sequential bargaining as a noncooperative foundation for walrasian equilibrium allocation are weakly preferred to those obtainable from the initial endowments by means of the given set of net trades these conditions are similar to ones studied by schmeidler and vind 1972 and vind 1978 but here they are thought of as characterizing the set of net trades available in steady state equilibria of market games like those studied by douglas gale 1984 1985 1986a 1986b and 1986c the characterization result is used as a key step in the proof of results like gale s the allocations induced by steady state equilibria are walrasian for the economy given by the constant flow of new agents into the market our approach generalizes the one followed in gale 1986c and allows us to dispense with assumptions made in previous treatments for example gale s 1986a assumption of dispersed characteristics is dropped we also demonstrate that such a result depends on the assumption that agents cannot observe the past behavior of agents with whom they trade

overlapping expectations and hart s conditions for equilibrium in a securities model hart j econ theory 9 1974 293 311 gave conditions for equilibrium to exist in a securities model where each agent undertakes asset transactions to maximize expected utility of wealth these conditions rule out agents wanting to undertake unbounded balanced transactions to reach a pareto superior allocation given their expectations with mild extra assumptions to make agents unwilling to risk incurring unbounded losses on their portfolios hart s conditions become equivalent to an assumption of overlapping expectations which is comparable to a much weaker form of green s common expectations econometrica 41 1973 1103 1124

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

asset market equilibrium with short selling this paper presents simple conditions and a simple proof of the existence of equilibrium in asset markets where short selling is allowed and satiation is possible unlike standard non satiation assumptions the one used here is weak enough to be reasonable in the mean variance capital asset pricing model and in asset market models where investors maximize expected utility and where total returns to individual assets may be negative this paper analyses the existence of equilibrium in exchange economy models where choice sets may be unbounded below and satiation is likely there are two main examples of such models one is an asset market model where investors maximize expected utility and the total return to individual assets may be negative with positive probability the other is the mean variance capital asset pricing model capm where investors do not necessarily maximize expected utility but instead maximize a function of only the mean and variance of return to their portfolios in both of these models the investors choice sets will be unbounded if short selling is allowed to short sell a share of an asset means to borrow it and sell it promising to buy it back and return it to the lender at a later date formally short selling corresponds to holding a negative number of shares if unlimited short selling is allowed then there is no limit to how large negative numbers of shares can be held and therefore the choice sets are unbounded satiation can also occur both in the mean variance model and in the expected utility model unless there is a riskless asset in the expected utility model there may be satiation if the individual assets have negative returns with positive probability as the investor gets more and more shares the potential positive returns get larger and larger but so do the potential negative returns if the investor is very averse to large negative returns then he may eventually be satiated and not want any more shares in the mean variance model the expected return to an investor s portfolio increases as he holds more and more shares of the assets but so does the variance of return it may be that at some point the additional expected return gained from adding more shares to the portfolio is not sufficient to compensate for the increase in variance if so then there will be satiation satiation in the mean variance model iie analysed in nielsen 1987 1988 the expected utility model with short selling has been used in many specific analyses of portfolio selection and asset pricing to name but one connor 1984 studies arbitrage pricing in a general equilibrium model where there are no short sales restrictions the mean variance capm is of course very prominent in the finance literature because the

transaction cost economics the natural progression abstract this manuscript provides the nobel laureate s reflections on transaction cost economics the overview section frames governance as the overarching concept and transaction cost economics as the means by which to breathe operational content into governance and organization the vertical integration section identifies efficiency factors associated with determining when a firm produces a good or service to its own needs rather than outsource a discussion of the rudiments of transaction cost analysis is subsequently provided puzzles and challenges that require pushing the logic of efficient governance to completion are examined and followed by concluding remarks

the antitrust implications of capacity reallocation by a dominant firm when a firm acquires rival firms in one market and moves their capacity to another market should antitrust authorities be concerned we address this question by studying a multi stage game a dominant firm has the opportunity to acquire fringe firms that operate in the same market then the dominant firm has the opportunity to move capacity from that market to a second market the model is motivated by a series of acquisitions in the specialized mobile radio industry aimed at establishing a new cellular carrier we derive necessary and sufficient conditions for the dominant firm to acquire too little capacity relative to the social optimum the results shed light on the consent decree negotiated in us v motorola inc and nextel communications inc 1994

the impact of tax deductibility on charitable giving by covenant in the uk the 1985 86 survey of personal incomes is used to estimate the impact of tax deductibility on giving by covenant estimates are based on two models a generalized tobit model and reece and zieschang s 1985 model that allows for a nonlinear budget constraint the results suggest that the latter is not appropriate for the u k tax system in the tobit models the income effects on participation and expenditure are well determined and similar to those in previous work for the united kingdom and in many u s studies there is no robust evidence of a tax price effect on participation or expenditure copyright 1991 by royal economic society

monopoly and the preemption of competitive recycling the paper shows that a monopolistic primary producer of a recycleable material will choose to preempt market entry by competitive recyclers unless the cost of producing virgin ingot is very high compared to the cost of reconditioning used material unlike earlier results it is shown that in the absence of transaction costs on scrap sales competition by independent recyclers fails to reduce price below its full monopoly level moreover if transaction costs are present the mere threat of entry by independent recyclers may raise the price above that level

charitable donations by uk households evidence from the family expenditure survey this paper reports estimates based on both standard tobit and generalized tobit techniques of the determinants of charitable giving in the uk using 1984 family expenditure survey data this is the first such study using uk data separate estimates are presented of the determinants of participation and of the level of donations by giving households participation is seen to be sensitive to income the tax price of giving and a range of demographic variables while the level of donations varies primarily with income donations are found to be inelastic with respect to changes in disposable income

sleeping quotas pre emptive quota bidding and monopoly power abstract we rationalize the puzzling existence of binding quotas that are not fully utilized our model has its roots in bhagwati 1965 in r baldwin et al eds trade growth and the balance of payments essays in honor of g haberler mit press new york on tariffs quotas equivalence and is related to the io literature on preemption we study the conditions that lead a monopolist facing a quota restricted market to buy the quota licenses itself and the conditions under which they may remain unused the divisibility of the quota is crucial for the monopolist to pre emptively buy the quota furthermore we study the implications of use it orlose it clauses commonly imposed on auctioned quotas

piecewise procurement of a large scale project this paper studies the optimal piecewise procurement of a large scale project in the unique markov perfect equilibrium mpe of the dynamic procurement game it is found that 1 unlike the static setting the procurer s optimal strategy depends on the number of suppliers and more importantly it is nonmonotonic as one more supplier participates in the procurement auction the procurer softens competition in the initial stages by including more cost btypesq while increasing competition in the mature stages 2 this in turn implies that existing suppliers might favor participation of additional suppliers 3 absent scheduling and or resource constraints the procurer prefers to procure the project as one piece if the suppliers technology exhibits constant or increasing returns and no additional suppliers are enticed to bid and 4 the optimal dynamic mechanism can be easily implemented via a sequence of dominant strategy auctions of the vickrey type d 2004 elsevier b v all rights reserved

managing dynamic competition in many important high technology markets including software development data processing communications aeronautics and defense suppliers learn through experience how to provide better service at lower cost this paper examines how a buyer designs dynamic competition among rival suppliers to exploit learning economies while minimizing the costs of becoming locked in to one producer strategies for controlling dynamic competition include the handicapping of more efficient suppliers in procurement competitions the protection and allocation of intellectual property and the sharing of information among rival suppliers jel c73 d44 l10

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

continuum economies with finite coalitions core equilibria and widespread externalities abstract we develop a new model of a continuum economy with coalitions consisting of only finite numbers of agents the core called the f core is the set of allocations that are stable against improvement by finite coalitions and feasible by trade within finite coalitions even with widespread externalities preferences depend on own consumptions and also on the entire allocation up to the null set we obtain the result that the f core coincides with the walrasian allocations without widespread externalities the f core the aumann core and the walrasian allocations all coincide however with widespread externalities there is no obvious natural definition of the aumann core

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

charity donations in the uk new evidence based on panel data abstract this paper presents a set of panel data estimates for 159 of the most prominent uk charities for the period 1983 1990 in evaluating alternative specifications we settle on a fixed effects estimation social welfare charities are shown to fund raise short of the point at which net revenues are maximized whereas health and overseas charities are found to net revenue maximize religious charities maximize total revenues estimates of price and fund raising elasticities are presented for charities overall and for four cohorts for alternative income sources no evidence of crowding out is found

consistent estimation of the impact of tax deductibility on the level of charitable contributions when charitable contributions are tax deductible the marginal price of charitable giving in other consumption foregone per dollar of contributions is generally less than unity further if the income tax schedule is a progressive step function the marginal price of contributions is generally a rising step function of the level of contributions the problem of estimating a contributions demand function for individuals is therefore complicated by the spurious correlation between the level of contributions and the observed marginal price we take this econometric problem into account in estimating a contributions demand function using data from the 1972 73 consumer expenditure survey after comparing our results with those of estimation techniques used by other authors we provide evidence on the impacts of alternative tax policies on charitable giving using our estimates of the model parameters

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

on equilibrium in hart s securities exchange model in this paper we use a no unbounded arbitrage condition to give a very direct proof of the existence of equilibrium in hart s unbounded securities exchange model j econ theory 9 1974 293 311 we also examine the relationship between the no unbounded arbitrage condition and the sufficiency conditions of hart ibid and hammond j econ theory 31 1983 170 175 we present an example to show that if traders are not sufficiently risk averse then hammond s overlapping expectations condition is not in general equivalent to the no unbounded arbitrage condition or hart s sufficiency conditions and therefore is not sufficient to guarantee the existence of equilibrium we also present an example to show that it is possible for the no unbounded arbitrage condition to hold without overlapping expectations and therefore it is possible for equilibrium to exist without overlapping expectations

the economics of governance the economics of governance is an effort to implement the study of good order and workable arrangements where good order includes both spontaneous order in the market which is a venerated tradition in economics adam smith 1776 friedrich hayek 1945 kenneth a arrow and gerard debreu 1954 and intentional order of a conscious deliberate purposeful kind chester irving barnard 1938 p 9 also i interpret workable arrangements to mean feasible modes of organization all of which are flawed in comparison with a hypothetical ideal avinash dixit 1996 pp 4 9 the object is to work out the efficiency logic for managing transactions by alternative modes of governance principally spot markets various long term contracts hybrids and hierarchies interest among social scientists economists included in the study and practice of good order and workable arrangements has been steadily growing in contrast with the orthodox lens of choice prices and output supply and demand the economics of governance is a lens of contract construction broadly in the spirit of james buchanan s 2001 p 29 observation that mutuality of advantage from voluntary exchange is the most fundamental of all understandings in economics the economics of governance as herein described is principally an exercise in bilateral private ordering by which i mean that the immediate parties to an exchange are actively involved in the provision of good order and workable arrangements to be sure the need for private ordering varies with the rules of the game as provided by the state distinctions between lawlessness where the state provides limited or unreliable protection for property and contract dixit 2004 and lawfulness where the state undertakes to protect property and enforce contracts in a principled way are pertinent the first of these applies mainly to primitive and transition economies the second is commonly associated with western democracies recourse to private ordering under conditions of lawlessness is altogether understandable given the absence of state support the walter a haas school of business university of california berkeley ca 94720 1900 the paper has benefited from workshop presentations at the university of california berkeley the university of valencia insead fountainebleau and the 2004 annual conference of the international society for new institutional economics an abbreviated version was also given as the horst claus recktenwald lecture at nuremburg on 4 november 2004 comments and suggestions from fred balderston ernesto dalbo avinash dixit robert gibbons witold henisz ian larkin steven tadelis and dean williamson are especially acknowledged 1 lon fuller s 1954 p 477 definition of eunomics as the science theory or study of good order and workable arrangements is very much in the spirit of what i refer to as governance 2 one of the immediate ramifications of insistently comparing feasible alternatives all of which are flawed is that the purported inefficiencies that are ascribed to failures to achieve first best optimality are not dispositive but invite the query as compared with what i return to this issue in section iv 3 excluding corporate governance the numbers of articles that used the word governance during the period 1998 2000 as compared with the period 1977 1979 in selected economics business management sociology organization and political science journals were 60 vs 1 76 vs 4 79 vs 18 and 60 vs 25 where the journals surveyed were the american economic review journal of political economy quarterly journal of economics rand journal of economics and journal of economic perspectives in economics strategic management journal management science academy of management journal and academy of management review in business management administrative science quarterly organization science american journal of sociology american sociological review and annual review of sociology in sociology organization and american political science review political science quarterly journal of politics and political research quarterly in political science combining these four categories articles using the word governance increased from 48 to 275 over this 20 year interval dixit 2004 pp 149 50 reports that the number of web pages that turn up under the search for governance is huge