid truthfully and returns the economically efficient basis unlike other ascending auctions for this environment ours runs in pseudopolynomial or polynomial time furthermore we prove the impossibility of an ascending auction for nonmatroidal independence set systems

efficient incentive compatible economies are perfectly competitive abstract efficient anonymous and continuous mechanisms for exchange environments with a finite number of individuals are dominant strategy incentive compatible if and only if they are perfectly competitive i e each individual is unable to influence prices or anyone s wealth equivalently in such a mechanism each individual creates no externalities for others by her announcement of a type the characterization applies whether preferences are ordinal or quasilinear and it also applies to continuum economies perfectly competitive mechanisms are non generic although non vacuous in finite economies and are generic but non universal in continuum economies we use these results to provide bridges to related work journal of economic literatureclassification numbers c72 d51 d62

valuing risky projects option pricing theory and decision analysis in the academic literature and professional practice there are a number of alternative and apparently competing methods for valuing risky projects in this paper we compare and contrast three different approaches risk adjusted discount rate analysis option pricing analysis and decision analysis focusing on the last two we show that in contrast to some of the claims made in the real options literature when both option pricing and decision analysis methods are correctly applied they must give consistent results we also explore ways in which option pricing and decision analysis methods can be profitably integrated in particular we show how option pricing techniques can be used to simplify decision analysis when some risks can be hedged by trading and conversely how decision analysis techniques can be used to extend option pricing techniques to problems with incomplete securities markets

efficiency of simultaneous search this paper presents an equilibrium labor search model in which workers can simultaneously apply to multiple firms to increase their search intensity they observe firms wage postings before choosing where to apply owing to coordination frictions a firm may not receive any applications otherwise it is able to hire unless all its applicants have better offers it is shown that the equilibrium converges to the efficient walrasian outcome as application costs vanish even for nonnegligible application costs the entry of firms the search intensity and the number of filled vacancies are constrained efficient wage dispersion is essential for constrained efficiency

competitive equilibrium with search frictions a general equilibrium approach abstract when the trading process is characterized by search frictions traders may be rationed so markets need not clear we build a general equilibrium model with transferable utility where the uncertainty arising from rationing is incorporated in the definition of a commodity in the spirit of the arrow debreu theory prices of commodities then depend not only on their physical characteristics but also on the probability that their trade is rationed the standard definition of competitive equilibrium is extended by replacing the market clearing condition with an exogenous matching function which describes a trading technology that is not frictionless as is typical in search models the matching function relates the rationing probabilities of buyers and sellers to the ratio of buyers to sellers in the market when search frictions vanish our model is equivalent to the continuous assignment model of gretsky et al 20 we adapt their approach which uses linear programming techniques and duality theory to show that a competitive equilibrium exists and is constrained efficient in our environment our competitive equilibrium notion is equivalent to that of directed or competitive search the strength of our formulation and the linear programming approach is that they allow us to generalize the constrained efficiency and existence results in the directed search literature to a much broader class of economies our framework also opens the door to the use of existing algorithms for computing equilibria and taking these models to the data

a complete system of engel curves in the spanish economy the main goal of this article is the estimation of the consumption income relationship along with socio economic factors using cross section data from the spanish household expenditure survey 1991 the data has been grouped according to exogenous criteria to avoid the problem of null expenditure first a non linear system of equation is estimated from which the linear form that best fits the used data is tested finally income elasticities are calculated considering three alternative formulations depending on how an initial income increment is distributed among consumers income elasticities are shown for the whole income distribution

investment and competitive matching we study markets in which agents first make investments and are then matched into potentially productive partnerships equilibrium investments and the equilibrium matching will be efficient if agents can simultaneously negotiate investments and matches but we focus on markets in which agents must first sink their investments before matching additional equilibria may arise in this sunk investment setting even though our matching market is competitive these equilibria exhibit inefficiencies that we can interpret as coordination failures all allocations satisfying a constrained efficiency property are equilibria and the converse holds if preferences satisfy a separability condition we identify sufficient conditions most notably quasiconcave utilities for the investments of matched agents to satisfy an exchange efficiency property as well as sufficient conditions most notably a single crossing property for agents to be matched positive assortatively with these conditions then forming the core of sufficient conditions for the efficiency of equilibrium allocations

impact of sourcing flexibility on the outsourcing of services under demand uncertainty abstract this paper investigates the relationship between market conditions and the value and use of sourcing flexibility for service processes we develop and analyze a series of models and we derive expressions for the optimal switching decision the value of the option to outsource the value of the option to backsource and the probability and timing of switches between the alternative sources one contribution is the models and associated derivations which are largely new to the literature and may serve as a tool to support service sourcing plans and decisions the second contribution is a series of results with managerial implications 1 the probability of outsourcing is generally increasing in volatility for high skill process and decreasing in volatility for low skill processes earlier work has found that the hysteresis band is increasing in volatility which is interpreted as an indicator of increasing organizational inertia we also find that the hysteresis band is increasing in volatility but interestingly for the case of high skill processes organizational inertia tends to be decreasing in volatility 2 the option to backsource is generally more valuable for high skill processes than for low skill processes this result suggests that investments to make it easier to backsource should have a higher priority for high skill processes 3 the value of the option to backsource a high skill service process can be decreasing in volatility the result suggests that a rather nuanced consideration of volatility is in order when considering investments in the flexibility to backsource a high skill process

competitive equilibrium in an exchange economy with indivisibilities abstract we analyze an exchange economy in which i all commodities except money are indivisible ii agents preferences can be described by a reservation value for each bundle of indivisible objects and iii all agents are price takers we obtain a necessary and sufficient condition under which market clearing prices exist implications for market mechanisms are discussed journal of economic literatureclassification numbers d51 c78

a note on incentives in large economies nash equilibria of anonymous and efficient mechanisms are studied in economies with a continuum of traders conditions are given under which some or all the nash equilibria of such mechanisms yield competitive allocations particular attention is payed to the case of direct mechanisms where the truth constitutes a nash equilibrium

competitive search equilibrium with multidimensional heterogeneity and two sided ex ante investments abstract we analyze a competitive price taking search model where workers and firms make costly investments e g in education and physical capital respectively before they enter the labor market the environment features transferable utility and symmetric information a key novelty with respect to existing work is that we allow for multidimensional heterogeneity on both sides of the market the probabilities of finding and filling different jobs and the corresponding wages are determined endogenously in equilibrium we show that constrained efficient allocations can be determined as optimal solutions to a linear programming problem whereas the prices supporting these allocations and the associated expected payoffs for workers and firms correspond to the solutions of the dual of that linear program we use this characterization to show that an equilibrium exists and is constrained efficient under very general conditions the fact that linear programming techniques are used for the structural estimation of frictionless matching models suggests that our framework is potentially useful for empirical studies of labor markets and other markets where search frictions are prevalent

perfectly competitive bilateral exchange without discounting in a random matching economy of traders who maximize cumulative consumption overtaking criterion the stationary markov bayesian perfect equilibrium is studied at such equilibrium two results hold 1 perfect substitutability between current and future consumption implies a no surplus condition and 2 by the no surplus condition there is a nominal price at which all trades must occur these results strengthen the seminal results of ostroy 1973 regarding monetary bilateral exchange in two ways the incentive compatibility of the equilibrium trading pattern is established and a less roundabout trading pattern enhances welfare by enabling consumption to occur more frequently

the strategy structure of two sided matching markets we study two sided markets in which agents are buyers and sellers or firms and workers or men and women the agents are to form partnerships which provide them with satisfaction and at the same time make monetary transfers e g salaries or dowries the core of this market game is shown to have a particularly nice structure so that precise answers can be given to questions concerning comparative statics and manipulability the idea of using walrasian equilibrium as a mechanism for making allocations with desirable properties of fairness and efficiency has been studied extensively the scheme involves having agents specify their supply and demand functions the competitive equilibria are then calculated and allocations are made accordingly in general this procedure may run into two difficulties first nonuniqueness if there are several equilibria there may be no fair way to decide which one should be implemented and second manipulability if there is only one equilibrium an informed agent may be able to influence it by suitably falsifying his demand data however as we will show here using the walrasian mechanism does work remarkably well for a certain class of important markets these are the matching markets of our title and they include markets for single items like houses where it is assumed that traders do not wish to acquire more than one item they also include labor markets in which it is desired to match workers with jobs at suitable salaries academic markets in which students are to be assigned to educational institutions marriage markets where men and women are matched through negotiating of dowries it turns out that in these markets both the problems of nonuniqueness and manipulability can be resolved in a

clubs and the market this paper defines a general equilibrium model with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of the other members of their clubs the space of agents is a continuum but clubs are finite it is shown that i competitive equilibria exist and ii the core coincides with the set of equilibrium states the central subtlety is in modeling club memberships and expressing the notion that membership choices are consistent across the population

multi item auctions a collection of items is to be distributed among several bidders and each bidder is to receive at most one item assuming that the bidders place some monetary value on each of the items it has been shown that there is a unique vector of equilibrium prices that is optimal in a suitable sense for the bidders in this paper we describe two dynamic auction mechanisms one achieves this equilibrium and the other approximates it to any desired degree of accuracy

effects of corn stover year to year supply variability and market structure on biomass utilization and cost the availability of corn stover can vary considerably from year to year in a region due to annual changes in yield and area planted with corn such variations interacting with biomass market structures can affect biomass cost and utilization rate this study first characterizes year to year variations in corn stover supply for the us in general and for selected major us corn producing counties in particular there have been 20 30 year to year variations in stover supply in the us since 1975 game theoretic analysis is then applied to examining corn stover utilization rate and production cost in three market structures the analysis reveals that a free market structure will take the form of oligopoly oligopsony where large stover supply variations will expose both biorefineries and farmers to significant price volatility price equilibrium will shift significantly from year to year of the three market structures analysed the derisked supply market structure will be most favorable to biorefineries and farmers under this structure biorefineries will maintain a stover supply region that is based on derisked lower than average yield density to buffer for the supply uncertainty associated with annual variations this market structure results in significantly less volatility in biomass cost while on average only 63 of collectable stover will be used for biofuel production our findings suggest that year to year variation in corn stover availability will increase feedstock cost and reduce its potential for biofuel production

dynamic marriage matching an empirical framework the paper proposes a dynamic version of the frictionless becker shapley shubik marriage matching model with transferable utility its primary objective is to develop a tractable model that rationalizes the marriage distribution of who marries whom by age this behavioral dynamic model rationalizes a new marriage matching function an empirical methodology that relies on the equilibrium outcomes of the model identies the marital preferences over spouses this framework also allows the inverse problem of computing the vector of aggregate marriages given a new distribution of available single individuals and estimated preferences to be solved the solution to this inverse problem has been shown to exist under mild conditions this paper also develops a simple test of the model s empirical validity using aggregate data of new marriages and available single men and women in the us in 1970 1980 and 1990 i investigate the changes in the gains to marriage over this period

vickrey clarke groves mechanisms and perfect competition abstract we present a game theoretic mechanism characterization of perfect competition we prove the perfectly competitive mechanism is the only pareto optimal individually rational dominant strategy allocation mechanism thus perfect competition is uniquely capable of efficiently and non coercively solving the incentive bargaining problem when there is incomplete information i e when each individual knows his own tastes and production possibilities better than anyone else we also show one can interpret any dominant strategy demand revealing mechanism as working because it mimics the reward scheme that characterizes the perfectly competitive market namely the marginal product reward scheme

entrants reputation and industry dynamics this article analyzes entry exit decisions in a market where reputation determines the price that firms may charge within a rational expectation model of competition in a nonatomic market under heterogeneous reputations the analysis focuses on the class of name switching reputational equilibria in which a firm discards its name if and only if its reputation falls below the entrants reputation the main technical result is the existence of a unique steady state equilibrium within this class in which the entrants reputation is endogenous the resulting industry dynamics is largely on agreement with the findings in the empirical literature

fair allocations in large economies the purpose of this paper is the study of problems of equity in an economy with many agents conditions are given under which every equitable and pareto optimal allocation is a competitive equilibrium with equal incomes for all agents the results are also of potential relevance for the literature on incentive compatibility since the allocations that are obained through incentive mechanisms in large economies turn out to be equitable

the modified vickrey double auction abstract we modify w vickrey s 1961 j finance 16 8 37 mechanism for call markets by introducing the participation stage and study the efficiency properties of the modified mechanism we provide sufficient conditions under which the modified vickrey double auction achieves full efficiency in addition we prove that the modified vickrey double auction achieves asymptotic efficiency even when full efficiency cannot be achieved journal of economic literature classification numbers c72 d44 d82

valuing oil properties integrating option pricing and decision analysis approaches there are two major competing procedures for evaluating risky projects where managerial flexibility plays an important role one is decision analytic based on stochastic dynamic programming and the other is option pricing theory or contingent claims analysis based on the no arbitrage theory of financial markets in this paper we show how these two approaches can be profitably integrated to evaluate oil properties we develop and analyze a model of an oil property either a developed property or a proven but undeveloped reserve where production rates and oil prices both vary stochastically over time and at any time the decision maker may terminate production or accelerate production by drilling additional wells the decision maker is assumed to be risk averse and can hedge price risks by trading oil futures contracts we also describe extensions of this model that incorporate additional uncertainties and options discuss its use in exploration decisions and in evaluating a portfolio of properties rather than a single property and briefly describe other potential applications of this integrated methodology

mergers and the market for organization capital abstract in this paper mergers are an equilibrium outcome in which acquirers marry targets so as to gain access to their organization capital firms with lower learning costs about the new technology are not necessarily those that manage it best once it is mature since there are gains from trade a market for organization capital can arise through mergers this model generates a merger wave after a shock to technology and is consistent with several other stylized facts on mergers documented in the literature

the effect of risk on the ceo market this article presents a market equilibrium model of ceo assignment pay and incentives under risk aversion and moral hazard each of the three outcomes can be summarized by a single closed form equation in the presence of moral hazard assignment is distorted from positive assortative matching on firm size as firms with higher risk or disutility choose less talented ceos such firms also pay higher salaries in the cross section but economywide increases in risk or the disutility of being a ceo do not affect pay the strength of incentives depends only on the disutility of effort and is independent of risk and risk aversion if the ceo can affect firm risk incentives rise and are increasing in risk and risk aversion we calibrate the losses from various forms of poor corporate governance such as failures in monitoring and inefficiencies in ceo assignment jel g34 j33 this article presents a market equilibrium model of ceo assignment pay and incentives risk averse managers of different talents are hired in a competitive market by heterogeneous firms which vary in their size risk and level of effort required the level of pay drives the assignment of talent to firms the strength of incentives induces the efficient effort level and is determined by an optimal contracting approach our main contribution is to incorporate risk into a ceo market equilibrium in a tractable manner a large empirical literature has shown that risk is a firstorder determinant of compensation contracts demsetz and lehn 1985 garen 1994 core and guay 1999 oyer and schaefer 2004 peters 2009 peters and wagner 2009 but most theories assume risk neutrality this assumption is