efficient non contractible investments in large economies abstract do investors making complementary investments face the correct incentives especially when they cannot contract with each other prior to their decisions we present a two sided matching model in which buyers and sellers make investments prior to matching once matched buyer and seller bargain over the price taking into account outside options efficient decisions can always be sustained in equilibrium we characterize the inefficiencies that can arise in equilibrium and show that equilibria will be constrained efficient we also show that the degree of diversity in a large market has implications for the extent of any inefficiency journal of economic literature classification numbers c78 d41 d51

price taking equilibrium in economies with multiple memberships in clubs and unbounded club sizes abstract we model an economy with clubs or jurisdictions where individuals may belong to multiple clubs and where clubs sizes are arbitrary clubs may be restricted to consist of only one or two persons or as large as the entire economy or anything in between notions of price taking equilibrium and the core both with communication costs are introduced these notions take into account that there is a small communication cost of deviating from a given outcome we demonstrate that given communication costs for all sufficiently large economies the core is nonempty and the set of price taking equilibrium outcomes is equivalent to the core

paired comparison and contingent valuation approaches to morbidity risk valuation abstract this research uses an experimental approach for eliciting consumer valuations of morbidity risk reductions associated with safter chemical products and introduces the paired comparison questions approach to non market valuation in four applications the paired comparisons approach yields higher morbidity valuations than the more familiar contingent valuation approach however both methodologies produce large values of morbidity reduction benefits in comparison to estimates derived from wage hedonic studies explanations for the difference in the estimates and their magnitudes are suggested along with the public policy implications

incentives contracts and markets a general equilibrium theory of firms1 this paper takes steps toward integrating firm theory in the spirit of alchian and demsetz 1972 and grossman and hart 1986 contract theory in the spirit of holmstrom 1979 and general equilibrium theory in the spirit of arrow and debreu 1954 and mckenzie 1959 in the model presented here the set of firms that form and the contractual arrangements that appear the assignments of agents to firms the prices faced by firms for inputs and outputs and the incentives to agents are all determined endogenously at equilibrium agents choose consumption but they also choose which firms to join which roles to occupy in those firms and which actions to take in those roles agents interact anonymously with the large market but strategically within the small firms they join the model accommodates moral hazard adverse selection signaling and insurance equilibria may be pareto ranked

a utility consistent combined discrete choice and count data model assessing recreational use losses due to natural resource damage abstract a two stage budgeting approach can often be taken when analyzing consumer choice situations in this paper we examine the particular situation where a consumer makes purchases of a discrete commodity of which there are a number of brands in the first stage the consumer decides how many purchases to make in the second stage the consumer decides how to allocate these purchases across brands our econometric approach to this type of situation uses a utility consistent combined discrete choice and count data model the second stage which is specified as a multinomial choice model produces a price index for the commodity which is used to estimate the first stage which is specified as a count data model we apply the model to recreational demand behavior in alaska in order to estimate the welfare losses suffered by recreational users due to the exxon valdez oil spill these results may provide useful input to government agencies attempting to estimate the appropriate level of taxes fines or regulations for deterring damage to the environment

should congestion tolls be set by the government or by the private sector the knight pigou debate revisited this paper clarifies issues debated by a c pigou and frank knight about correcting inefficient use of congestible resources focusing for concreteness on their original example of road congestion instead of government imposed pigouvian access fees knight favoured access fees set by private toll setters we consider the case of n 2 congestible roads and an uncongestible road of arbitrary speed knight argued that in the case of a single congestible road a private toll setter would always choose the toll that pigou recommended hence the allocation would minimize aggregate commute time without government meddling we find instead that two or more toll setters would never choose pigouvian tolls except in the special case of a sufficiently fast uncongestible road moreover for uncongestible roads of slower speed the allocation of motorists under knight s proposal is almost never efficient whenever it is inefficient motorists are strictly worse off when they pay tolls set by private firms instead of paying government imposed tolls and aggregate toll revenue is also lower nevertheless if the private sector does set tolls then the full cost to motorists can be limited if the government provides an uncongestible alternative such as a train to offer potential competition along the same route

differences between continuous and discrete contingent value estimates in a split sample contingent valuation study of willingness to pay wtp for food safety improvements the dichotomous choice dc elicitation method consistently generated much larger estimates of wtp than did a continuous method little or none of these differences was due to bias introduced by the statistical techniques used with the dc data most or all of the difference was due to differences in respondent behavior in addition the continuous wtp responses showed a significant scope effect while the dc responses did not the observed difference in behavior may be attributable in part to yea saying by dc respondents

a comparison of contingent preference models i compare the informational efficiencies of contingent rating contingent ranking and two contingent paired comparison methods as alternatives to the referendum contingent valuation method the contingent rating method is hypothesized to be most efficient because ratings convey information on preference intensities and can uniquely represent respondent indifference or ambivalence survey data on hunters ratings of alternative hypothetical hunting trips are used to estimate four alternative indirect utility models from which marginal willingness to pay measures for individual trip attributes are derived model comparison wtp estimates and their confidence intervals confirm the relative efficiency of the contingent rating approach

comparative reliability of the dichotomous choice and open ended contingent valuation techniques abstract the comparative reliability of dichotomous choice and open ended contingent valuation methods cvm is evaluated by resurvey of the same households 9 months after their original survey test retest correlations on willingness to pay are statistically significant at the 1 level and range from 0 57 for the dichotomous choice cvm to 0 62 for the open ended cvm the test retest correlations were not statistically different between dichotomous choice and open ended cvm a likelihood ratio test for temporal stability of each method s willingness to pay functions indicates stability half of the time for both methods

entrepreneurship and organization design we model entrepreneurship and the emergence of firms as an outcome of simultaneous bidding for labor services among heterogeneous agents what distinguishes our approach from prior work is that occupational choice and job matching are determined simultaneously so that the opportunity costs of entrepreneurs are accounted for those who are relatively unmanageable while possibly excellent managers themselves become entrepreneurs entrepreneurs compete and create value by building efficient organizations and offering potentially well paid jobs to others while the entry of an additional entrepreneur typically reduces some individual wages we show that it always raises the average wage and depresses the average income of incumbent entrepreneurs this result may help explain the empirically low returns to entrepreneurship

collective decisions and competitive markets in a general equilibrium model we allow for households with several typically heterogeneous members households that make efficient collective consumption decisions where different households may use different collective decision mechanisms yet households that operate within a competitive market environment the interaction of two allocation mechanisms collective decisions and competitive markets is investigated with a focus on the efficiency properties and decentralization possibilities of the dual allocation mechanism

discrete choice survey experiments a comparison using flexible methods abstract this study investigates the convergent validity of discrete choice contingent valuation cv and contingent rating ranking cr methods using flexible econometric methods our results suggest that cv and cr can produce consistent data achieve convergent validity when respondent s preferred choices and the same changes in environmental quality are considered we also find that cr models that go beyond modeling the preferred choice and include additional ranks cannot be pooled with the cv models accounting for preference heterogeneity via random coefficient models and their flexible structure does not make rejection of the hypothesis of convergent validity less likely but instead rejects the hypothesis to about the same degree or perhaps more frequently than fixed parameter models commonly used in the literature

potential pitfalls for the purchasing power parity puzzle sampling and specification biases in mean reversion tests of the law of one price the ppp puzzle is based on empirical evidence that international price differences for individual goods loop or baskets of goods ppp appear highly persistent or even nonstationary the present consensus is these price differences have a half life that is of the order of five years at best and infinity at worst this seems unreasonable in a world where transportation and transaction costs appear so low as to encourage arbitrage and the convergence of price gaps over much shorter horizons typically days or weeks however current empirics rely on a particular choice of methodology involving i relatively low frequency monthly quarterly or annual data and ii a linear model specification in fact these methodological choices are not innocent and they can be shown to bias analysis towards findings of slow convergence and a random walk intuitively if we suspect that the actual adjustment horizon is of the order of days then monthly and annual data cannot be expected to reveal it if we suspect arbitrage costs are high enough to produce a substantial band of inaction then a linear model will fail to support convergence if the process spends considerable time random walking in that band thus when testing for ppp or loop model specification and data sampling should not proceed without consideration of the actual institutional context and logistical framework of markets

on price taking equilibria in club economies with nonanonymous crowding abstract competitive equilibrium in a coalition production economy or a club economy typically does not exist when there is free entry for two reasons first there may be an integer problem as is familiar from club theory with anonymous crowding second optimal groups may have different compositions from the population and then even if there is no integer problem it may be impossible to partition the population into optimal groups i define a notion of approximate equilibrium and show that such an equilibrium always exists in a sufficiently large economy i focus on the optimal size of the economy rather than of clubs

comparing ranking and contingent valuation for valuing human lives applying nested and non nested logit models the aim of this paper is to investigate whetherrespondents perceive a discrete choice contingentvaluation dc cvm question differently from a rankingquestion we combine the two approaches to valuepublic projects that try to prevent people from dyingprematurely the combined valuation procedure enablesus to investigate the internal consistency of theutility structure between choices applying nested andnon nested logit models if the preference structureis allowed to shift the relative utility weights ofthe attributes differ between the valuation questions and the willingness to pay wtp estimate from thecombined procedure changes

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

valuation equilibrium with clubs abstract this paper considers model worlds in which there is a continuum of individuals who form finite sized associations to undertake joint activities we show how through a suitable choice of commodity space restrictions on the composition of feasible groups can be incorporated into the specification of the consumption and production sets of the economy we also show that if there are a finite number of types then the classical results from the competitive analysis of convex finite agent economies can be reinterpreted to apply journal of economic literatureclassification numbers d51 h41

migration proof tiebout equilibrium existence and asymptotic efficiency abstract tiebout s basic claim was that when public goods are local competition between jurisdictions solves the free riding problem in the sense that equilibria exist and are always pareto efficient unfortunately the literature does not quite support this conjecture for finite economies one must choose between notions of tiebout equilibrium which are pareto optimal but which may be empty or which are nonempty but may be inefficient this paper introduces a new equilibrium notion called migration proof tiebout equilibrium which we argue is a natural refinement of nash equilibrium for a multijurisdictional environment we show for sufficiently large economies with homogeneous consumers such an equilibrium always exists is unique and is asymptotically pareto efficient

competitive equilibrium and the core in club economies with anonymous crowding in club economies with anonymous crowding competitive equilibrium states of the economy are efficient and coincide with the core when there is only one private good anonymous admission prices permit consumers with different tastes to share facilities consumers might do so when their demands for facility size and crowding coincide in which case sharing is efficient thus similarity of demands is the relevant consideration for efficiently grouping consumers with different tastes

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide a comprehensive empirical analysis of majority rule and tiebout sorting within a system of local jurisdictions the idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice the estimator controls for observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and the potential endogeneity of prices and expenditures as well as the self selection of households into communities of their choice we estimate the structural parameters of the model using data from the boston metropolitan area the empirical findings reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

validation of empirical measures of welfare change a comparison of nonmarket techniques since the passing of the flood control act of 1936 the attention of many resource economists has been directed towards measuring the benefits and costs of alternative uses of natural resources increasingly it has been recognized that the value of some of these uses is not explicitly determined through market transactions this has led to the focus of much attention upon the development of nonmarket methods to estimate the value of these uses in the 1940s the groundwork for the travel cost method was established by hotelling prewitt 1949 following this in the 1960s davis initiated the basic foundation for bidding methods davis 1963 which were later to be subsumed under the heading of contingent valuation methods brookshire randall and stoll 1980 schulze d arge and brookshire 1981 thayer 1981 both of these methods will be further discussed below in addition to these two methods a third approach the unit day value method has been recognized as acceptable but not preferred for the valuation of recreational uses of water and related land resources dwyer kelley and bowes 1977 u s water resources council 1979 given the existence of alternative methods of estimating the value of resource uses several obvious questions arise one of the first of these is under what circumstances is each method most appropriate existing literature has focussed sufficiently on this question and pointed out limitations of each especially the travel cost method and unit day value methods brookshire ives and schulze 1976 dwyer kelly and bowes 1977 freeman 1979 mcconnell 1975 randall ives and eastman 1977 schulze d arge and brook

an empirical investigation of the consistency of nested logit models with utility maximization global conditions under which nested logit models are consistent with utility maximization are provided by daly and zachary and by mcfadden recently borsch supan and herriges and kling have provided conditions under which a nested logit model is locally consistent however previous work has not discussed implementation of these conditions here three alternative approaches to checking and formally testing for the consistency conditions using classical statistics are investigated in addition a bayesian approach to interpreting and imposing the local consistency conditions is provided the application is based on anglers choices regarding sportfishing alternatives in southern california

relative ppp in the medium run abstract this paper tests the relative purchasing power parity rppp hypothesis on month by month post 1972 data and still obtains regression coefficients that are close to unity two methodological aspects have contributed to this encouraging result firstly although all rppp tests are vis a vis the usa we nevertheless exploit our a priori knowledge about the implications of these usd based equations on ppp relations between cross rates so in a sense we use all information implicit in all cross rates too secondly we selected an instrumental variable that is specifically designed to cope with lead and lag effects in non traded vs traded goods inflation our estimates indicate that most lead and lag effects seem to occur within a six month window jel f31

temporal aggregation and hall s model of consumption behaviour a simple exercise of time series analysis shows that the presence of the phonomenon of temporal aggregation in quarterly consumption data can substantially alter the empirical inference about hall mocel of consumption behaviour this fact has received almost no attention in the econometric research in this field

core equivalence theorem with production abstract in production economies the extent to which non equilibria are blocked depends on the allocation of control rights among shareholders because a blocking coalition s resources are affected by the firms it jointly owns with outsiders we formulate a notion of blocking that takes such interdependency problem into account and we prove an analog of the debreu scarf theorem for replica production economies our theorem differs from theirs in using an additional assumption which we argue is indispensable and is driven by the interdependency problem

inventories as factors of production and economic fluctuations this paper presents a theory of inventory investment by stage of processing and uses it to examine the role of inventory investment in economic fluctuations the model in which inventories are treated as factors of production is estimated for four durable goods industries three conclusions emerge from the estimation first the estimates generally satisfy the theoretical restrictions second the elasticity of inventory demand with respect to output is high indicating an important accelerator effect finally the estimates suggest that shifts in the demand for inventories are an important source of economic fluctuations copyright 1989 by american economic association

equivalence of the core and competitive equilibrium in a tiebout economy with crowding types abstract we propose a new model of a local public goods economy with differentiated crowding the new feature is that taste and crowding characteristics of agents are distinguished from one another we prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of tiebout equilibrium outcomes equilibrium prices are defined to depend solely on crowding characteristics this implies that only publicly observable information and not private information such as preferences is needed to induce agents to sort themselves into efficient jurisdictions thus our model allows us to satisfy bewley s 6 anonymity requirement on taxes in his well known criticism of the tiebout hypothesis

efficient club formation in a frictional environment we study the assignment of agents to clubs in a frictional market environment club entry is endogenous and clubs compete by posting reserve prices in a competing auctions game prior to the agents decisions regarding which club to visit the competing auctions equilibrium is constrained efficient and the reserve price in general will not be zero

birgit grodal a friend to her friends it was much too soon we knew it could happen she participated in the proceedings of the conference in her honor held in copenhagen in september 2002 with a display of her usual acumen and vigor but we left worried i do not know if the time ever comes for anyone but it had not come for her it is hard to accept with the passing of birgit grodal the european economic association loses its 2005 president the community of european economists one of its shapers and leading figures the worldwide community of economic theorists and mathematical economists an outstanding general equilibrium theorist and her many friends a friend

hatred and profits under the hood of the ku klux klan in this article we analyze the 1920s ku klux klan those who joined it and its social and political impact by combining a wide range of archival data sources with data from the 1920 and 1930 u s censuses we find that individuals who joined the klan in some cities were more educated and more likely to hold professional jobs than the typical american surprisingly we find little evidence that the klan had an effect on black or foreign born residential mobility or vote totals rather than a terrorist organization the 1920s klan is best described as social organization with a very successful multilevel marketing structure fueled by an army of highly incentivized sales agents selling hatred religious intolerance and fraternity in a time and place where there was tremendous demand jel codes d71 d72 r23 n32 copyright 2012 oxford university press

entrepreneurial land developers joint production local externalities and mixed housing developments abstract housing developments condos and suburban developments are not necessarily homogeneous developers provide different types of units of various sizes and other characteristics catering to different types of customers in this paper we allow joint production and local consumption externalities within each development and show that land developers who seek a profit maximizing set of units in developments may provide mixed developments we show that there exists an equilibrium and that every equilibrium is pareto efficient we provide examples in which mixed developments arise in a long run equilibrium we relate this work to a widely used hedonic pricing model by rosen 1974 and to an equilibrium concept under asymmetric information by rothschild and stiglitz 1976

a mechanism design approach to the tiebout hypothesis we revisit the tiebout hypothesis in a world in which agents may learn extra information as to how they value the various local public goods once located and jurisdictions are free to commit to whatever mechanism to attract citizens it is shown in quasi linear environments that efficiency can be achieved as a competitive equilibrium when jurisdictions seek to maximize local revenues but not necessarily when they seek to maximize local welfare interpretations and limitations of the result are discussed

sorting by foot travel for local public goods and equilibrium stratification we re examine tiebout s hypothesis of endogenous sorting in a competitive spatial equilibrium framework by considering both income and preference heterogeneity and by allowing agents to decide endogenously the number of visits to a travel for local public good the equilibrium configuration may be completely segregated incompletely segregated or completely integrated depending on relative market rents and income preference local tax parameters a segregated equilibrium may feature endogenous sorting purely by income or by both income and preferences while the rich need not be closer to the local public facility site multiple equilibria may arise when the equilibrium configuration is incompletely segregated jel classification d50 h41 classification par deplacement biens publics locaux accessibles par deplacement et stratification d equilibre les auteurs reexaminent l hypothese de tiebout de classification endogene dans un cadre d equilibre spatial concurrentiel en tenant compte a la fois de l heterogeneite des revenus et des preferences ainsi qu en permettant aux agents de decider de maniere endogene du nombre de visites pour se procurer un bien public local par deplacement il peut s ensuivre des equilibres de segregation complete de segregation incomplete ou d integration complete selon les rentes relatives et les parametres de revenus de preferences ou de fiscalite locale un equilibre de segregation peut entrainer une classification endogene sur la base seulement des revenus ou sur la base des revenus et des preferences alors que les riches n ont pas besoin d etre plus proches du site du bien public local des equilibres multiples peuvent surgir quand la configuration d equilibre en est une de segregation incomplete

meritocracy egalitarianism and the stability of majoritarian organizations we gratefully acknowledge support from the severo ochoa programme for centres of excellence in r d sev 2011 0075 barbera and bevia acknowledge support from grants consolidated group c eco2008 04756 and feder and sgr2014 515 ponsati acknowledges support from grants eco2012 37065 and sgr2009 1142

choosing peers homophily and polarization in groups this paper studies the formation of peer groups entailing the joint production of public goods in our model agents choose their peers and have to pay a connection cost for each member added to the group after groups are formed each agent selects a public project to make a costly contribution to and all members of the group experience the benefits of these contributions since agents differ in how much they value one project relative to the other the group s preferences affect the generated profile of public goods we characterize mutually optimal groups groups that are optimal for all their members when contribution costs are low relative to connection costs mutually optimal groups must be sufficiently homogeneous as contribution costs increase relative to connection costs agents desire more connections which in turn raises the risk of free riding extreme peers are then more appealing since they are more willing to contribute and polarization arises

decentralization in replicated club economies with multiple private goods abstract we show that exhaustion of blocking opportunities is a sufficient condition such that every allocation in the core of a replicated club economy can be decentralized as a competitive equilibrium and that a related condition efficient scale is necessary and under an assumption on endowments sufficient such that competitive equilibrium exists and the core is nonempty these results do not require the euclidean structure and monotonicity assumed in lindahl equilibrium do not require convexity of preferences or costs and do not require the strong assumption that private goods are essential journal of economic literature classification numbers d46 d50 d61 h40

norwegian residential electricity demand a microeconomic assessment of the growth from 1976 to 1993 abstract the norwegian residential electricity consumption increased by an average of 3 annually during the period 1976 1993 political signals indicate that the growth in norwegian residential energy consumption should be reduced and that it may be necessary to increase energy taxes based on data for the sample of households from the annual consumer expenditure survey we study factors that are of importance explaining the growth in norwegian residential electricity demand during this period nearly half of the growth is due to an increase in the number of households while the rest reflects an increase in average consumption per household the increase in average consumption per household is due to an increasing number of households possessing electric household appliances such as dryers and dishwashers an increase in real disposable household income and in the floor space of dwellings

differences between willingness to pay estimates from open ended and discrete choice contingent valuation methods the effects of heteroscedasticity most comparative studies find that the discrete choice contingent valuation method dc cvm yields higher willingness to pay wtp estimates than the open ended oe format in this paper we discuss and test several hypotheses to explain why wtp estimates from oe and dc cvm questions differ we find that wtp estimates from discrete choice data are very sensitive to assumptions made about the random utility in particular violation of the homoscedasticity assumption may lead to biased wtp estimates if the error terms are correlated with the cost this violation was a main source of difference in wtp estimates in our studies

competitive markets with endogenous health risks we study an economy where agents productivity and labor endowment depend on their health status and indivisible occupational choices affect individual health distributions we show that pareto efficiency requires cross transfers across occupations moreover workers with relatively less safe jobs must get positive transfers whenever labor supply is not very reactive to wages a condition in line with the findings of a large empirical literature in these instances compensating wage differentials equalizing the utilities of ex ante identical workers in different jobs undermine ex ante efficiency moreover competitive equilibria where only assets with deterministic payoffs are traded are not first best finally we show that simple transfer schemes implemented through linear subsidies to health insurance enhance efficiency

nominal exchange rate regimes and the real exchange rate abstract two assumptions about the real exchange rate are common in the literature on international finance 1 the real exchange rate is a random walk 2 the time series properties of the real exchange rate depend on the nominal exchange rate regime this paper presents evidence that indicates that the random walk behavior of the real exchange rate is only a characteristic of the post world war ii period moreover our findings also suggest that what is crucial to the real exchange rate behavior is the particular historical period rather than the nominal exchange rate arrangement

clubs and the market large finite economies abstract this paper builds a general equilibrium model of finite economies 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 other club members because club memberships are indivisible and choices of club memberships must be coordinated across the population the core of such an economy may be empty and equilibrium may not exist however for large finite club economies an approximate core is not empty and states in this approximate core can be approximately decentralized by prices for private goods and for club memberships the arguments use convexification tools familiar from the literature on private goods economies and a new tool of some independent interest that addresses the special problems created by the nature of club memberships journal of economic literature classification numbers d2 d5 h4

testing the consistency of nested logit models with utility maximization abstract this paper provides simple necessary conditions for testing the local consistency of nested logit models with stochastic utility maximization a graphical analysis illustrates the extent to which these conditions extend the range of admissible dissimilarity coefficients beyond the unit interval

econometric methods and purchasing power parity short and long run ppp this paper defines the different versions of the purchasing power parity and establishes the existing relationships between them in the light of econometric techniques monthly and annual data for real exchange rates are studied through a variance ratio test unlike other authors it is found that there is not explosive behaviour in the real exchange rate when monthly data are used besides stationarity is easily accepted using annual data these results allow to reconcile the two main versions of the purchasing power parity and also explain why trade imbalances are persistent but not permanent

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

testing for misspecification in the referendum contingent valuation approach binary choice models are frequently used in the analysis of referendum contingent valuation data because omitted regressors heteroskedasticity and distribution asymmetry in these models result in inconsistent parameter estimates it is important that misspecification tests be undertaken in this article conditional moment tests for these problems are presented and applied to data from two referendum contingent valuation studies results show that some models have misspecification problems and that these problems affect the estimation of welfare measures

admission tuition and financial aid policies in the market for higher education we present an equilibrium model of the market for higher education our model simultaneously predicts student selection into institutions of higher education financial aid educational expenditures and educational outcomes we show that the model gives rise to a strict hierarchy of colleges that differ by the educational quality provided to the students we also develop a new estimation procedure that exploits the observed variation in prices within colleges identification is based on variation in endowments and technology it does not rely on observed variation in potentially endogenous characteristics of colleges such as peer quality measures and expenditures we estimate the structural parameters using data collected by the national center for education statistics and aggregate data from peterson s and the national science foundation

groups collective decisions and markets abstract we consider a general equilibrium model where multi member households make efficient collective consumption decisions and operate in a competitive market environment individuals have the option to leave the household and make it on their own or join another household we study the effect of these outside options on household formation household stability and equilibrium existence

dynamics and stability of constitutions coalitions and clubs a central feature of dynamic collective decision making is that the rules that govern the procedures for future decision making and the distribution of political power across players are determined by current decisions for example current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations we develop a general framework for the analysis of this class of dynamic problems under relatively natural acyclicity assumptions we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness we show how this framework can be applied in political economy coalition formation and the analysis of the dynamics of clubs the explicit characterization we provide highlights two intuitive features of dynamic collective decision making 1 a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society 2 efficiency enhancing changes are often resisted because of further social changes that they will engender

valuing public goods discrete versus continuous contingent valuation responses independent applications of open ended and dichotomous choice formats are compared using tests of means estimating joint likelihood functions and nonparametric tests of distributions the null hypothesis of no difference in the open ended and dichotomous choice estimates of central tendency cannot be rejected for two out of three data sets while estimated standard deviations are significantly different for all three data sets in addition actual dichotomous choice means and standard deviations exceed those from comparable synthetic dichotomous choice data sets suggesting either open ended questions underestimate values or dichotomous choice bid structures may lead to systematic overestimates

financial deregulation and consumption in the united kingdom the last decade has seen widespread deregulation of domestic financial markets in the united kingdom this paper uses regional data to investigate the connection between consumption and financial deregulation it is concluded that deregulation has led to a significant increase in the forward looking nature of aggregate consumption copyright 1993 by mit press

comparing continuous and discrete contingent valuation questions this paper explores two commonly used methods to elicit an individual s willingness to pay wtp for a public good in contingent valuation studies currently the most preferred method is the take it or leave valuation question or discrete valuation question dvq where the respondent accepts or rejects a suggested cost for the good the traditional method the continuous valuation question cvq simply asks an individual to state his wtp for the suggested change in the provision of a public good like cleaner air we introduce a simple way to compare the results from these two methods we also test the anchoring behavior suggested in the psychological literature on choice under uncertainty the results do not support the anchoring hypothesis but suggest the hypothesis that people perceive the two tested valuation questions differently

intra day and inter market volatility in foreign exchange rates four foreign exchange spot rate series recorded on an hourly basis for a six month period in 1986 are examined a seasonal garch model is developed to describe the time dependent volatility apparent in the percentage nominal return of each currency hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets robust lm tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets

temporary and permanent changes in consumption growth this paper examines whether demographic variables and other household characteristics are more likely to affect the intercept of the euler equation or the intertemporal elasticity of substitution ise of the household analysis of british data suggests that demographics affect the growth rate of consumption in a purely transitory way while the educational level and the employment status of the wife appear to have a significant effect on the ise the effect of the employment status of the head is more uncertain after taking these differences into account the hypothesis of no excess sensitivity cannot be rejected for households with two earners

occupational choice incentives and wealth distribution abstract we consider a model of occupational choice in large economies where individuals differ in their wealth endowment individuals can remain self employed or engage in productive matches with another individual i e form firms matches are subject to a moral hazard problem with limited liability the division of the gains from such matches is determined by competitive forces when the incentive problem is asymmetric matches are typically wealth heterogeneous with richer individuals choosing the occupation for which incentives are more important the utilities attained within a match depend on the wealth distribution and changes in the latter give rise to trickle down effects