monetary policy coordination under fixed and floating exchange rates this paper studies monetary policy coordination in a familiar fixed price perfect capital mobility multicountry model it is shown that under fixed exchange rates countries can coordinate their policies and reach pareto efficient outcomes with rules closely related to the nash based mechanisms that have been designed to overcome free riding in standard public good economies the coordination rules defined in this paper do not make countries lose the control of their own policies it is also shown that nash implementation of pareto efficient states with similar rules is in general not possible under floating exchange rates copyright 1990 by royal economic society

dynamic implementation in two agent economies abstract the dynamic mechanisms that implement pareto efficient and individually rational allocations in standard public good economies suppose that agents communicate by exchanging as messages their marginal rates of substitution in some familiar models such as economies with non monotonic preferences marginal rates of substitution are not well defined or do not characterize preferences and therefore cannot play the role of communication messages we define a dynamic mechanism that implements pareto efficient and individually rational allocations in a general two agent economy

the role of collateral in credit markets with imperfect information abstract the paper analyzes the structure of credit market equilibrium under imperfect information collateralization and credit rationing are compared as alternative means to cope with problems of adverse selection and moral hazard it is shown that lenders may use collateral as a self selection and incentive mechanism rationing occurs only if the borrowers collaterizable wealth is too small to allow perfect sorting or to create sufficiently strong incentives whenever there is rationing in an equilibrium some borrowers are charged the maximum amount of collateral

biases in valuation vs usage of innovative product features we investigate biases in product valuation and usage decisions that arise when consumers consider a new generation of a product that offers an expanded set of capabilities of uncertain value two experiments using a novel computer game show evidence of a valuation usage disparity participants display a high willingness to pay for a new version of the game that offers a new set of controls but fail to fully exercise the option to use these controls after purchase this discrepancy is attributed to a fundamental difference in how new capabilities are valued at the time of purchase versus use consumer usage decisions appear to be driven by such myopic concerns as a desire to avoid short term learning costs whereas purchase decisions often fail to take into account the factors that drive usage and are further inflated by global optimism in the future usefulness of new capabilities we show that this lack of foresight can be explained by an intertemporal judgment model in which consumers attempt to value

the impossibility of efficient decision rules for firms in competitive stock market economies considerable attention has been focused recently on models of firms under uncertainty in which there is an incomplete set of securities markets in these models each firm can issue only one security and consumers can generate consumption plans only through the purchase of firms securities consequently if the economy is competitive each stockholder of a firm will impute the same value to the firm in equilibrium where this value is given by the market price of the firm s security however stockholders will not in general have the same implicit prices for state contingent consumption since the financial market is said to be incomplete if the number of independent securities is less than the number of states of nature consumers cannot hedge perfectly whichimplies that unconstrained pareto optimal allocations are not generally attainable see 2 and 3 finally it is unclear what firms objectives should be in these models because profit maximization is not well defined firms profits in different states cannot be aggregated into a single index it is still generally accepted however that firms should operate in their own stockholders interests a necessary condition for allocative efficiency

a reference price theory of the endowment effect abstract the common finding that selling prices exceed buying prices the so called endowment effect is typically explained by the assumptions that consumers evaluate potential transactions with respect to their current holdings and that the owners of a good regard its potential loss to be more significant than nonowners regard its potential acquisition in contrast to this pain of losing account the authors propose that the endowment effect reflects a reluctance to trade on terms that appear unfavorable with respect to salient reference prices in six experiments and eight more summarized in appendixes the authors show that manipulations that reduce the gap between valuations and reference prices reduce or eliminate the endowment effect these results suggest that the endowment effect is often best construed as an aversion to bad deals rather than an aversion to losing possessions

a simple auctioneerless mechanism with walrasian properties abstract a simple mechanism for reallocating holdings is described in which no auctioneer is required outcomes are determined solely from traders actions and without any requirement that the mechanism be in equilibrium the mechanism is shown to exactly duplicate the performance of the walrasian auctioneer both in its equilibria and in its disequilibrium path if individuals are price takers and if the number of individuals is large to approximately duplicate the auctioneer s performance even when individuals behave strategically each taking account of his own influence on prices

consumer valuation of modularly upgradeable products although product modularity is often advocated as a design strategy in the operations management literature little is known about how consumers respond to modular products in this research we undertake several experiments to explore consumer response to modularly upgradeable products in settings featuring technological change we consider both the initial product choice between a modularly upgradeable product and an integral one and the subsequent upgrade decision replacement of a module versus full product replacement first we show that consumers tend to discount the cost savings associated with modular upgrades excessively insufficiently when the time between the initial purchase and the upgrade is short long this suggests that modular upgradability as a product feature has higher profit potential for slowly rather than rapidly improving products second we observe a preference reversal between the initial purchase and the point of upgrade at the point of initial purchase people foresee making a full product replacement in the future yet when faced with the actual upgrade decision they are more likely to revert to modular upgrades finally we discuss and test several pricing and product design strategies that the firm can use to respond to these cognitive biases this paper was accepted by kamalini ramdas entrepreneurship and innovation

learning dynamics for mechanism design an experimental comparison of public goods mechanisms in a repeated interaction public goods economy incomplete information and dynamic behavior may affect the realized outcomes of mechanisms known to be efficient in a complete information oneshot game an experimental test of five public goods mechanisms indicates that subjects with private information appear to best respond to recent observations this provides predictions about which mechanisms will generate convergence to their efficient equilibrium allocations these predictions match the experimental result that globally stable efficient mechanisms realize the highest efficiency in practice the simplicity of the suggested best response model makes it useful in predicting stability of mechanisms not yet tested

trade ins mental accounting and product replacement decisions when a consumer who already owns a durable type product in a category faces the opportunity to upgrade to a new higher quality product the replacement purchase decision is driven by both normative economic factors and psychological factors as a normative decision maker s he considers the purchase price of the new alternative but s he additionally considers the mental cost of retiring the old product before s he has gotten his her money s worth out of it during ownership of a product a consumer mentally depreciates the initial purchase price thus creating a mental book value for the product the write off of this mental book value is felt as the mental cost of a replacement purchase based on the principles of mental accounting and mental depreciation i provide a theoretical explanation for this mental cost and why an individual s replacement purchase decision may be more sensitive to the mental cost than the marginal cost when applied appropriately mental accounting can serve a useful purpose

private versus public production of information abstract this paper re examines a recent article by grossman and stiglitz 1980 where information production is shown to be fundamentally incompatible with decentralized market systems based upon their model public production of information is discussed as a natural alternative three main implications of the analysis are i the market can be informationally efficient with public production of information ii there exists an informational equilibrium and the resulting allocation is pareto efficient and iii although the optimal level of information critically depends upon information users preferences and endowments their complete knowledge t the societal level is not necessary for public production of information

continuous and feasible implementation of rational expectations lindahl allocations abstract in this paper we consider bayesian implementation of rational expectations lindahl allocations for economic environments with public goods when agents are incompletely informed about environments we construct a continuous and feasible mechanism whose bayesian equilibrium allocations coincide with rational expectations lindahl allocations we not only allow the types of individuals to be unknown but also allow both the preferences and the initial endowments to be unknown to the designer in addition we allow some types of boundary equilibrium allocations and a continuous information structure journal of economic literatureclassification number c72 d71 d82 h41

consumption self control by rationing purchase quantities of virtue and vice consumers attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers pricing policies addressing theoreticians and practitioners alike this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self control problems for example many regular smokers buy their cigarettes by the pack although they could easily afford to buy 10 pack cartons these smokers knowingly forgo sizable per unit savings from quantity discounts which they could realize if they bought cartons by rationing their purchase quantities they also self impose additional transactions costs on marginal consumption which makes excessive smoking overly difficult and costly such strategic self imposition of constraints is intuitively appealing yet theoretically problematic the marketing literature lacks operationalizations and empirical tests of such consumption self control strategies and of their managerial implications this paper provides experimental evidence of the operation of consumer self control and empirically illustrates its direct implications for the pricing of consumer goods moreover the paper develops a conceptual framework for the design of empirical tests of such self imposed constraints on consumption in consumer goods markets within matched pairs of products we distinguish relative virtue and vice goods whose preference ordering changes with whet her consumers evaluate immediate or delayed consumption consequences for example ignoring long term health effects many smokers prefer regular relative vice to light relative virtue cigarettes because they prefer the taste of the former however ignoring these short term taste differences the same smokers prefer light to regular cigarettes when they consider the long term health effects of smoking these preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption this creates a potential self control problem because these consumers will be tempted to over consume the vices they have in stock at home purchase quantity rationing helps them solve the self control problem by limiting their stock and hence their consumption opportunities such rationing implies that per purchase occasion vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts we first test this prediction in two laboratory experiments we then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain wide store level demand across a variety of different pairs of matched vice regular and virtue reduced fat calorie or caffeine etc product categories the analyses of these experimental field and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as among others potato chips chocolate chip cookies cream cheese beer soft drinks ice cream and frozen yogurt chewing gum coffee and beef andturkey bologna vice consumers demand increases less in response to price reductions than virtue consumers demand although their preferences are not generally weaker for vices than for virtues constraints on vice purchases are self imposed and strategic rather than driven by simple preferences we suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption as a result of purchase quantity rationing however vice buyers forgo savings from price reductions through quantity discounts effectively paying price premiums for the opportunity to engage in self control thus purchase quantity rationing vice consumers are relatively price in sensitive from a managerial and public policy perspective our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self control they can charge premium prices for small sizes of vices relative to the corresponding quantity discounts for virtues virtue consumers on the other hand will buy larger amounts even when quantity discounts are relatively shallow a key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self constraining consumer behaviors empirically moreover this research is the first to extend previous theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making

out of equilibrium performance of three lindahl mechanisms experimental evidence abstract we describe an experimental comparison of the out of equilibrium performance of three allocation mechanisms designed to achieve lindahl outcomes as nash equilibria the mechanisms due to walker 1981 kim 1993 and chen 2002 we find that chen s mechanism which is supermodular converges closest and most rapidly to its equilibrium however we find that the properties that move subjects toward equilibrium in chen s mechanism typically generate sizeable taxes and subsidies when not in equilibrium and correspondingly large budget surpluses and deficits which typically far outweigh the surplus created by providing the public good the kim mechanism on the other hand converges relatively close to its equilibrium and exhibits much better out of equilibrium efficiency properties

secure implementation experiments do strategy proof mechanisms really work strategy proofness requiring that truth telling is a dominant strategy is a standard concept used in social choice theory saijo et al 2003 argue that this concept has serious drawbacks in particular announcing one s true preference may not be a unique dominant strategy and almost all strategy proof mechanisms have a continuum of nash equilibria for only a subset of strategy proof mechanisms do the set of nash equilibria and the set of dominant strategy equilibria coincide for example this double coincidence occurs in the groves mechanism when preferences are single peaked we report experiments using two strategy proof mechanisms where one of them has a large number of nash equilibria but the other has a unique nash equilibrium we found clear differences in the rate of dominant strategy play between the two

equilibrium binding agreements abstract we study equilibrium binding agreements the coalition structures that form under such agreements and the efficiency of the outcomes that result we analyze such agreements in a context where the payoff to each player depends on the actions of all other players thus a game in strategic form is a natural starting point unlike the device of a characteristic function explicit attention is paid to the behavior of the complementary set of players when a coalition blocks a proposed agreement a solution concept and its applications are discussed journal of economic literature classification numbers c70 c71

surplus sharing with a two stage mechanism in this article we consider environments where agents jointly produce a private output good by contributing privately owned resources an efficient outcome may not be realized due to strategic behavior and conflicting interests of the agents we construct a two stage mechanism building on a varian mechanism the modified mechanism ensures an equilibrium for a large class of preferences and guarantees the feasibility of outcomes

non excludable public good experiments we conduct a two stage game experiment with a non excludable public good in the first stage two subjects choose simultaneously whether or not they commit to contributing nothing to provide a pure public good in the second stage knowing the other subject s commitment decision subjects who did not commit in the first stage choose contributions to the public good we found no support for the evolutionary stable strategy equilibrium and the ratio of subjects who did not commit to contributing nothing increased as periods advanced that is the free riding rate declined over time furthermore this behavior did not arise due to altruism or kindness among subjects but from spiteful behavior of subjects

a voluntary participation game with a non excludable public good faculty of economics tokyo metropolitan university hachioji tokyo 192 0397 japanyamato takehiko c metro u ac jpreceived november 14 1997 revised august 21 1998in the previous mechanism design on public goods it was implicitly assumed thatevery agent must participate in the mechanism that the designer provides thisapproach neglects non excludability of public goods we explicitly incorporatenon excludability and examine a two stage game with voluntary participation inthe first stage each agent simultaneously decides whether she participates in themechanism or not and in the second stage knowing the other agents participationdecisions the agents who selected participation in the first stage choose theirstrategies participation of all agents is not an equilibrium in many situations journal of economic literature classification numbers c72 d71 d78 h41

opportunity cost neglect to properly consider the opportunity costs of a purchase consumers must actively generate the alternatives that it would displace the current research suggests that consumers often fail to do so even under conditions promoting cognitive effort various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options sensitivity to such cues varies with chronic dispositional differences in spending attitudes we discuss the implications of these results for the marketing strategies of economy and premium brands

comparison neglect in upgrade decisions abstractto properly evaluate a potential product upgrade consumers should compare the upgraded option with the product they already own to assess the upgrade s added utility however although consumers explicitly and spontaneously acknowledge the importance of comparing the upgrade with the status quo the authors find that they often fail to do so consequently consumers frequently buy product upgrades that they would not have bought had they followed their own advice five experiments involving both real and hypothetical upgrade decisions show that even when the status quo option is represented in the decision context if consumers are not explicitly prompted to reflect on it or compare it with the upgraded option they often do not compare it with the upgrade and thus show an elevated likelihood of upgrading the experiments suggest that this comparison neglect increases upgrade likelihood by making people overlook the similarities between the upgraded and status quo options and that it persists

ratio lindahl equilibria and an informationally efficient and implementable mixed ownership system abstract in this paper we formalize an informationally efficient and implementable mixed ownership economic institutional framework by using the ratio lindahl equilibrium that yields pareto efficient and individually rational allocations for public goods economies with general variable returns we consider the incentive aspects of the system by giving an incentive compatible informationally efficient and privacy preserving mechanism whose nash allocations coincide with ratio lindahl allocations moreover the mechanism is well behaved in the sense that it uses an individually feasible balanced and continuous outcome function and further has a message space of minimal dimension

implementation in undominated nash equilibria without integer games a mechanism which uses neither integer games nor modulo games is shown to implement any social choice function in a production economy with private and excludable public goods more precisely th

efficient allocation of a prize king solomon s dilemma abstract a planner is interested in allocating an indivisible good a prize to one of many agents in the economy his objective is to give the prize to the agent who values it most without any payments being made by the recipient the planner however does not know the identity of this agent while the agents themselves do this paper shows how the planner can construct simple multistage mechanisms with a unique subgame perfect equilibrium outcome at this outcome the agent who values the prize most gets it without any transfer of money being made by any of the agents or the planner

islamic economics the emergence of a new paradigm the authors illustrate the potential impact of the islamic doctrine on western economic relationships by focusing on the prohibition of interest riba in islamic economics they show that the alternate method of financier remuneration i e mudarabah profit and loss sharing will under certain conditions enhance capital investment on account of its ability to act as an efficient revelation device by applying ideas developed in the western contract literature the authors show that a mudarabah contract between the manager of a project and a syndicate of investors may permit a more efficient revelation of any informational asymmetries between the two copyright 1994 by royal economic society

from a bundled energy capacity pricing model to an energy capacity ancillary services pricing model in this paper we extend the chilean power generation pricing mechanism with capacity and energy payments to one where ancillary services as as frequency regulation and voltage control are explicitly recognized adequacy and security attributes of the electric system and the public good characteristics of as are set within the payment structure to distribute the financing of as among those who benefit from their provision the contribution to finance the provision of as is determined assessing the value assigned to the system security by each agent following what s an efficient pricing mechanism in the presence of public goods

stable implementation of lindahl allocations abstract the resource allocation mechanisms using nash equilibrium as the solution concept in economies with incomplete information rely on the assumption that agent s disequilibrium messages converge to a nash equilibrium the mechanisms implementing lindahl allocations are however extremely unstable under the most used process to represent disequilibrium behaviour in games of incomplete information the cournot process we provide a new mechanism overcoming the instability difficulty in the case of quasi linear preferences

economies with public projects efficiency and decentralization the article deals with the two fundamental theorems of welfare economics for production economies with a finite set of agents infinitely many private goods and a set of public projects the problem of efficiency and decentralization is addressed under the following very general assumptions a the commodity price duality is endowed with a consistent locally convex topology b the set of public projects is without any mathematical structure moreover any agent is characterized by a nonordered preference relation depending on consumption goods and public projects approximate and exact welfare theorems are discussed throughout the article

excess payoff dynamics and other well behaved evolutionary dynamics abstract we consider a model of evolution in games in which agents occasionally receive opportunities to switch strategies choosing between them using a probabilistic rule both the rate at which revision opportunities arrive and the probabilities with which each strategy is chosen are functions of current normalized payoffs we call the aggregate dynamics induced by this model excess payoff dynamics we show that every excess payoff dynamic is well behaved regardless of the underlying game each excess payoff dynamic admits unique solution trajectories that vary continuously with the initial state identifies rest points with nash equilibria and respects a basic payoff monotonicity property we show how excess payoff dynamics can be used to construct well behaved modifications of imitative dynamics and relate them to two other well behaved dynamics based on projections

evolutionary implementation and congestion pricing we consider an implementation problem faced by a planner who manages a roadway network the problem entails both hidden information and hidden actions we solve the planner s problem by introducing a new class of mechanisms and a new notion of implementation the mechanisms called price schemes attach transfers to the available routes they do not involve direct revelation the method of implementation is evolutionary requiring that players who follow any reasonable myopic adjustment process eventually learn to behave as the planner desires we show that efficient behaviour can be guaranteed using simple decentralized price schemes

the groves ledyard mechanism an experimental study of institutional design the groves ledyard mechanism theoretically can solve the free rider problem in public good provision in certain environments two questions are of overriding importance in implementing the mechanism the first is related to the actual performance of the mechanism in general the second is the choice of a punishment parameter which is the only parameter that is available for those who may want to actually use the mechanism thus the determination of the role of this variable on mechanism performance is fundamental for any advances along the lines of actual implementation in studying the groves ledyard mechanism we show that the punishment parameter plays a crucial role in the performance of the mechanism by using 1 and 100 we show that under the higher punishment parameter the groves ledyard equilibrium is chosen much more frequently a higher level of the public good is provided and efficiency is higher by examining two behavioral models we show that a higher leads to an increase in the probability of an individual choosing a best response predicted by the model the parameter alone explains nearly 70 of the data in both the cournot and the carlson auster behavioral model we also found that convergence to cournot behavior is faster and more stable under a high than under a low

lindahl mechanisms and free riders several authors have proposed mechanisms whose nash equilibria yield lindahl tax allocations however as is well known so does the lindahl procedure with an auctioneer moreover the game forms of all these mechanisms and of any as yet undiscovered such mechanism all have the same normal form as does the lindahl procedure without an auctioneer the manipulative nash equilibria are consequently the same for all these mechanisms so that all have the traditional free rider problem and all have the same outcome under strategic behavior

implementation of lindahl allocations with nontotal nontransitive preferences abstract the purpose of this paper is to present a mechanism the nash allocations of which coincide with the lindahl allocations even when preferences are nontransitive or nontotal this extension to include nontotal nontransitive preferences is potentially very important since preferences of agents are nontransitive nontotal in many cases in particular in the case where the players are groups of individuals besides the mechanism presented here uses outcome functions that are individually feasible balanced not merely weakly balanced continuous differentiable around nash equilibria and furthermore almost everywhere differentiable moreover the mechanism has a message space of minimal dimension

islamic banks and investment financing islamic law prohibits charging interest we study financial instruments used by islamic banks and find that most are not based on profit and loss sharing equity but instead are very debt like in nature we see some bias against providing financing for agriculture and industry long term financing is rarely offered to entrepreneurs our model shows that debt like instruments are a rational response by islamic banks to their contracting environments as agency problems become more severe debt becomes the dominant instrument of finance we give conditions under which banning debt increases social welfare as well as conditions under which banning debt decreases social welfare

a note on feasible implementations abstract this paper is concerned with the problem of individually feasible outcomes in decentralized allocation mechanisms we consider a well known mechanism which achieves efficient allocations in equilibrium this mechanism however may leave agents bankrupt if they fail to reach equilibrium it is shown that the bankruptcy problem can be avoided if a voting stage is added to the original mechanism

implementation of balanced linear cost share equilibrium solution in nash and strong nash equilibria abstract this paper considers the incentive aspect of the balanced linear cost share equilibrium blcse which yields an endogenous theory of profit distribution for public goods economies with convex production technologies we do so by presenting an incentive compatible mechanism which doubly implements the blcse solution in nash and strong nash equilibria so that nash allocations and strong nash allocations coincide with blcse allocations the mechanism presented here allows not only preferences and initial endowments but also coalition patterns to be privately observed in addition it works not only for three or more agents but also for two agent economies

on the existence of optimal truth dominant mechanisms abstract the existence of optimal dominant strategy mechanisms has been shown only for quadratic valuation functions this paper shows that non trivial pareto efficient and truth dominant mechanisms exist for a slightly larger set of valuation functions

generalized groves ledyard mechanisms abstract groves and ledyard 1977 construct a mechanism for public goods procurement that can be viewed as a direct revelation groves mechanism in which agents announce a parameter of a quadratic approximation of their true preferences the mechanism s nash equilibrium outcomes are efficient the budget is balanced because groves mechanisms are balanced for the announced quadratic preferences tian 1996 subsequently discovered a richer set of budget balancing preferences we replicate the groves ledyard construction using this expanded set of preferences and uncover a new set of complex mechanisms that generalize the original groves ledyard mechanism the original mechanism however remains the most appealing in terms of both simplicity and stability

evolutionary implementation in a public goods game abstract we consider implementation of the efficient state in a large population public goods game due to positive externalities the efficient state is different from the nash equilibrium of the game we apply a transfer scheme equal to the externality in the game the externality adjusted public goods game is a potential game with a unique nash equilibrium which is the efficient state of the original game it is also a continuous strategy aggregative game we introduce the best response dynamic for such aggregative potential games to show evolutionary implementation agents converge to the efficient state under this dynamic in the externality adjusted game we extend this result to other prominent evolutionary dynamics the pure externality price scheme however causes a budget deficit a modification of this scheme solves this problem while evolutionarily implementing efficiency

subgame perfect implementation of bargaining solutions abstract this paper provides simple four stage game forms that fully implement a large class of two person bargaining solutions in subgame perfect equilibrium the solutions that can be implemented by our game forms are those that maximize a monotonic and quasi concave function of utilities after normalizing each agent s utility function so that the maximum utility is 1 and the utility of the disagreement outcome is 0 this class of solutions includes the nash kalai smorodinsky and relative utilitarian solutions the game forms have a structure of alternating offers and contain no integer device

sharing costs in highways a game theoretic approach this paper introduces a new class of games highway games which arise from situations where there is a common resource that agents will jointly use that resource is an ordered set of several indivisible sections where each section has an associated fixed cost and each agent requires some consecutive sections we present an easy formula to calculate the shapley value and we present an efficient procedure to calculate the nucleolus for this class of games

decisions and optimality in competitive stock ownership economies reexamination of the decision theoretic structure of a diamond dreze stock market economy reveals that general lack of optimal equilibrium allocations is an informational problem prices of firms shares and observed production convey information sufficient for weak form market efficiency but is inadequate for investors to select socially optimal portfolios which constitute strong form market efficiency revising the optimality concept to accommodate information constraints yields a notion of information constrained pareto optimality this concept reflects general application of the principle of semistrong form market efficiency our approach subsumes the bayesian approach

sharing the cost of a public good an incentive constrained axiomatic approach we study the problem of provision and cost sharing of a public good in large economies where exclusion complete or partial is possible we search for incentive constrained efficient allocation rules that display fairness properties population monotonicity says that an increase in population should not be detrimental to anyone demand monotonicity states that an increase in the demand for the public good in the sense of a first order stochastic dominance shift in the distribution of preferences should not be detrimental to any agent whose preferences remain unchanged under suitable domain restrictions we give an explicit characterization of all incentive constrained efficient allocation rules we then show that there exists a unique incentive constrained efficient and demand monotonic allocation rule the so called serial rule in the binary public good case the serial rule is also the only incentive constrained efficient and population monotonic rule

instability in the implementation of walrasian allocations abstract the existence of game forms which implement walrasian allocations as cournot nash equilibrium outcomes is well known however if the equilibria are also required to be locally dynamically stable at least for environments with unique walrasian allocations this paper shows that the requisite game forms do not exist our definition of a game form entails certain regularity conditions and requires the cournot equilibrium to be unique when the walrasian equilibrium is unique the main result is that for such a game form there does not exist a continuous time strategy adjustment process which ensures the local stability of cournot equilibria throughout a certain class of environments having unique walrasian equilibria each trader adjusts his strategy in response to his own characteristics and the observed current strategies of others but the direction and magnitude of adjustments are not constrained by any behavioral assumptions the definitions permit the inclusion of an artificial player such as an auctioneer so the well known tatonnement instability emerges as a special case

sharing contracts marginalisation adverse selection and markup calculation this paper proposes a new approach to explain the dominance in the islamic banking market of markup contracts at the expense of sharing ones we show that the dual pricing practised in this market produces an additional or artificial dimension of adverse selection which is causing the sharing contracts marginalization we suggest specialized use of two islamic contractual categories as a device for eliminating artificial adverse selection we suggest also an endogenous calculation of the markup that is independent of the interest rate based on the financing cost unification this approach allows the deduction of default and liquidity risk premiums

experiments with the pivot process for providing public goods interest in demand revealing mechanisms for providing public goods has both waned and then renewed over the past two decades the possibility of using such mechanisms in different venues than originally anticipated sparked the research reported here the specific motivation for this paper is to conduct a series of simple direct tests of one version of the class of mechanisms failure of demand revelation was much more expensive than we had expected even when compared to previous research with related mechanisms the reason for this remains an open question

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

a mechanism for the allocation of corporate investment corporate investment in an economy without a complete set of contingent claims markets has the characteristic of a public good in the sense that the stockholders consumption planscannot be separated from but depend on the specific investment plans of the firms dreze 4 has shown that a constrained pareto optimal cpo allocation of investment in a stock market economy must satisfy a generalization of the samuelson 24 condition for efficient production of public goods the investment plan should maximize a weighted sum of the stockholders personal valuations of future output minus current input cost however except for those special cases in which cpo investment plans are unanimously supported by stockholders see 17 20 and 2 the theory of the firm in incomplete markets lacks a suitable maximization criterion although the dreze samuelson condition is a most appealing candidate it is not unanimously preferred by stockholders each of whom prefers that his or her own valuation of future output receives all the weight in the investment decision furthermore the application of the dreze samuelson condition depends on the correct revelation of stockholders preferences which in the absence of special inducements cannot be expected from economic agents

fair divisions as attracting nash equilibria of simple games abstract we give a mechanism fully implementing envy free divisions such that strategy spaces are symmetric the set of nash equilibria is a global attractor for the best reply dynamics as a byproduct undesired mixed strategy equilibria are weeded out by the adjustment process

a note on allocations attainable through nash equilibria abstract this note reexamines the issue of attaining efficient resource allocations as noncooperative equilibria of a strategic game contrary to the spirit of earlier work on this subject it is shown that there is an entire class of choice rules aside from the walrasian one which are implementable in nash equilibrium stategies

an experiment on nash implementation we perform an experimental test of a modification of the controversial canonical mechanism for nash implementation using three subjects in non repeated groups as well as three outcomes states of nature and integer choices we find that this mechanism successfully implements the desired outcome a large majority of the time providing empirical evidence for the feasibility of such implementation in addition the performance is further improved by imposing a fine on a dissident so that the mechanism implements strict nash equilibria while our environment is stylized our results offer hope that experiments can identify reasonable features for practical implementation mechanisms

stability of the groves and ledyard mechanism abstract it is shown that the nash equilibria of the game defined by the groves and ledyard mechanism in a public good economy can be made locally stable under cournot best replay behavior and general assumptions on preferneces

economics of a bottleneck abstract drawing on vickrey amer econ rev 59 251 261 1969 and subsequent literature this paper provides a thorough economic analysis of the simplest bottleneck model of road congestion with peak load demand in the morning rush hour a fixed number of identical individuals one per car must travel from home to work between which is a bottleneck of given capacity the costs of travel include queuing time and schedule delay time early or late for work the frequency distribution of departure times adjusts so that in equilibrium all individuals have the same travel costs the paper extends the previous literature by examining a coarse toll and solving for optimal capacities the application of congestion tolls can generate efficiency gains by altering the frequency distribution of departure times previous estimates of the efficiency gains from congestion tolling are likely to be substantially downward biased because they have ignored this effect