rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

nash implementation a complete characterization the authors extend e maskin s results on nash implementation first they establish a condition that is both necessary and sufficient for nash implementability if there are three or more agents the case covered by maskin s sufficiency result second and more important they examine the two agent case for which there existed no general sufficiency results the two agent model is the leading case for applications to contracting and bargaining for this case too they establish a condition that is both necessary and sufficient the authors use their theorems to derive simpler sufficiency conditions that are applicable in a wide variety of economic environments copyright 1990 by the econometric society

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

introducing household production in collective models of labor supply in a recent paper chiappori 1992 i proposed a model of labor supply based on a collective representation of household behavior in this framework each household member is characterized by his or her own utility function and decisions are only assumed to result in pareto efficient outcomes i showed that these simple assumptions were sufficient to i generate testable restrictions on labor supply functions and ii recover individual preferences and the outcome of the decision process from observed behavior for the sake of simplicity the results were derived in the simplest possible case namely a static labor supply model with private consumptions such a framework was appropriate only for the purpose of the paper that is a preliminary exploration of the properties of collective models of labor supply the next step is to evaluate the robustness of the results to various extensions of the basic model this opens a general research program and generates a wide range of particular problems that it is hoped will be considered in the future among the most serious shortcomings of the 1992 model is the absence of household production as in most labor supply models agents were assumed to divide their time between market activities and leisure as apps and rees 1997 in this issue very rightly point out in their comment the absence of domestic production is far from innocuous as soon as welfare issues are considered for instance a low level of market labor supply will automatically be interpreted as a large consumption of leisure whereas it may in fact reflect the specialization of one of the members in domestic

delayed career entry industrial pension structure and early retirement in a cohort of unmarried women the effects of early family and work patterns and industrial pension structures on the timing of retirement among unmarried women are examined within a life course perspective the retirement process is viewed in a longitudinal framework with similar combinations of factors influencing successive stages of final withdrawal from work logistic regression techniques are applied to data from a panel of unmarried women workers of retirement age to predict early versus late retirement over a five year period having children and delayed career entry along with late life family pension and health status affect retirement schedules

retirement in dual career families a structural model a structural econometric model of retirement of dual career couples is specified and estimated with panel data from the national longitudinal survey of mature women a coincidence of spouses retiring together despite the younger ages of wives suggests explicit efforts at coordination the estimates suggest that one reason is a correlation of tastes for leisure more important each spouse and perhaps husbands in particular values retirement more once their spouse has retired the opportunity set accounts for peaks in the retirement hazards of each spouse individually but not for peaks in the simultaneous retirement of both spouses

investment in competitive electricity scope for incentive contracts abstract there is considerable interest in investment in electric power but few projects have actually taken off the situation with investor owned plant is that recovery of the total costs of a new power station via tariffs in the usual way is not automatic the difficulty most often is that the investor and the host system or government need to negotiate on issues such as long term energy pricing the rate of return risk sharing and long term guarantees this paper argues that incentive contracts incorporating risk sharing parameters whose values are set to account for perceptions of risk magnitude and the degree of willingness to take risk are a promising approach to the problem the scope of incentive power contracts the spatial relationship between return and parameters and the methods of deciding parameter values are discussed

budget balancing incentive mechanisms abstract a p xepapadeas j environ econom management20 113 26 1991 developed a pollution abatement incentive mechanism that both reduces the information requirements of a regulator and is budget balancing drawing only on the social gains from pollution abatement to encourage firm compliance this paper demonstrates that contrary to xepapadeas the budget balancing system of random penalties cannot be used to induce compliance with the regulator s objectives if firms are risk neutral however the mechanism can be successfully applied if firms are sufficiently risk averse e rasmusen rand j econom 18 428 435 1987

retirement effects on health in europe what are the health impacts of retirement as talk of raising retirement ages in pensions and social security schemes continues around the world it is important to know both the costs and benefits for the individual as well as the governments budgets in this paper we use the survey of health ageing and retirement in europe share dataset to address this question in a multi country setting we use country specific early and full retirement ages as instruments for retirement behavior these statutory retirement ages clearly induce retirement but are not related to an individual s health exploiting the discontinuities in retirement behavior across countries we find significant evidence that retirement has a health preserving effect on overall general health our estimates indicate that retirement leads to a 35 percent decrease in the probability of reporting to be in fair bad or very bad health and an almost one standard deviation improvement in the health index while the self reported health seems to be a temporary impact the health index indicates there are long lasting health differences

balanced bayesian mechanisms in the transferable utility case a number of authors have identified conditions on beliefs that guarantee the existence of bayesian incentive compatible mechanisms with balanced transfers we present a new easy to interpret condition and we show that it is strictly more general than all the other conditions found in the literature we also study conditions guaranteeing the bayesian implementability of all social decision rules with balanced budget mechanisms

on the informational superiority of quantities over prices in the presence of an externality in this study we investigate the convexity of the profit function of a regulated firm with respect to the random shocks in the marginal costs and the demand intercept and its implications regarding information disclosure when these shocks are revealed to the firm at a future stage we illustrate that information disclosure is attained when the firm is regulated through the use of a quantity rather than a price instrument to do so we argue that increased convexity obtained under complete information is a sufficient condition as a policy implication we suggest a new argument which favors the use of quantities over prices these implications are more pronounced once we allow for multiple firms

labor force dynamics of older married couples this article analyzes the dynamics of joint labor force behavior of older couples in the united states using the retirement history survey rhs i analyze the determinants of joint retirement and the effect of one spouse s labor force status on the labor force transitions of the other spouse the results reveal strong associations between the labor force transition probabilities of one spouse and the labor force status of the other spouse these result from structural differences in exit and entry behavior by the spouse s status several lagged endogenous variables have substantial effects on behavior even after controlling for unobserved heterogeneity

public pension programmes and the retirement of married couples in denmark in this paper we study the economic determinants of the joint retirement process of married couples we propose a tractable dynamic discrete choice model for retirement decisions which allows for non trivial saving behaviour we estimate the model on a 1 sample of danish couples of potential retirement age drawn from a population based administrative register the introduction and subsequent reforms of a publicly financed early retirement programme provide us with variation in the data to insure identification of the parameters of interest the elasticities of participation retirement with respect to income flows our estimates imply a significant asymmetry in the sensitivity of retirement behaviour of men and women with respect to variation in their own or their spouse s income flows

markets for electricity in europe competition in the electricity industry requires properly functioning wholesale markets this paper discusses the better established electricity markets of europe in the nordic countries england and wales and spain the different market designs can all produce efficient outcomes if not hindered by market power long term contracts provide some defence against market power and give price stability to promote investment competition in electricity retailing may discourage retailers from signing long term contracts in future

menus of price quantity contracts for inducing the truth in environmental regulation abstract many authors have proposed mechanisms to induce regulated polluting firms to truthfully reveal their private information this paper proposes an alternative scheme in which the regulator offers each firm a menu of linear price quantity contracts faced with this menu each firm s dominant strategy is to truthfully report its private information and self select the contract that is ex post efficient the proposed menu schedule that is more elastic than the firm s residual marginal damage function engenders a positive quantity effect thereby counterbalancing the firm s incentive to misreport prompted by the linearity of price due to its built in price quantity structure the scheme performs as designed regardless of the elasticities of marginal damage and demand functions

exclusionary vertical contracts and product market competition this article considers whether a monopolist is able to deter more efficient entrants through contracting with buyers in the antitrust literature the chicago school s stand is that such contracts cannot be anticompetitive hence vertical contracts should be accorded per se legal status in a four stage game with the following features 1 the incumbent enjoys a first mover advantage 2 the entrant must incur some sunk cost to enter the market and 3 entry is uncertain the author shows that vertical contracts can be anticompetitive if there exists product market competition thus the author advocates caution in treating all contracts as per se legal a three factor repeated measures experiment tested the effect of leadership style charismatic structuring and considerate on performance improvement on a manufacturing task over four trials findings from a repeated measures multivariate analysis of variance indicated that individual exposed to considerate leadership had superior initial performance but that this difference faded over time further analysis indicated that self efficacy fully mediated the relationship between leadership style and performance copyright 1999 by university of chicago press

vertical foreclosure with the choice of input specifications we develop an equilibrium model of vertical foreclosure with the choice of input specifications vertical foreclosure occurs as the upstream division of the integrated firm makes a specialized input for its sister downstream division while it would as an independent firm provide a generalized input the changes in incentives with vertical integration can be explained by the externalities the choice of a specialized input entails vertical integration allows the upstream firm to internalize the benefit of raising the rival firm s costs at the downstream level we derive conditions for equilibrium vertical foreclosure to occur and discuss its welfare consequences

an equilibrium selection theory of monopolization we develop a duopoly model in which firms compete for the market e g investing in process innovation or product development as well as in the market e g setting quantities or prices competition for the market generates multiple equilibria that differ in the firms investment levels relative size and profitability we show that monopolization that affects competition in the market can act as an equilibrium selection device in competition for the market in particular it eliminates equilibria that are undesirable for the monopolizing firm while not generating new equilibria this result complicates the task of determining whether a firm s dominance in a given market is the result of fair competition or unlawful monopolization we discuss a number of implications for antitrust policy and litigation and illustrate these by means of two well known antitrust cases

exclusive dealing investment promotion may facilitate inefficient foreclosure this paper studies a model whereby exclusive dealing ed can both promote investment and foreclose a more efficient supplier since ed promotes the incumbent seller s investment the seller and the buyer realize a greater surplus from bilateral trade under exclusivity hence the parties involved may sign an ed contract that excludes a more efficient entrant in circumstances where ed would not arise absent investment the paper therefore invites a more cautious attitude towards accepting possible investment promotion arguments as a defense for ed

health insurance and retirement of married couples summary most health insurance in the usa is provided by employers until eligibility for public health insurance medicare begins at age 65 retiring before 65 exposes workers who lack retiree health insurance coverage to the risk of catastrophic medical expenditure we solve and estimate a dynamic model of the employment behavior of older married couples that includes risky medical expenditure and health insurance parameter estimates imply that the risk reducing feature of health insurance can account for about half of the observed association between retiree health insurance and employment for married men but can account for only one tenth of the much larger observed association for married women policy simulations imply very small effects on employment of changing the age of eligibility for medicare from 65 to 67 copyright 2006 john wiley sons ltd

the saving behaviour of a two person household the facts that wives are typically younger than their husbands and that women typically live longer than men imply that wives may have more incentive to save for old age than do husbands a theoretical model of the determination of household saving and portfolio choice is introduced which takes into account differences in preferences for saving the most important result is that the level and the composition portfolio of saving and the time path of consumption are dependent on the distribution of income within the household women typically live longer than men and wives are typically younger than their husbands these two facts imply that preferences about saving for old age in married households with forward looking members may differ between husband and wife this paper presents a theoretical analysis of saving and portfolio behaviour if the members of the household have differ ent preferences over future consumption as compared to current consump tion the analysis stands in contrast to unitary models of household intertemporal allocation which assume that the household has a single utility function thus this paper is a contribution in a novel context to the burgeoning literature on intra household decision making the base case analysis is for a simple two person husband and wife1 two period model in which there is only one asset saving it is assumed that because of the two facts given at the start of the introductory paragraph the husband discounts the future more than the wife in section ii the implications of a non cooperative decision making process for the base case are derived see ulph 1988 for a non cooperative model of demand and

a simple auction mechanism for the optimal allocation of the commons efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators e g cost of pollution abatement this paper proposes a simple mechanism that implements the first best for any number of firms a uniform price sealed bid auction of an endogenous number of transferable licenses with a fraction of the auction revenues given back to firms paybacks which rapidly decrease with the number of firms are such that truth telling is a dominant strategy regardless of whether firms behave non cooperatively or collusively the mechanism also provides firms with incentives to invest in socially optimal r d jel d44 d62 d82 q28 regulatory authorities generally find that part of the information they need for implementing an efficient regulation is in the hands of those who are to be regulated regulating externalities such as access to common resources e g clean air water streams fisheries etc is a good example environmental regulators for example know little about firms pollution abatement costs so without communicating with firms they would be unable to establish the efficient level of pollution a number of mechanisms have been proposed for inducing firms to reveal their private information but for different reasons

the role of health insurance in joint retirement among married couples because the near elderly have high expected medical expenditures availability of health insurance is an important factor in their retirement decisions using health and retirement study data colle

full implementation and belief restrictions we introduce a framework to study the problem of full implementation under general restrictions on agents beliefs which we call implementation first we provide a characterization of the properties of the mechanisms that achieve implementation these conditions relate the possibility of achieving full implementation to the strength of the strategic externalities induced by the mechanism we then study how to achieve full implementation via the design of simple transfer schemes in these context the general conditions for implementation suggest a simple design principle in which belief restrictions are used to weaken the strategic externalities induced by the baseline transfers of the belief free benchmark importantly our results require minimal information on agents beliefs which regard simple moments of the distribution of types these moment conditions arise naturally in applications and in practical problems of mechanism design

the externalities problem of transboundary and persistent pollution abstract this paper deals with implementing the efficient allocation of transboundary and persistent pollution in particular we adapt varian s compensation mechanism varian a solution to the problem of externalities when agents are well informed amer econ rev 85 1994 1278 1293 to cover situations in which pollutants extend to neighboring regions and their effects persist over time the main contribution of this paper is the design of a mechanism that implements in subgame perfect equilibrium the efficient pollution levels in this context

a solution to the problem of externalities when agents are well informed the author describes a class of simple two stage mechanisms that implement efficient allocations as subgame perfect equilibria for economic environments involving externalities these mechanisms known as compensation mechanisms solve a wide variety of externalities problems including implementation of lindahl allocations regulation of monopoly and efficient solutions to the prisoner s dilemma copyright 1994 by american economic association

exclusive quality exclusive quality in the case of vertically differentiated products bertrand competition at the retail level does not prevent an incumbent upstream firm from using exclusivity contracts to deter the entry of a high quality rival indeed because of differentiation the incumbent s inferior product is not eliminated upon entry due to the resulting competitive pressure a retailer who considers rejecting the exclusivity contract expects to earn much less than the incumbent s monopoly rents thus in equilibrium the incumbent can always offer high enough an upfront payment to induce all retailers to sign the contract and achieve exclusion this is true under linear pricing for intermediate levels of entry costs and with two part tariffs even in the absence of entry costs copyright 2010 the author the journal of industrial economics 2010 blackwell publishing ltd and the editorial board of the journal of industrial economics

incentives to invest in liberalised electricity industries in the north and south differences in the need for suitable institutional arrangements the issue of investment is all too often underplayed in deregulation reforms focused on market rules and de integration measures this presentation criticises first the optimistic approach of the theory of investment incentives through market signals when it is applied to deregulated electricity industries the greater part of the investment in base load and peak equipment should be made profitable by income from very high prices during peak and extreme peak periods that raises a problem of political acceptability the problem is then addressed in the context of the mature electricity industries in the north given the maturity of markets there a number of modifications to the pure market model could be envisaged to strengthen incentives to invest but none of them is perfect the main way is to focus on adaptation of market rules on the supply of power at peaks and extreme peaks by considering capacity adequacy as a public good with three solutions capacity payment reserve obligations centralised procurement by auctioning for peak capacity observation of reforms suggests also the validity of some other solutions based on a limitation of the competition by allowing long term contracts and vertical integration between production and supply finally the question is extended to the specific problem of developing countries characterised by irregular growth it is argued that reforms must be designed in view of the importance of the need for investment through long term coordination and reduction of investment risks indeed experiences of latin american liberalised industries show that they have to include a number of competition based imperfections and to allow ongoing exercise of market power in order to allow prices to rise above competition prices the single buyer model or some variants of it appear to be good alternatives if one wishes to avoid the twists and turns of the competition paradigm the difficulty with this model arises from the institutional conditions necessary to make it efficient and not overcostly c 2005 elsevier ltd all rights reserved

verifiable and non verifiable anonymous mechanisms for regulating a polluting monopolist abstract optimal regulation of a polluting natural monopolist must correct for both external damages and market power to achieve a social optimum existing non bayesian regulatory methods require knowledge of the demand function while bayesian schemes require knowledge of the underlying cost distribution we introduce mechanisms adapted to use less information our p rice based s ubsidy ps mechanisms give the firm a transfer that matches or approximates the incremental surplus generated each period the regulator need not observe the abatement activity or know the demand cost or damage functions of the firm all of the mechanisms induce the firm to price at marginal social cost either immediately or asymptotically

naked exclusion an experimental study of contracts with externalities this paper reports the results of an experiment designed to assess the ability of an incumbent seller to profitably foreclose a market with exclusive contracts we use the strategic environment described by rasmusen ramseyer and wiley 1991 and segal and whinston 2000 where entry is unprofitable when sufficiently many downstream buyers sign exclusive contracts with the incumbent when discrimination is impossible the game resembles a stag hunt coordination game in which the buyers payoffs are endogenously chosen by the incumbent seller exclusion occurs when the buyers fail to coordinate on their preferred equilibrium two way non binding pre play communication among the buyers lowers the power of exclusive contracts and induces more generous contract terms from the seller when discrimination and communication are possible the exclusion rate rises divide and conquer strategies are observed more frequently when buyers can communicate with each other exclusion rates are significantly higher when the buyers payoffs are endogenously chosen rather than exogenously given finally secret offers are shown to decrease the incumbent s power to profitably exclude

reforms in the french power system from weak contestability to effective competition abstract one way to introduce competition in the power industries is to preserve the integration of the incumbent companies and to organise the access of potential competitors to the network on a fair basis but the combination of hierarchy and bilateral contracts between entrants ipp candidates foreign producers intermediaries suppliers and consumers appears to be unstable because of permanent tensions between the incumbent s dominant position and fair competition moreover in an institutional environment enlarged by the supranational powers of the european union heterogeneity of rules and structures between quasi integrated power industries and decentralised competitive ones are sources of permanent questioning the paper analyses the stability of the recent reform of the french power industry the extreme integration of which being deeply rooted in the french institutional peculiarities has been weakly affected by the directive 96 92 transcription two institutional scenarios are defined which give a different weight to two competition paradigms in conflicts one pertains to the industrial policy which inclines to preserve hierarchy in the national area to gain national champion s competitive advantages in the european as in the global field and the other to the neo classical paradigm of effective competition in the first scenario the integration of the industrial organisation is preserved but with transparent grid access rules supposed to create an actual market contestability and the playing field is the continental europe on which national champions compete in the second one the french industrial organisation has to conform to the competitive model with vertical and horizontal disintegration and creation of a power exchange market for promoting competition but this scenario is heavily strained by the institutional determinism of the nuclear legacy the future reality should be set between these two scenarios

implementing the efficient allocation of a persistent pollutant in the presence of threshold effects abstract the regulation of a persistent pollutant through a sequence of compensation mechanisms varian h 1994 a solution to the problem of externalities when agents are well informed american economic review 85 1278 1293 involves the unexpected conclusion that it may be optimal to establish lower taxes in response to an increase in the magnitude of a possible catastrophe

exclusive contracts and market dominance we propose a new theory of exclusive dealing the theory is based on the assumption that a dominant firm has a competitive advantage over its rivals and that the buyers willingness to pay for the product is private information in this setting the dominant firm can impose contractual restrictions on buyers without necessarily compensating them implying that exclusive dealing contracts can be both profitable and anticompetitive we discuss the general implications of the theory for competition policy and illustrate by examples its applicability to antitrust cases jel d21 d43 d82 d86 k21 l13 l40

implementing optimal taxes using tradable share permits abstract this paper presents a simple system for efficient regulation under asymmetric information each firm s income is controlled by a tax that depends on the firm s own output and on a parameter construed as a share permit these shares of total expected output lower a firm s tax burden and are acquired in a competitive market by employing this scheme the planner only requires knowledge of marginal damage to induce the first best outcome relative to a traditional cap and trade approach the system increases expected social welfare

correlated information and mechanism design in models of asymmetric information possession of private information leads to rents for the possessors this induces mechanism designers to distort away from efficiency the authors show that this is an artifact of the presumption that information is independently distributed rent extraction in a large class of mechanism design games is analyzed and a necessary and sufficient condition for arbitrarily small rents to private information is provided additionally the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition similar conditions allow full rent extraction in milgrom weber auctions

economic determinants of workers retirement decisions the landscape for older workers has changed dramatically in recent decades governments have made cuts to public pension programs private pensions have shifted from defined benefit to defined contribution plans equity and housing markets have been unusually volatile and workers have experienced declining morbidity and mortality at the same time the labor force participation rate for older men and women has been rising over the past two decades implying later retirement are these phenomena related this paper reviews the large and growing body of literature exploring the economic determinants of workers retirement decisions including public and private pensions wealth and savings health and health insurance and labor demand

the transaction costs driving captive power generation evidence from india the 2003 indian electricity act incentivizes captive power production through open access in an attempt to harness all sources of generation yet we observe that only some firms self generate while others do not in this paper we give a transaction cost explanation for such divergent behavior using a primary survey of 107 firms from india we construct a distinct variable to measure the transaction specificity of electricity use the make or buy decision is then econometrically tested using probit model results are highly responsive to transaction specificity and the likelihood of captive power generation is positively related to it at the industrial level this explains why food and chemical firms are more likely to make their own electricity since the burden of poor grid supply is highest on smaller sized and high transaction specific firms the grid access policies need to account for firm level characteristics if government wants to incentivize captive power generation

spending time and money within the household we consider both theoretically and empirically the allocation of time and money within the household the research question is whether a married person who enjoys more leisure than their partner also receives more consumption which seems to indicate the outcome of power within the household or receives less consumption which seems to indicate differing intrahousehold preferences we develop a simple parametric structural model with household production that is tested on survey data we find that relative wages have an impact on power for leisure this effect is dominated by a conventional wage effect in which the partner who has the higher wage takes less leisure

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

collective labor supply and welfare the paper develops a general collective model of household labor supply in which agents are characterized by their own possibly altruistic preferences and household decisions are only assumed to be pareto efficient an alternative interpretation is that there are two stages in the internal decision process agents first share nonlabor income according to some given sharing rule then each one optimally chooses his or her own labor supply and consumption this setting is shown to generate testable restrictions on labor supplies moreover the observation of labor supply behavior is sufficient for recovering individual preferences and the sharing rule up to a constant finally the traditional tools of welfare analysis can be adapted to the new setting

environmental policy under imperfect information incentives and moral hazard abstract when net emissions of individual polluters cannot be efficiently monitored then emissions charges controls on emissions levels or subsidies for emissions reduction are not effective as environmental policy instruments this paper proposes instruments that can be applied in such limited information situations these instruments take the form of contracts between a pollution control agency and individual polluters the contracts include a combination of fines and subsidies that induces dischargers to follow optimal environmental policies in the absence of individual monitoring

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

exclusive dealing as a barrier to entry evidence from automobiles exclusive dealing contracts between manufacturers and retailers force new entrants to set up their own costly dealer networks to enter the market we ask whether such contracts may act as an entry barrier and provide an empirical analysis of the european car market we first estimate a demand model with product and spatial differentiation and quantify consumers valuations for dealer proximity and dealer exclusivity we then perform policy counterfactuals to assess the profit incentives and possible entry deterring effects of exclusive dealing we find that there are no unilateral incentives to maintain exclusive dealing but there is a collective incentive for the industry as a whole furthermore a ban on exclusive dealing would raise the smaller entrants market share but more importantly consumers would gain not so much because of increased price competition but rather because of the increased spatial availability which compensates for the demand inefficiency from a loss of dealer exclusivity

dynamic regulation design without payments the importance of timing abstract we consider a two period model of optimal regulation of a firm subject to marginal compliance cost shocks the regulator faces an asymmetric information problem the firm knows current compliance costs but the regulator does not both the regulator and the firm are uncertain about future costs in our basic framework the regulator may not offer payments to the firm we show that the regulator can vary the strength of regulation over time to induce the firm to reveal its costs and increase welfare in the optimal mechanism the regulator offers stronger weaker regulation in the first period and weaker stronger regulation in the second period if the firm reports low high compliance costs in the first period low cost firms expect compliance costs to rise in the future and thus prefer weaker regulation in the second period high cost firms expect costs to fall in the future and thus prefer regulation which becomes stricter over time thus the regulator offers the low high cost firms slightly weaker stronger regulation in the second period in exchange for much stronger weaker regulation in the first period thereby timing the regulation if the regulator can make payments then the optimal mechanism to some degree times the regulation as long as a positive marginal cost of funds exists if the marginal cost of funds is high enough then under the optimal mechanism the regulator will not use payments and use our timing mechanism exclusively

an energy pricing scheme for the diffusion of decentralized renewable technology investment in developing countries the purpose of this paper is to investigate price support for market penetration of renewable energy in developing nations through a decentralized supply process we integrate the new decentralized energy support renewable premium tariff to analyze impacts of tariff incentives on the diffusion of renewable technology in senegal based on photovoltaic and wind technologies and an assessment of renewable energy resources in senegal an optimization technique is combined with a cash flow analysis to investigate investment decisions in renewable energy sector our findings indicate that this support mechanism could strengthen the sustainable deployment of renewable energy in remote areas of senegal although different payoffs emerged profits associated with a renewable premium tariff are the highest among the set of existing payoffs moreover in analyzing impacts of price incentives on social welfare we show that price tariffing schemes must be strategically scrutinized in order to minimize welfare loss associated with price incentives finally we argue that a sustainable promotion of incentive mechanisms supporting deployment of renewable technology in developing nations should be carried out under reliable institutional structures the additional advantage of the proposed methodology is its ability to integrate different stakeholders producers investors and consumers in the planning process

economic determinants of workers retirement decisions economic determinants of workers retirement decisions the landscape for older workers has changed dramatically in recent decades governments have made cuts to public pension programs private pensions have shifted from defined benefit to defined contribution plans equity and housing markets have been unusually volatile and workers have experienced declining morbidity and mortality at the same time the labor force participation rate for older men and women has been rising over the past two decades implying later retirement are these phenomena related this paper reviews the large and growing body of literature exploring the economic determinants of workers retirement decisions including public and private pensions wealth and savings health and health insurance and labor demand

time inconsistency and delayed retirement decision the french pension bonus with the increase in life expectancy and demographic shocks several public policies in the last decades aim to encourage individuals to postpone retirement one of them the pension bonus gives a

distance to retirement and older workers employment the case for delaying the retirement age this paper presents empirical evidence and a theoretical foundation in favor of the view that the retirement age decision affects older workers employment prior to retirement to the extent that there are search frictions on the labor market the return on jobs is determined by their expected duration the time to retirement is then key to understanding older workers employment countries with a retirement age of 60 are indeed characterized by lower employment rates for workers aged 55 59 based on the french labor force survey we show that the likelihood of employment is significantly affected by the distance to retirement in addition to age and other relevant variables we then extend mccall s job search model by explicitly integrating life cycle features with the retirement decision using simulations we show that the distance effect in interaction with the generosity of unemployment benefits and the depressed demand for older workers explains the low rate of employment just before the eligibility age for the social security pension finally we show that implementing actuarially fair schemes not only extends the retirement age but also encourages a more intensive job search by older unemployed workers jel j22 j26 h55

market power and transferable property rights the appeal of using markets as a means of allocating scarce resources stems in large part from the assumption that a market will approximate the competitive ideal when competition is not a foregone conclusion the question naturally arises as to how a firm might manipulate the market to its own advantage this paper analyzes the issue of market power in the context of markets for transferable property rights first a model is developed that explains how a single firm with market power might exercise its influence this is followed by an examination of the model in the context of a particular policy problem the control of particulate sulfates in the los angeles region

should i stay or should i go an econometric analysis of retirement decisions by couples abstractthis article analyses retirement decisions from a household perspective treating the retirement timing of spouses as potentially interdependent choices to identify the determinants of ret

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

implementing the efficient allocation of pollution we provide simple mechanisms to implement the efficient allocation of pollution first assuming complete information across firms and then allowing for incomplete information both mechanisms operate by inducing firms to monitor one another using firms reports to determine pollution allotments and transfers the complete information mechanism determines a firm s transfer according to a linear pollution price set by other firms both mechanisms can be modified to be budget balanced in and out of equilibrium the complete information mechanism implements the efficient allocation even when firms are allowed to use mixed strategies under a single crossing condition the same holds for the incomplete information mechanism this abstract was borrowed from another version of this item

nash implementation of a proportional solution to international pollution control problems abstract for a very general class of pollution control models involving strictly quasi concave utility functions over consumption and environmental quality and strictly convex emission abatement cost functions a proportional cost sharing mechanism is presented inspired by the ratio equilibrium introduced by 7 it is shown that the proportional solution yields a cost efficient allocation of abatement efforts and that the resulting utility imputation always lies in the stand alone core of the cost sharing game in order to decentralize the proportional cost sharing equilibrium a financial compensation mechanism implementing the proportional solution in complete information nash equilibrium is presented

concentration in the european electricity industry the internal market as solution abstract this article offers an analysis of the present competitive and regulatory framework of the european electricity sector and the results achieved with the liberalisation process considering the reactions of incumbents to the liberalisation the focus in this work is mainly on the problem of market concentration in the sector the new trends toward the creation of national champions as well as recent mergers between gas suppliers and electricity producers raise serious concerns about abuses of market power and risk of future collusion in particular the strategic linkage of existing markets and the expansion into new ones are analyzed in the light of the multimarket contact theory considering investment in interconnection among member states the internal market issue is investigated as a solution to the risks coming from liberalisation

a complete implementation of the efficient allocation of pollution abstract this paper presents a simple twofold mechanism that attains a complete implementation of the efficient allocation of pollution the first component is adopted from duggan and roberts duggan j roberts j 2002 implementing the efficient allocation of pollution american economic review 92 1070 1078 the second new component takes care of the moral hazard problem

two questions about european unemployment a general equilibrium search model makes layoff costs affect the aggregate unemployment rate in ways that depend on equilibrium proportions of frictional and structural unemployment that in turn depend on the generosity of government unemployment benefits and skill losses among newly displaced workers the model explains how before the 1970s lower flows into unemployment gave europe lower unemployment rates than the united states and also how after 1980 higher durations have kept unemployment rates in europe persistently higher than in the united states these outcomes arise from the way europe s higher firing costs and more generous unemployment compensation make its unemployment rate respond to bigger skill losses among newly displaced workers those bigger skill losses also explain why u s workers have experienced more earnings volatility since 1980 and why especially among older workers hazard rates of gaining employment in europe now fall sharply with increases in the duration of unemployment

upgrades switching costs and the leverage theory of tying this article investigates the role of product upgrades and consumer switching costs in the tying of complementary products previous analyses have found that a monopolist of one product will not increase its profits and reduce social welfare by tying and leveraging its monopoly position into a complementary market if the initial monopolised product is essential where essential means that all uses of the complementary good require the initial monopolised product we show that this is not true in settings characterised by product upgrades and consumer switching costs we also discuss various extensions including the role of the reversibility of tying

using markets to allocate pollution permits and other scarce resource rights under limited information abstract we consider the design of government policy to ration such scarce resources as water or pollution permits in the presence of limited information when government policy is formulated some informed agents e g established public utilities know how highly they value the resource other uninformed agents e g potential independent power producers only learn their valuations at some later date the government allows uninformed agents to trade the resource rights they receive on a competitive market informed agents may or may not have the same privilege the optimal initial distribution of resource rights differs significantly according to whether informed agents can trade the rights they receive

full extraction of the surplus in bayesian and dominant strategy auctions we consider auctions for a single indivisible object in the case where the bidders have information about each other which is not available to the seller we show that the seller can use this information to his own benefit and we completely characterize the environ ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder s willingness to pay we provide this characterization for auctions in which the bidders have dominant strate gies and for those where the relevant equilibrium concept is bayesian nash in both set ups the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties we consider the situation in which an agent the seller possesses one indivisible unit of a good to which he attaches no value but the good has value to a number of potential buyers and its transfer to one of them would increase social welfare in particular the transfer to the buyer with the highest valuation maximizes social welfare in this paper we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay if the seller had full information about the reservation prices of potential buyers his optimal selling strategy would be very simple he would announce a price equal or very close to the highest reservation value the optimal strategy for the bidder with the highest evaluation would be to accept the offer note that we are treating a situation in which the seller can commit himself to a price as a result of the exchange the utility of the seller increases by the full amount of the increase in social welfare and he has been able to fully extract the surplus in many circumstances however a seller has only imperfect knowledge of the buyers willingnesses to pay in this case he must find some mechanism or auction which will enable him to maximize his benefit from the sale of the object the auction literature starts with this observation and shows how the seller can by an astute choice of auction extract the largest possible fraction of the surplus in general the literature has shown that this proportion is strictly less than one in some circumstances the bidders will have information about each other which is not available to the seller for instance in auctions for petroleum drilling rights bidders know the results of geological tests which they have

regulation via the polluter pays principle we consider the problem of regulating an economy with environmental pollution we examine the distributional impact of the polluter pays pp principle which requires that any agent compensates all other agents for the damages caused by his or her pollution emissions with constant marginal damages we show that regulation via the pp principle leads to the unique welfare distribution that induces non negative individual welfare change and renders each agent responsible for his or her pollution impact we extend both the pp principle and this result to increasing marginal damages due to pollution we also compare the pp principle with the vickrey clark groves scheme

the timing of mergers along the production chain capital structure and risk dynamics abstract i demonstrate that the timing of vertical mergers is generally dependent on industry characteristics my predictions are consistent with empirically observed patterns of vertical mergers i show that merger activity during economic upturns tends to be motivated by operating efficiencies while merger activity during economic downturns tends to occur as a means of keeping production chain operational mergers allow firms to capture synergies and improve efficiencies in order to survive economic contractions the pricing framework implies that a vertical merger decision usually reduces risk during two different economic states

buyer power and intrabrand coordination we analyze the competitive effects of vertical contracts in a contracting situation where rival retailers offer contracts to a manufacturer in contrast to bernheim and whinston 1998 who study the situation in which competing manufacturers offer contracts to a common retailer we find that two part tariffs even if contingent on exclusivity or not do not suffice to implement the monopolyoutcome richer arrangements including e g conditional fixed fees and upfront payments are thus required to internalize all contracting externalities the welfare implications are ambiguous on the one hand richer contracts ensure that no efficient retailer is excluded on the other hand they allow firms to maintain monopoly prices despite intrabrand competition simulations suggest that the latter effect may be more significant

strategic ex ante contracts rent extraction and opportunity costs this article cosiders the possibility that a seller can contract with one uninformed buyer prior to an auction involving two potential buyers the seller s optimal strategic ex ante contract more accurately reflects joint opportunity costs of the seller and the contracted buyer and therefore extracts more rent from the entrant moreover this ex ante contract mitigates the seller s ex post rent seeking vis a vis the contracted buyer accordingly it may create more social welfare than the absence of ex ante contracts depending upon the contracted buyer s financial constraint and the distributions of trade surplus implementation of the optimal strategic ex ante contract and policy implications are discussed

marginal tax rates and tax favoured pension savings of the self employed evidence from sweden in recent years the study of how individuals respond to policies that aim at promoting pension savings has emerged as a vital area of economic research this paper adds to this body of literature by estimating the tax price elasticity of contributions to tax favoured pension savings accounts on a population of self employed individuals i exploit a unique total database over the swedish population that covers the years 19992005 using instrumental variables i obtain a tax price elasticity estimate of 0 51 and an income elasticity estimate of 0 13 whereas ordinary least squares ols produces estimates that conflict with consumer theory

environmental policy under imperfect information comment abstract in a recent article in this journal xepapadeas presented a budget balancing mechanism to implement a policy leading to optimal emissions when only aggregate emissions are observable however as this comment shows the proposed mechanism leads to multiple nash equilibria and is not even incentive compatible