spectrum auction designs and revenue variations this study examines a sample of 93 national 3g spectrum auctions for the period 2000 2011 to identify the sources of substantial revenue variations an implied reduced form econometric model that recognises the censored nature of the sample relates per capita winning bid per mhz per million populations values to regulator determined auction design characteristics auction competitiveness mobile wireless market conditions and spectrum package attributes identified from tender documents the analysis reveals that among other factors all auction design characteristics independently impact on realized 3g spectrum auction revenues

implications of economic interdependence for endogenous wage indexation decisions this paper shows how economic interdependence affects the indexation decisions of atomistic wage setters in an environment in which monetary authorities do not observe stochastic disturbances before making their policy choices if stochastic disturbances are common across countries interdependence has no effect on equilibrium indexation choices in identical countries however if disturbances are country specific numerical simulations show that interdependence is likely to reduce equilibrium indexation choices relative to a small open economy we also show that indexation choices may be either strategic complements or strategic substitutes but that strategic complementarity becomes more likely as the degree of interdependence rises

effective sub simulation free upper bounds for the monte carlo pricing of callable derivatives and various improvements to existing methodologies abstract we present a new non nested approach for computing additive upper bounds for callable derivatives using monte carlo simulation it relies on the regression of greeks computed using adjoint methods we also show that it is possible to early terminate paths once points of optimal exercise have been reached a natural control variate for the multiplicative upper bound is introduced which renders it competitive to the additive one in addition a new bi iterative family of upper bounds is introduced which takes a stopping time an upper bound and a martingale as inputs

privately informed seekers of an uncertain rent two departures from antecedent rent seeking models are invoked a rent of unknown size is sought and rent seekers obtain private imperfect estimates of this size a symmetric equilibrium for a fixed number of rent seekers is characterized and shown to underdissipate the rent then a model of the decision to obtain private information and participate in the rent seeking contest is built the symmetric equilibrium participation probability equates expected profit to participation costs a simple formula for underdissipation results dissipation is incomplete pre cisely by the expected aggregate participation costs if an award mechanism can attain a lower level of dissipation for a fixed number of seekers then it will raise the endogenous probability of partici pation and as a result will dissipate less rent in the equilibrium with an endogenous number of seekers

mergers in symmetric and asymmetric noncooperative auction markets the effects on prices and efficiency abstract united states antitrust merger analysis has recently focused on simulating the unilateral effects of mergers we develop a model to simulate the unilateral price increase from a merger in an auction market we illustrate our results in the context of hospital mergers in the u s and calibrate our simulations to known market parameters we compare the price increases in our model to those suggested by analytically simpler models the simulation results suggest that the unilateral price increases predicted by our model are modest in general we also simulate the merger cost savings that are needed to offset the price effects

oil price shocks and the macroeconomy this paper examines the impact of oil price shocks and attempts to explain why the rise in oil prices up to 2008 had little impact on the world economy it makes three main arguments first that oil prices have never been as important as is popularly thought second that the most important route through which oil prices affect output is monetary policy when oil prices pass through to core inflation monetary authorities raise interest rates slowing growth based on the second argument the third argument is that high oil prices have not reduced growth in recent years because they no longer pass through to core inflation so the monetary tightening previously seen in response to high oil prices is absent it also argues that oil prices had little impact on the global recession of 20089

the cyclical behavior of prices abstract the procyclical behavior of prices has been a staple of business cycle lore since the work of the early nber business cycle researchers this paper reexamines that empirical fact the aggregate data do not support procyclical price movements as a stable feature of the business cycle the only episode where it is a robust feature of the data is the period between the two world wars particularly the period of the great depression

asymmetric private values auctions with application to joint bidding and mergers abstract much of the theoretical auction literature assumes that there are no observable differences between the bidders of an auction in this paper i present an asymmetric auction model where the distribution of a bidder s value depends on some commonly observed characteristics the model is applied to joint bidding and mergers in auction markets the results provide additional evidence that first price auctions are less susceptible to the acquisition and exercise of market power than open auctions

on the role of money in real business cycle models within the equilibrium explanation of busines cycles there are two major classes of models real business cycle models emphasize real factors such as technological changes in determining economic fluctuation while monetary business cycle models advocate the role of money in generating business cycles recent theoretical efforts have atempted to provide a reconcilation by allowing technology to be endogenous in an empirical model that accounts for endogenous technology technological changes are statistically significant in determining fluctuations in real activity in contrast monetary surprises do not induce significant effects that determine the growth of real industrial output nonetheless anticipated technological advances are endogenous with respect to anticipated changes in the money supply this endogeneity provide the sole channel through which the effects of monetary policy can be transmitted to real activity that is anticipated policy changes have long lasting effects that determine the

oil price shocks and their short and long term effects on the chinese economy a considerable body of economic literature shows the adverse economic impacts of oil price shocks for the developed economies however there has been a lack of empirical study of this kind on china and other developing countries this paper attempts to fill this gap by answering how and to what extent oil price shocks impact china s economy emphasizing on the price transmission mechanisms to that end we develop a structural vector auto regressive model our results show that an oil price increase negatively affects output and investment but positively affects inflation rate and interest rate however with the differentiated price control policies for materials and intermediates on the one hand and final products on the other hand in china the impact on real economy represented by real output and real investment lasts much longer than that to price monetary variables our decomposition results also show that the short term impact namely output decrease induced by the cut of capacity utilization rate is greater in the first one to two years but the portion of the long term impact defined as the impact realized through an investment change increases steadily and exceeds that of short term impact at the end of the second year afterwards the long term impact dominates and maintains for quite some time

price prediction errors and real activity a reassessment price prediction errors and real activity a reassessment i introduction macro models employing rational expectations and natural rate assumptions have proven to be powerful and tractable analytical tools in these models output and employment fluctuations are typically demand driven with aggregate demand disturbances transmitted to the real sector through price prediction errors the waning popularity of natural rate models is due in part to the widely held belief that although theoretically appealing the models are of questionable empirical relevance this view appears to be based on a small number of studies which fail to find evidence of a robust empirical relationship between price level surprises and aggregate real activity indeed the available evidence has led some influential macroeconomists to conclude that the channels through which aggregate demand influences the economy have yet to be identified 1 this has had the two fold effect of i stimulating research on channels other than price through which aggregate demand may affect the economy and ii discouraging research on channels that do act through the price level while the first of these effects may be desirable the second is of concern this paper is motivated by our conviction that potentially valuable research has been discouraged on the basis of thin and seriously suspect evidence the sections that follow reassess the role of price prediction errors in determining aggregate real activity we provide evidence that the inability of other researchers to verify a positive correlation between demand driven price prediction errors and real activity is due to misspecified models and in some cases inappropriate estimation procedures we demonstrate that in a more correctly specified and estimated model the relationship between price surprises and real activity is positive and strongly significant thus we conclude that previous researchers were incorrect in discarding the major natural rate paradigms as empirically irrelevant these models do appear to identify an important channel namely price surprises through which aggregate demand influences the real sector ii issues and early evidence price prediction errors play a central role in the most prominent natural rate macro models these models typically fall into one of two general classes equilibrium models and contracting models in both classes of models unanticipated movements in the price level are the channel through which aggregate demand disturbances influence the real sector the exact nature of transmission process however differs across the two sets of theories equilibrium models of the sort pioneered by lucas 1973 depend on the assumption of incomplete information to produce non neutrality of aggregate demand disturbances in the best known examples of this kind of model confusion between relative and aggregate price movements causes firms to react to unanticipated price level movements as though they were at least in part relative price movements thus positive price level shocks cause all firms to increase output and generate positive deviations of aggregate output from its natural rate contracting models as developed in the work of fischer 1977 and gray 1976 depend on contractually set wages to produce non neutrality in these models nominal wages are incompletely responsive to unexpected changes in the price level during the term of the contract under which they are set consequently an unanticipated rise in the price level causes a fall in the real wage of all workers whose contracts are not in the process of renegotiation at that moment with employment determined by the firm during the contract interval the result is a rise in aggregate employment and output our present concern is with testing the common implications of equilibrium and contracting models possibilities for distinguishing between the two classes of models are explored in separate work

the asymmetric impact of oil prices interest rates and oil price uncertainty on unemployment in the us abstract in this study we investigate the presence of asymmetric interactions between oil prices oil price uncertainty interest rates and unemployment in a cointegration framework utilizing the nonlinear auto regressive distributed lag nardl approach we show the asymmetric responses of unemployment to changes in oil prices oil price uncertainty and interest rates in the long run more specifically the results of our analyses suggest that an increase in oil price results in increased unemployment while there is no significant impact of reduced oil prices on the one hand reduced oil price uncertainty leads to a decrease in unemployment whereas an increase in oil price uncertainty does not have an impact we also observe increased unemployment in response to a decrease in interest rates as the impact of increased interest rates is not significant last but not least we find that option implied oil price volatility as a measure of oil price uncertainty outperforms the conditional volatility of crude oil prices in predicting unemployment this study provides valuable implications for policymakers to design sound economic policies

monte carlo methods for security pricing the monte carlo approach has proved to be a valuable and flexible computational tool in modern finance this paper discusses some of the recent applications of the monte carlo method to security pricing problems with emphasis on improvements in efficiency we first review some variance reduction methods that have proved useful in finance then we describe the use of deterministic low discrepancy sequences also known as quasi monte carlo methods for the valuation of complex derivative securities we summarize some recent applications of the monte carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of american options we conclude by mentioning other applications

the role of energy in real business cycle models abstract this paper modifies hansen s 1985 analysis of a real business cycle mode with indivisible labor by explicitly including energy as a productive input and modelling the relative price of energy as an exogenous random process one goal is to determine the extent to which the introduction of energy price shocks reduces the reliance of the real business cycle model on unobserved technology shocks the other goal following christiano and eichenbaum 1991 is to compare the correlation between real wages and hours predicted by the energy inclusive model to that predicted by hansen s model

understanding the large negative impact of oil shocks this paper oers a plausible explanation for the close link between oil prices and aggregate macroeconomic performance in the 1970s although this link has been well documented in the empirical literature standard economic models are not able to replicate this link when actual oil prices are used to simulate the models in particular standard models cannot explain the depth of the recession in 1974 75 and the strong revival in 1976 78 based on the oil price movements in that period this paper argues that a missing multiplier accelerator mechanism from standard models may hold the key

risk aversion in auctions with asymmetrically informed bidders a desensitizer from uncertainty abstract in the context of first price auctions with asymmetrically informed bidders we show that risk aversion not only increases a player s bid but also makes him less sensitive to the probability that other bidders are informed about his private valuation

asymmetric price benefits auctions abstract this paper studies the performance of two auction procedures for allocating the assets of a dissolving partnership when partners valuations for the assets are independent and asymmetrically distributed with one partner reputed to be more interested in the assets to be divided we provide results on existence and uniqueness of the equilibrium induced by these auctions comparative statics are developed especially the differences between relative efficiency and revenue from the two auctions journal of economic literature classification numbers c72 d39 d44 d52 d74 d82

asymmetries in the responses of regional job flows to oil price shocks this paper studies the effect of oil price innovations on manufacturing job flows across u s states first i estimate a nonlinear structural equation model and compute impulse response functions by monte carlo integration i find asymmetries in the responses of job flows to positive and negative oil price innovations yet these asymmetries do not pass a test of symmetry on the impulse responses especially after accounting for data mining third i use a test for the absence of job reallocation to evaluate whether an unexpected increase in the real price of oil price triggers an important change in job reallocation i find that oil price shocks have limited regional allocative effects

fast delta computations in the swap rate market model abstract we develop an efficient algorithm to implement the adjoint method that computes sensitivities of an interest rate derivative to different underlying rates in the co terminal swap rate market model the order of computation per step of the new method is shown to be proportional to the number of rates times the number of factors which is the same as the order in the libor market model

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

some evidence on demand fluctuations and the increased stability of the post war american economy this paper investigates the implications of a sticky wage contracting model that can explain both the decline in wage and price flexibility and the increased stability of the post war american economy the reduction in the size of demand shocks in the post war period has increased agents incentives to write longer contracts though longer contracts have rendered real activity more responsive to demand shocks in the post war period the reduction in the size of these shocks has dominated the increase in the size of response to a particular shock overall real activity has become more stable in the post war period as predicted by theory

expectations and monetary neutrality an empirical reexamination modern monetary business cycle models feature rational expectations and natural rate assumptions which imply that unanticipated changes in nominal aggregates affect real output but anticipated changes do not initial tests conducted by barro 3 and by barro and rush 4 supported the neutrality of anticipated money growth in a particularly influential study mishkin 21 22 rejected the neutrality of anticipated policy mishkin s paper 21 has become one of the most frequently cited studies in empirical macroeconomics the influence of the study probably derives in large part from the unequivocal nature of the results in particular mishkin showed that i the hypothesis that anticipated policy has no effect on output is strongly rejected ii anticipated nominal changes have a greater estimated effect on output than do unanticipated nominal changes iii lags as long as 17 quarters have significant coefficients implying that barro s eight lag model was underspecified iv in some specifications the estimated sign of the effect of nominal innovations is opposite to the prediction of monetary business cycle theory frydman and rappoport 9 used mishkin s empirical model to provide further evidence against the neutrality hypothesis by showing that the data provide no evidence for distinguishing between the output effects of anticipated policy and those of unanticipated policy although several subsequent studies have supported the neutrality hypothesis 7 12 mishkin s careful study and a small number of additional studies suggest that the neutrality hypothesis is not robust the empirical rejection of the neutrality hypothesis contradicts a wide range of modern monetary models including those based on imperfect information 14 18 19 and those based on imperfect competition 8 20 as a consequence the focus of macroeconomists has in recent years shifted to non monetary models in which money responds passively to changes in aggregate output 16 17 this paper explores the robustness of mishkin s results using an updated data set the model yields results that are more consistent with the neutrality hypothesis than those of mishkin in par

pricing american style securities using simulation abstract we develop a simulation algorithm for estimating the prices of american style securities i e securities with opportunities for early exercise our algorithm provides both point estimates and error bounds for the true security price it generates two estimates one biased high and one biased low both asymptotically unbiased and converging to the true price combining the two estimators yields a confidence interval for the true price the proposed algorithm is especially attractive compared with lattice and finite difference methods when there are multiple state variables and a small number of exercise opportunities preliminary computational evidence is given

a flexible matrix libor model with smiles abstract we present a flexible approach for the valuation of interest rate derivatives based on affine processes we extend the methodology proposed in keller ressel et al in press by changing the choice of the state space we provide semi closed form solutions for the pricing of caps and floors we then show that it is possible to price swaptions in this multifactor setting with a good degree of analytical tractability this is done via the edgeworth expansion approach developed in collin dufresne and goldstein 2002 a numerical exercise illustrates the flexibility of wishart libor model in describing the movements of the implied volatility surface

international effects of stock market dispersion we study the extent to which stock market dispersion is related to unemployment and output growth for 16 countries over 20 years using panel vector auto regressions and panel dynamic regressions we find increases in stock market dispersion across industries to induce future increases in unemployment and future decreases in industrial production ip growth moreover the responses of unemployment and ip growth following a positive shock to stock market dispersion are persistent and are robust to various controls sample periods and estimation methods our article provides cross country evidence in support of the hypothesis that shifts in demand across industries negatively affect employment

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

monetary innovations capital taxation and real wage movements some new evidence central to many new classical macroeconomic models is the notion that unanticipated money growth affects real wages adversely while anticipated money growth is neutral to date however the empirical evidence on the subject has been mixed early studies of sargent and sims 29 and sims 30 reported that monetary surprises had a positive effect on real wages leiderman 18 however provided evidence consistent with the implications of these models the results of more recent studies have also been ambiguous koray 16 concludes that anticipated money growth has an adverse effect on total real wages but unanticipated money growth is neutral in contrast kim 15 finds that both anticipated and unanticipated money growth have negative effects on real wages one difficulty with these studies is the implicit assumption that real wage movements are primarily caused by aggregate demand disturbances in a recent paper sumner and silver 33 assert that real shocks can also have an important influence on real wages and should be taken into account

oil price shocks and the dispersion hypothesis recent research by david lilien shows that a significant fraction of aggregate unemployment can be explained by the dispersion of employment growth across industries this paper presents two new results in this area first it is shown that a significant fraction of the variation in lilien s dispersion index is due to the differential impact of oil shocks across industries second and more important it is shown that once the dispersion in employment growth due to oil shocks is accounted for the residual dispersion has no explanatory power for unemployment

oil price fluctuations and u s dollar exchange rates adding oil prices to the monetary model of exchange rates we find that oil prices significantly explain movements in the value of the u s dollar usd against major currencies from the 1970s to 2008 our long run and forecasting results are remarkably consistent with an oil exchange rate relationship increases in real oil prices lead to a significant depreciation of the usd against net oil exporter currencies such as canada mexico and russia on the other hand the currencies of oil importers such as japan depreciate relative to the usd when the real oil price goes up

auction theory with private values for many centuries auctions have been a common form of selling procedure although auction methods vary across country and product the two most frequently observed are the open ascending bid or english auction and the sealed bid auction recent theoretical research has led to a theory of equilibrium bidding in these two auctions and a wide range of alternatives as well as a result it has been possible to compare the revenue extracted by the seller under different auction methods and even to characterize the revenue maximizing auction the revenue equivalence theorem see for example william vickrey 1961 roger myerson 1981 and riley and william samuelson 1981 asserts that when each bidder s reservation price for a unit of an indivisible good is an independent draw from the same distribution and bidders are risk neutral the sealed bid auction generates the same expected revenue as the open auction much recent research has involved weakening each of the main hypotheses risk neutrality identically distributed values and independence of values in turn we shall illustrate some of the principal conclusions of this work by considering the properties of open and sealed bid auctions in a model of two bidders whose reservation prices can assume only two values and by comparing these auctions to the optimal or revenuemaximizing auction i revenue equivalence

dual mechanism for an online retailer abstract while posted price and auction have typically been seen as alternatives to each other we observe web stores selling a product at a posted price and simultaneously running auctions for the identical product a phenomenon that has not been studied fully in this article we study a dual mechanism where an online retailer combines the two conventional mechanisms posted price and auction for multiple units of a product we demonstrate that the dual mechanism can be used to achieve market segmentation when customers discount the expected utility of auctions we characterize the customer s decision rule and formulate a retailer s profit function under the dual mechanism finally we compare the performance of three selling mechanisms posted price auction and dual through computational experiments

government procurement and international trade abstract we model the bidding for a government contract in which there is imperfect competition each bidder is better informed about his own costs than either his rival bidders or the government and the distribution of the domestic firms costs differs from the distribution of foreign firms costs because of comparative advantage effects we find that the government minimizes its expected procurement cost by operating a price preference policy not necessarily purchasing from the lowest bidder

ex post information in auctions assumptions maskin and riley 1984 show that when the amount a buyer is willing to pay for the auctioned object is not independent of his wealth expected revenue tends to be lower under open bidding in contrast milgrom and weber 1982 relax the assumption that valuations are independent and assume instead that buyers private estimates of the item s value are affiliated a buyer with a high estimate then tends to believe that other buyers will have higher estimates as well maintaining the other assumptions milgrom and weber show that expected revenue is higher in the open ascending bid auction the intuition behind this result is that in sealed high bid auctions a buyer s bid is determined not only by his own beliefs but via their bids by the beliefs of those with lower estimates a buyer with a low estimate believes that others are more likely to have low estimates as well he therefore bids less aggressively it follows that a buyer can beat all opponents who have lower estimates with a bid which is lower than it would be if beliefs were independent 2 milgrom and weber also show that if the seller purchases and then publicly reveals information which is positively linked to buyers valuations this also raises expected gross revenue from an auction the intuition here is that this helps to reduce the difference in bidders willingness to pay 3 that such a reduction should raise expected revenue is easily understood for the limiting case in which the seller s information includes all the buyers private information for then all buyer asymmetry is eliminated and so expected buyer profit is bid away to zero the seller therefore reaps the entire surplus in the following pages the implications of correlated signals are further explored while milgrom and weber emphasized the potential gains to a seller who reveals information ex ante the focus here is on ex post information in section 2 it is shown that under weak assumptions the sealed high bid auction is dominated by any auction

an empirical study of scoring auctions and quality manipulation corruption abstract we provide a modeling framework for empirical studies of scoring auction data that addresses the problem that scores are intangible and cannot be compared across auctions we apply the method on a dataset from chinese server room procurement auctions and provide empirical evidence for the seminal scoring auction model developed by che 1993 and asker and cantillon 2008 using this method we study the problem of quality manipulation the quality evaluating agent may exaggerate the quality score of a favored firm in exchange for a bribe we propose a test for quality manipulation and perform it on the server room procurement dataset we find that the bidding behaviors are generally consistent with the competitive model but not the corruption model

information revelation and buyer profits in repeated procurement competition i investigate how procurement costs are affected by the information that buyers reveal about sellers behavior in a setting with two sequentially offered contracts for which a seller s privately known costs are identical expected prices are lowest when sellers learn nothing until all contracts are allocated are higher when they learn all sellers price offers as contracts are allocated and typically are even higher when they learn only the winner s identity or the winner s identity and price offer the results suggest that buyers engaged in repeated procurement may pay less by revealing minimal or extensive information rather than an intermediate amount

multidimensional private value auctions we consider parametric examples of symmetric two bidder private value auctions in which each bidder observes her own private valuation as well as noisy signals about her opponent s private valuation we show that in such environments the revenue equivalence between the first and second price auctions spas breaks down and there is no definite revenue ranking while the spa is always efficient allocatively the first price auction fpa may be inefficient equilibria may fail to exist for the fpa we also show that auction mechanisms provide different incentives for bidders to acquire costly information about opponents valuation

altruistic voting and campaign contributions abstract an altruistic citizen votes yes in a referendum if the perceived benifit of the project exceeds its perceived cost the altruist gets information about benifits and costs from contributions to the pro and con campaigns in the nash equilibrium of a campaign contribution game with two beneficiaries altruists vote on the side with the largest contribution and altruistic voting guarantees efficient choices if there are many agents however altruistic voters do not always make efficient choices a disclosure law that provides information about the number of beneficiaries increases the efficiency of the referendum process

the impact of oil prices on gdp in european countries an empirical investigation based on asymmetric cointegration this paper investigates the existence of a long term relationship between oil prices and gdp in 12 european countries to account for the fact that economic activity responds asymmetrically to oil price shocks we propose an approach based on asymmetric cointegration our results show that while standard cointegration is rejected there is evidence for asymmetric cointegration between oil prices and gdp in the majority of the considered european countries

variations in the response of real output to aggregate demand shocks a cross industry analysis using industry data this paper investigates the determinants of the response of real output to aggregate demand shocks across industries of the u s economy the purpose of this investigation is to verify the empirical validity of two competing explanations for this response a new classical explanation and a new keynesian explanation the author finds that the impact of aggregate demand shocks on industrial real output is negatively related to the mean inflation of industrial output price and positively related to the variability of the demand for this output in addition some industry specific factors are important in differentiating the cyclical behavior of real output across industries this evidence does not provide a clear support for any of the competing explanations considered in this paper the evidence however sheds some light on important factors that differentiate the response of real output to aggregate demand shocks across industries of the economy copyright 1991 by mit press

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

fixed revenue auctions theory and behavior i introduction there are numerous varieties of auction institutions used in practice and studied in the economics literature the four standard mechanisms for selling a fixed quantity as in a single unit or lot are the english dutch first price sealed bid and second price sealed bid auctions the widely known theoretical results are that the english and second price auctions are equivalent as are the dutch and first price auctions one of the most insightful theoretical results of private value auctions is that under certain assumptions the expected revenue is constant across the four mechanisms see mcafee and mcmillan 1987 milgrom 1987 myerson 1981 but behavioral examinations of private value auctions have consistently found that the relationships among the formats are not so straightforward english clock auctions generate truthful revelation as predicted however second price auctions which should also generate truthful revelation do not reliably do so in a laboratory setting harstad 2000 kagel harstad and levine 1987 further revenue equivalence does not hold between first price and second price auctions coppinger smith and titus 1980 1 in part this is due to the fact that many bidders in first price auctions act as if they are risk averse furthermore dutch auctions and first price sealed bid auctions are not behaviorally isomorphic observed prices are significantly lower in the dutch clock auctions than in first price auctions cox roberson and smith 1982 almost exclusively the focus of previous work has been on auctions determining the selling price for a prespecified lot 2 however in some situations a seller may be more concerned about raising a fixed amount of revenue for example a business may sell off just enough inventory to gain the needed liquidity to undertake a particular project a person may pawn just enough items to secure money with which to pay the monthly bills alternatively in a procurement setting a buyer may desire to acquire as much as possible for some nonfungible fixed budget for example a researcher whose grant is expiring may buy as many supplies as possible with the remaining money or a firm may have a fixed advertising budget with which to buy the most effective campaign though not typically thought of in this way auctions can be used to solve these types of problems as well 3 we define a fixed revenue auction to be a bidding mechanism in which a prespecified total payment is exchanged for a variable quantity of a good 4 wessen and porter 1997 developed a fixed revenue auction to cover the 326 000 cost of moving antennae for the cassini mission to saturn the auction allowed competing research teams to place bids in terms of the mass they desired on the craft and the price per unit for the mass the goal of this paper is to understand the behavioral properties of fixed revenue auctions utilizing the four standard mechanisms to enable comparisons with the extensive literature on auctions the environment is designed to allow the maximum similarity between auctions in the two dimensions this includes placing nontrivial restrictions on buyer values to yield a theoretical equivalence between auction dimensions given this one might be inclined to suppose that the behavioral properties are a forgone conclusion this need not be the case as evidenced by the aforementioned lack of isomorphism between first price and dutch auctions and between english and second price auctions in the standard setting experiments have shown that even simple changes in framing can impact behavior 5 for example framing a lottery as a gain or a loss can change the value one places on the lottery and framing the ultimatum game as a buyer seller interaction can lead to behavior more consistent with material self interest a change in auction dimension however is more than a simple framing effect it is a change in the underlying decision problem

the short run relationship between sectoral shifts and u s labor market fluctuations monthly data for the aggregate u s economy are used to assess competing hypotheses concerning the relationship between sectoral employment shifts and fluctuations in the unemployment rate it is shown that sectoral shifts are caused by major work stoppages aggregate fluctuations unrelated to permanent sectoral shifts a reallocation timing effect and allocative shocks at the sectoral level larger employment shifts are associated with higher unemployment during slow growth periods and lower unemployment during above average growth periods models are presented which demonstrate that both aggregate and allocative shocks are causes of cyclical increases in unemployment

risk aversion in first price auctions with common values abstract in a first price auction with private values bidders risk aversion increases the seller s revenue this is not generally true when there are common values because winning the auction entails receiving an object with uncertain value

an empirical analysis of oil price shocks in the interwar period i introduction post world war ii experience demonstrates that disturbances to aggregate supply are important determinants of aggregate economic performance a casual glance at the post 1970 data strongly suggests a correlation between shocks to the price of oil and recession hamilton 1983 formally demonstrates that this correlation arises from what appears to be a causal link that runs from oil price increases to reduced economic activity the sequence of oil price increases followed by recession characterizes every post world war ii economic downturn in the u s with the exception of 1960 61 other research confirms the critical role of supply shocks in explaining post world war ii macroeconomic performance burbidge and harrison 1984 employ vector autoregressions vars to examine the impact of oil price shocks over the 1962 82 period for several countries they conclude that these shocks played a large role in deepening the recessions of the 1970s with the impact on the 1973 74 recession much greater than that of 1979 80 tatom 1988 estimates the impact of the 1979 80 increase in the relative price of oil and reports that this shock reduced the amount of output that could be produced with available labor and capital by 5 7 percent thoma 1992 re examines the work of litterman and weiss 1985 and finds that the ex ante real interest rate is not exogenous to supply shocks contrary to what is reported in litterman and weiss using annual data over the 1948 82 period loungani 1986 shows that any correlation between an index of the dispersion of unemployment across industries and the aggregate unemployment rate is due to the dispersion index s collinearity with oil price shocks once this collinearity is accounted for the dispersion index has no explanatory power to account for movements in the aggregate unemployment rate while the evidence for the causal link between supply shocks and output appears most dramatic for the post 1970 data hamilton 1983 argues that the entire post war period be treated as a continuous whole the enduring regularity of the oil price shock recession relation in this period leads to a natural question is there any evidence that oil price shocks either positive or negative played any role in the cyclical fluctuations and secular expansion of the 1920s and the great depression figure 1 presents a plot of the relative price of oil defined precisely in section ii for the 1921 1 1938 6 period we observe a number of sharp movements in the relative price of oil that suggest an assessment of the empirical impact of oil price shocks during the interwar period is warranted accordingly we investigate the effects of oil price shocks during the interwar period within the context of a small macroeconomic model 1 the empirical framework is a var model that consists of output the price level the monetary base the m2 money multiplier the commercial paper rate government spending a financial intermediation variable and a measure of oil price shocks these are variables frequently found in small macroeconomic models monthly data for the period 1924 2 1938 6 are used to specify and estimate the model we evaluate the impact of oil price shocks on prices and output through computation of variance decompositions the standard errors reported are generated through monte carlo simulations historical decompositions for the 1929 9 1938 6 period are also computed so we can specifically examine the effects of oil price shocks over the sample period that includes the great depression we chose the var modeling approach because there is little agreement on the appropriate structural model and var estimation places few restrictions on the way in which the system s variables interact in the specification and estimation of the model all variables are treated as jointly determined no a priori assumptions are made about the exogeneity of any of the system s variables at this stage of analysis

in house competition organizational slack and the business cycle multiplant firms pit their facilities against each other for production assignments the present paper studies the consequences of this practice in a model where production is limited by capacity constraints and asymmetric information allows facilities to accumulate slack it shows the amount of slack per unit of output to be pro cyclical indeed as capacity constraints become more acute in economic booms the power of in house competition for quota assignments is reduced and slack per unit of output increases while the opposite is true in downturns moreover in downturns firms may use higher cost facilities even when lower cost plants are not running at capacity since this boosts x efficiency in low cost plants

does contractual wage rigidity play a role in determining real activity interest in nominal wage ridigity as a source of macroeconomic fluctuations has waxed and waned over the past half century the most recent wave of interest was triggered by the rational expectations revolution of the 1970s which inspired an improved sticky wage paradigm the paradigm posits the existence of short term contractual arrangements that in their simplest form fix wage schedules in nominal terms for a predetermined period the life of the contract and leave employment at the discretion of the firm the most influential examples of the paradigm incorporate rational expectations and satisfy the natural rate hypothesis 9 14 thus meeting the new minimum standards for demand driven theories of the business cycle nominal wage contracting models have been vigorously criticized for both a lack of theoretical rigor and an absence of empirical support despite their critics however the models have remained a popular analytical tool and after almost a decade of inattention economists are showing a renewed interest in empirical tests of nominal contracting models the studies produced to date are small in number and offer conflicting conclusions they are perhaps as important for the objections they provoke as for the answers they provide while the work reported in this paper

nominal wage contracts and real activity evidence from the german economy the research on microfoundations of the phillips curve over the last two decades has produced two alternative new classical explanations of the short run output inflation trade off the nominalwage contracting variety explanation of fischer 4 and gray 7 and the equilibrium explanation of lucas 11 both explanations are similar in their prediction that real activity responds to aggregate demand disturbances through price surprises that they generate they are very different however in mechanisms that generate such response the contracting theory emphasizes the existence of long term contractual arrangements that in their simplest form fix wage schedules in nominal terms for a predetermined period the life of the contract and leave the level of employment at the discretion of the firm in this framework a positive aggregate demand shock that occurs after the contract negotiation date will cause an increase in the general price level a decrease in the real wage and an increase in employment and output by contrast the equilibrium theory makes imperfect information central to the non neutrality of nominal disturbances according to this theory agents lack full current information about aggregate variables and thus cannot dichotomize unanticipated price movements into their relative and absolute components in this framework unanticipated changes in aggregate demand lead to positive movements in output and employment because their price level effects are confused with relative price movements 2 differences between the contracting and equilibrium explanations of the response of real activity to aggregate demand shocks provide empirically testable hypotheses gray kandil and spencer 8 test for the proposition that while both theories predict a positive output response to aggregate demand shocks the size of the response is larger in the contracting model than in the

all pay auctions with affiliated binary signals abstract we analyze all pay auctions with affiliated values and binary signals we analyze the unique symmetric equilibrium with any number of bidders and show that the bidders earn positive rents only if the equilibrium is monotone we also characterize the symmetric equilibrium of the closely related two player war of attrition we compare expected revenues across these formats all pay auctions result in lower expected rents to the bidders than standard auctions but they also induce inefficient allocations in some models with affiliated private values with two bidders the effect on rent extraction dominates and the all pay auctions outperform standard auctions in terms of expected revenue with many bidders standard auctions may result in higher expected revenue the war of attrition outperforms the standard auctions in terms of revenue but its ranking relative to all pay auctions is ambiguous

labour contracts and efficiency in on the job training two sources of inefficiency in the provision of on the job training are examined an externality between firms which arises if there is imperfect competition between firms in the labor market and allocation inefficiency due to asymmetry of information about the value of the trained worker the second source of inefficiency may compound the first various contracts between the worker and the training firm are considered analysis of a simple example suggests that a contract in which the wage is chosen by the firm performs best according to the criteria of reducing both types of inefficiency copyright 1994 by royal economic society

global factors uncertainty weather conditions and energy prices on the drivers of the duration of commodity price cycle phases abstract we investigate the role of global factors in explaining the length of commodity price cycle phases using a continuous time weibull duration model and data for a panel of 33 countries over the period 1980q1 2015q4 we find evidence of increasing constant positive duration dependence for commodity price booms and busts normal time spells global macroeconomic conditions in particular inflation economic policy uncertainty and monetary policy actions significantly affect the duration of all commodity price cycle phases global environmental conditions also impact the duration of commodity price booms with a rise in average temperature rainfall increasing reducing their length a rise in the number of military conflicts around the globe is associated with shorter booms and busts finally we find that a rise in oil prices is linked with longer booms and shorter busts

relative price dispersion aggregate price movement and the natural rate of unemployment this paper develops a model of relative price stickiness and examines its implications for the relationship between relative prices inflation and the natural rate of unemployment estimation of the model demonstrates that causality in the relationship between relative and aggregate prices runs in both directions however microeconomic disturbances have been the primary source of relative price change variance over the postwar period and these micro disturbances have exerted a strong effect on inflation in the short run it also is shown that micro relative price change dispersion has had a significant influence on the natural rate of unemployment

buy prices in online auctions irrationality on the internet abstract buy prices are puzzling it makes sense for a seller at auction to set a minimum bidding level i e a reserve price surely but a maximum we explore the use of maximum bidding levels buy prices in online auctions and provide a rational explanation for this seemingly irrational auction mechanism we show that augmenting an english auction with a buy price can improve the seller s profits by partially insuring and therefore increasing the expected payment from some risk averse bidders perhaps more surprising is that the english auction augmented with a buy price can also be superior even to the first price sealed bid and dutch auctions when bidders are risk averse

randomized quasi monte carlo methods in pricing securities abstract today quasi monte carlo methods are used successfully in computational finance and economics as an alternative to the monte carlo method one drawback of these methods however is the lack of a practical way of error estimation to address this issue several researchers introduced the so called randomized quasi monte carlo methods in the last decade in this paper we will present a survey of randomized quasi monte carlo methods and compare their efficiencies with the efficiency of the monte carlo method in pricing certain securities we will also investigate the effects of box muller and inverse transformation techniques when they are applied to low discrepancy sequences

interdependence of oil prices and stock market indices a copula approach article i nfo article history in this paper we study the relationship between the oil price and stock market index of various countries between 1982 and 2007 we exclude oil and gas stock companies from the stock indices to remove the obvious direct linkage oil price series are converted into local currency to account for possible exchange rate effects the method of copula is used to model the general dependence between stock returns and oil price returns our findings suggest a weak dependence between oil prices and stock indices for most cases which are consistent with the results from previous studies exceptions are for the stock index returns of large oil consuming and producing countries united states and canada which are shown to have a relatively strong dependence with the oil price series the introduction of euro in 1999 altered considerably dependence between oil prices and stock returns

aggregate price shocks and financial instability a historical analysis i introduction the notion that central banks should act as lenders of last resort is not controversial how best to carry out that responsibility is however not widely agreed on one view holds that the financial system is inherently fragile and a central bank should forgo other objectives such as preventing inflation when financial instability threatens an alternative view argues that by controlling inflation a central bank will in fact promote financial stability anna schwartz 1988 1995 for example contends that financial instability has often been caused by monetary policies that cause fluctuations in the rate of inflation she argues that monetary policy should focus exclusively on maintaining price stability a few countries for example canada and new zealand have recently made inflation control the paramount objective of their central bank s monetary policy and the maastricht treaty which established monetary union among 11 european community countries specifies control of inflation as the principal objective for the european central bank most countries including the united states assign their central banks multiple objectives such as full employment and financial stability as well as inflation control implicitly the specification of multiple objectives for monetary policy assumes trade offs between those goals that a country might have to accept higher inflation at least temporarily to maintain financial stability for example this article investigates the historical association between aggregate price and financial stability to shed light on the question of whether a commitment to price stability is likely to enhance or lessen financial stability specifically we use data for the united states from 1790 to 1997 to test the hypothesis that aggregate price disturbances cause or worsen financial instability unanticipated aggregate price declines might increase financial distress by leaving some borrowers with insufficient income to repay contracted nominal debt thus unanticipated aggregate price declines would increase insolvency and default rates positive aggregate price shocks on the other hand might cause default rates to fall below expectations and could encourage financial expansion if borrowers and lenders are unable to distinguish changes in relative prices from changes in the aggregate price level financial expansion based on aggregate price misperceptions can lead to resource misallocation however and thereby worsen financial distress associated with subsequent unanticipated aggregate price declines during 1790 1933 unanticipated movements in the price level best represent price shocks whereas the persistence of inflation since 1933 led us to examine the impact of unanticipated inflation on financial conditions during 1934 97 we use the phrase aggregate price shock to refer to unanticipated movements in either the price level or the inflation rate in the absence of consistent time series measures of aggregate financial conditions over a long period we construct an annual index of financial conditions from both quantitative and narrative sources we use a dynamic time series probit model to estimate the impact of aggregate price shocks on financial conditions as reflected in the index we also regress four series used to construct the index on aggregate price shocks to confirm that the relationship between aggregate price shocks and the index is present in its constituent series we control for liquidity real output growth and supply shocks and test whether relationships changed with changes in monetary or financial regime our objective is to shed light on the extent that aggregate price disturbances exacerbate financial instability and whether the relationship between such disturbances and financial conditions is affected by the institutional environment we begin by outlining why aggregate price shocks might cause or worsen financial instability

oil shocks and aggregate macroeconomic behavior the role of monetary policy a recent paper by bernanke gertler and watson 1997 suggests that monetary policy could be used to eliminate any recessionary consequences of an oil price shock this paper challenges this conclusion on two grounds first we question whether the federal reserve actually has the power to implement such a policy for example we consider it unlikely that additional money creation would have succeeded in reducing the fed funds rate by 900 basis points relative to the values seen in 1974 second we point out that the size of the effect that bernanke gertler and watson attribute to oil shocks is substantially smaller than that reported by other researchers primarily due to their choice of a shorter lag length than that used by other researchers we offer evidence in favor of the longer lag length employed by previous research and show that under this specification even the aggressive federal reserve policies proposed would not have succeeded in averting a downturn