fdi and income inequality evidence from a panel of u s states this study employs state level panel data to explore the relationship between inward foreign direct investment fdi and income inequality in the united states using panel cointegration techniques that allow for cross sectional heterogeneity cross sectional dependence and endogenous regressors we find that the short run effects of fdi on income inequality are insignificant or weakly significant and negative in the long run however fdi exerts a significant and robust negative effect on income inequality in the united states this result for the united states as a whole does not imply that fdi narrows income gaps in the long run in each individual state there is considerable heterogeneity in the long run effects of fdi on income inequality across states with some states 21 out of 48 cases exhibiting a positive relationship between fdi in income inequality

declining values and the afternoon effect evidence from art auctions we study the order of sale in art auctions the final bid relative to the auctioneer s estimated price declines throughout the course of an auction a theoretical model shows that in an auction ordered by declining valuation even in the presence of risk neutral strategic bidders the price received relative to the estimate for later items in an auction should be less than the price relative to the estimate for earlier items furthermore ordering heterogeneous items by value maximizes revenue for the auctioneer

bidding behavior at sequential first price auctions with out supply uncertainty a laboratory analysis abstract we report on a series of experiments that test the effects of an uncertain supply on bidding behavior and prices in sequential first price auctions with private independent values and unit demands supply is assumed uncertain when buyers do not know the exact number of units to be sold i e the length of the sequence we observe an important overbidding in all but the last stage of a sequence no matter whether supply is certain and a non monotone behavior when supply is certain yet the data qualitatively support most stage to stage bid predictions and the price trend predictions for risk neutral bidders

sequential auctions with informational externalities and aversion to price risk decreasing and increasing price sequences a large body of empirical research has shown that prices of identical goods sold sequentially sometimes increase and often decline across rounds this article introduces a tractable form of risk aversion called aversion to price risk and shows that declining prices arise naturally when bidders are averse to price risk when there are informational externalities there is a countervailing effect which pushes prices to raise along the path of a sequential auction even if bidder s signals are independent the article shows how to decompose the effect of aversion to price risk from the effect of informational externalities

the probability of sale and price premiums in withdrawn auctioned properties this paper examines the impact of the auction process of residential properties that whilst unsuccessful at auction sold subsequently the empirical analysis considers both the probability of sale and the premium of the subsequent sale price over the guide price reserve and opening bid the findings highlight that the final achieved sale price is influenced by key price variables revealed both prior to and during the auction itself factors such as auction participation the number of individual bidders and the number of bids are significant in a number of the alternative specifications

spatial competition and vertical integration cement and concrete revisited reply in this review 1983 mark mcbride reconsiders the federal trade commission s ftc enforcement policy toward vertical mergers between cement and ready mix concrete firms in response to a significant increase in acquisitions of ready mix concrete firms by cement manufacturers during the 1960 s the ftc undertook a series of legal actions to block or dissolve the mergers the actions of the ftc constituted one of the most intensive efforts undertaken to date to challenge vertical mergers in a single industry mcbride p 1012 notes that the actions of the ftc provoked considerable debate concerning the motivation for the mergers both in the industry and in academe a significant number of articles were published advancing various reasons for the mergers in addition to the ftc s main contention that the mergers were motivated by a desire for captive markets it has been suggested that there were economies of integration or that the mergers were the outcome of an erroneous view of the potential benefits to foreclosure held by executives in the beleaguered cement industry 2 mcbride s 1983 paper offers another explanation for the mergers his argument is that vertical integration was undertaken to avoid rigid oligopolistic pricing in the cement industry 3 the empirical results presented by mcbride suggest that vertical integration was a significant factor in the decline of cement prices in the 1960 s the purpose of this comment is to point out some of the problems with mcbride s analysis in particular we show that the experimental design of his testing equation is faulty and does not offer a test of his hypothesis as a result mcbride s analysis does not provide convincing evidence on whether cement firms vertically integrated to avoid rigid oligopolistic pricing or if cement firms were merely reacting to prices that had already begun to decline our intent however is not to challenge mcbride s contention that vertical integration can provide lower prices to consumers rather we would argue that the evidence presented at the ftc hearings involving cement and ready mix concrete firms as well as mcbride s and others analyses illustrate the problems in discerning the motives for mergers 4

integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

research note optimal selling in dynamic auctions adaptation versus commitment this paper analyzes optimal selling strategies of a monopolist facing forward looking patient unit demand bidders in a sequential auction market such a seller faces a fundamental choice between two selling regimes adaptive selling that involves learning about remaining demand from early prices and commitment selling that forgoes such learning and makes all selling decisions in the beginning of the game a model of the game between the seller and the bidders is proposed to characterize the optimal regime choice the model implies that the relative profitability of the two regimes depends on the expected gains from trade when the expected gains from trade are low commitment dominates adaptation and vice versa

basing point pricing and production concentration basing point pricing is a delivered price system in which the price quoted for delivery of a commodity is the sum of the price quoted at a predetermined basing point plus the cost of transportation from the basing point to the point of delivery whether or not the commodity is actually shipped from the basing point thus a seller who is not located at the base site absorbs freight for shipments toward the base point and charges phantom freight on shipments away from the base point basing point pricing has been widely practiced throughout the world for example testimony of the federal trade commission before the tnec i 94 i p 33 alleged that industries in the united states which then or previously followed basing point pricing included lumber iron and steel pig iron cement lime brick asphalt shingles and roofing window glass white lead metal lath building tile floor tile gypsum plaster bolts nuts and rivets cast iron soil pipe range boilers valves and fittings sewer pipes paper and paper products salt sugar corn derivatives industrial alcohol linseed oil fertilisers chemicals transportation equipment and power cable almost from its inception economists have generally considered basingpoint pricing to reflect a cartel or price leadership arrangement hoover i937 stigler i949 machlup i949 and such practices have been attacked under antitrust statutes for example aetna portland cement co vs ftc i 57 f 2nd 533 i946 triangle conduit cable co vs ftc i68 f 2nd i 75 7th cir i 948 cement institute vs ftc i57 f 2nd 533 i948 nonetheless basing point pricing remains prevalent particularly outside the united states opec has used a gulf based price plus transport costs to determine the delivered prices of crude oil to most places in the world haddock i982 p 290 the pricing of cement in great britain and steel in europe can be characterised as multibase point systems greenhut i987 recent attempts by for example haddock i982 to return to the theme that the basing point system could be competitive and desirable have been challenged by thisse and vives i988 and benson et al i990 on the basis of recent advances in the analysis of pricing policy given then that we assume basing point pricing to be a collusive device adopted by incumbent firms to impose some kind of price discipline on potential entrants the price leadership point referred to above important strategic and locational issues arise in particular a major concern of the early analysis of basing point pricing was the effect such a pricing policy would have on location choice of entrant firms

imperfect competition and basing point pricing i introduction basing point pricing occurs when firms that are geographically differentiated use a common location to formulate the transportation costs and thus delivered prices charged to consumers consumers are not generally permitted to purchase the commodity at free on board mill prices since such prices exist only for firms located at the basing point basing point pricing is sometimes associated with other seemingly unusual practices such as cross hauling the systematic transshipment of apparently identical commodities freight absorption the shipment of identical commodities longer distances at delivered prices that do not reflect additional transportation charges and phantom freight the assessment of fictitious transportation charges basing point pricing has a rich history in the united states and more recently was widely practiced by firms in the softwood plywood industry 1 economists have long been interested in the determinants of basing point pricing 2 their inquires have generally led them to conclude that basing point pricing is adopted to facilitate collusion 3 this view is articulated by stigler 1949 who combined two important branches of the literature to formulate a theory of how basing point pricing and more generally any delivered pricing system can solve the problems of cartel instability confronting firms that are geographically differentiated and face stochastic demand 4 examining the case of multiple production centers with limited numbers of firms serving geographically uncertain demand stigler 1949 1148 argued that the unpremeditable flexibility of mill prices would make it extremely difficult to maintain collusion among firms at the production center and even more difficult to maintain collusion between firms at different production centers the systematic freight absorption associated with any delivered pricing system provides a solution to these problems with a delivered pricing system there is a single price at each point in the market if transportation charges are agreed upon so price rivalry is eliminated one production center can sell in the natural territories of other production centers when this is necessary to obtain its share of the industry s sales these distant sales involve freight absorption moreover and are therefore partly self limiting the various prices need not change often so collusion is possible given the unstable geographical pattern of demand and the antitrust laws systematic freight absorption permitted efficient collusion stigler also provided some evidence such as the general magnitude of demand variability in those industries characterized by basing point pricing to support his hypothesis that delivered prices and basing point pricing facilitate collusion building upon stigler s theory mcgee 1954 argued that cross hauling is a symptom of the collusion facilitated by basing point pricing in a recent paper haddock 1982 challenged this view and argued that basing point pricing can arise if a firm at other than the base site takes the delivered price of the basing point product as given when formulating its production decision given this behavior a non base site firm faces a kinked marginal revenue schedule that supports basing point pricing for a wide range of marginal production and transportation cost schedules the non base firm earns a markup on its product in a particular market equal to the difference between the delivered price charged by base site firms and the non base site firm s costs of production and delivery the behavior and markups earned by firms located at the base point are not restricted in haddock s model and presumably can include bertrand behavior and competitive markups the behavior of non base site firms is explicitly monopolistic haddock also provided some non collusive rationales for cross hauling in contrast to the view that basing point pricing is adopted to facilitate collusion among all firms in the industry haddock s argument is that basing point pricing can have little to do with pervasive collusion and may at most be associated with positive markups and phantom freight charges by firms on the periphery of production

the impacts of trade on the brazilian labor market a cge model approach abstract the paper assesses the impacts of trade liberalization on macroeconomic variables and labor market indicators in brazil the discussion comes out of an earlier debate on the role of trade liberalization in shaping labor market outcomes in the well known heckscher ohlin and stolper samuelson hos theorems to address these issues we use a computable general equilibrium cge modeling approach to model the patterns of export growth by sector and their effects on macroeconomic and labor market indicators overall our results show that trade liberalization contributes to improve economic welfare by means of greater output lower domestic prices and higher labor demand the benefits of this economic improvement tend however to be appropriated by the most skilled workers in the most trade oriented sectors contradicting the predictions of the hos theorems

a note on sequential auctions this note provides an explanation for the declining price anomaly in sequential second price auctions we illustrate how the average winning bids of risk neutral agents bidding for objects with valuations drawn from independent identical distributions are lower in later auctions than in earlier auctions when the objects are not identical we determine the optimal order in which they should be auctioned

how international exchange technology and institutions affect workers an introduction in a world of deepening trade links rapid technological change and weakening institutions workers in rich and poor countries alike are concerned about their incomes and the security of their work in contrast to the substantial quantity of analysis on industrial countries relatively little careful work has been done on these issues in developing countries especially in the context of the recent globalization of economic relations empirical work suggests that disequalizing trends in some developing countries may have been caused by the entry of low income countries such as china into world production or by the greater quality and technological requirements of contemporary trade in goods whatever the source these results raise questions about the viability of institutional mechanisms for supporting the income security and working conditions of workers many labor market regulations are already ineffective owing to weak enforcement capabilities however in most developing countries there will be a rising fraction of workers in formal labor contracts rising demands for formal mechanisms for dealing with income insecurity and a potentially larger role for unions in an important segment of the workforce thus it is of increasing importance to set the policy and institutional framework in a fashion that is both consistent with competitive pressures and supportive of workers participation and security

openness and wage inequality in developing countries the latin american challenge to east asian conventional wisdom the experience of east asia in the 1960s and 1970s supports the theory that greater openness to trade tends to narrow the wage gap between skilled and unskilled workers in developing countries in latin america since the mid 1980s however increased openness has widened wage differentials this conflict of evidence is probably not the result of differences between east asia and latin america instead the conflict is probably the result of differences between the 1960s and the 1980s specifically the entry of china into the world market and perhaps the advent of new technology biased against unskilled workers

an analytic history of delivered price litigation do courts properly distinguish rivalrous from collusive instances the federal judiciary s present cautious approach to delivered pricing is appropriate using court records and recent contributions to the economic literature this article evaluates the antitrust history of those practices delivered pricing can replace mill pricing naturally in some rivalrous settings but under special circumstances could be collusive thus delivered pricing has sometimes been adjudged a sherman act violation but only given other evidence of collusion for a time however the legal system threatened to treat delivered pricing as a per se violation of the clayton and federal trade commission acts that reflected poor economic understanding delivered pricing litigation seems to be a pure statutory phenomena our investigation has unearthed no cases under the common law of restraint of trade 1 since the advent of federal antitrust legislation however plaintiffs have relied on several distinct acts of congress to bring delivered pricing practices before the courts the earliest of those statutes the sherman act of 1890 forbad conspiracies in restraint of trade but courts typically have required explicit evidence before they will find a collusive conspiracy the mere use of a novel and poorly understood delivered pricing technique has not been enough relying on the clayton and federal trade commission acts of 1914 however lawyers formulated various claims that purported to draw an inference of collusion from the mere use of a particular delivered pricing schedule under those arguments no evidence of collusion was to be required several important precedents were set in reliance on such claims that we argue below is a leap of logic inconsistent with present economic understanding because the courts sometimes have accepted such theories but at other times have not the predictability of the law has been eroded to the cost of defendants and ultimately to the cost of consumers i the dawn of delivered pricing as an antitrust problem the history a number of industrial practices that became evident during the decades following the civil war were soon followed by statutory antitrust law which largely supplanted the common law antitrust precedents that had developed over the preceding centuries the speed and distance over which commercial orders could conveniently be placed and deliveries made steadily increased as local and regional transportation and communication networks expanded to form national systems that evolution enabled aggressive entrepreneurs to expand local markets into regional ones regional markets into national ones and national markets into world wide markets 2 in industries where technical scale economies were important the market expansion ultimately led to large scale production centers arising at particularly favorable transport hubs resource nodes or buyer concentrations concomitantly firms at less favorable sites either failed in the face of the stiffening long distance competition or found ways to thread themselves into small niches that had been left poorly served by the large scale production centers in the absence of significant differentiation of the physical product modern economic theory implies that it would be difficult for more than one firm to survive in a single small market away from the advantaged production centers in a predominantly large scale industry 3 so with no local competitors such remote enterprises as did survive would be able to price discriminate among nearby customers in that sense the surviving small remote firms would resemble the norm from an earlier day when markets were more commonly characterized by small dispersed spatial monopolies but the manufacturing costs of firms in the new highly competitive production centers coupled with the transport costs required for them to reach various points in a market determined the delivered prices that were available from the production center

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

the declining price anomaly abstract data from wine auctions indicate that identical products sold sequentially typically follow a decreasing pattern of prices known as the declining price anomaly this is explained for both first and second price auctions by appealing to risk averse bidders earlier bids are then equal to expected later prices plus a risk premium associated with the risky future price we show that this logic rests on the assumption of nondecreasing absolute risk aversion which is necessary for pure strategy equilibrium bidding functions to exist thus decreasing absolute risk aversion implies ex post inefficiency with positive probability data from wine auctions are used to confirm the existence of the declining price anomaly journal of economic literature classification numbers d43 d44 d81 d82 l81

a decision support framework for evaluating revenue performance in sequential purchase contexts abstract this paper studies the product ordering problem in sequential purchase contexts where sellers aim to maximize their revenue faced with budget constrained buyers we propose a multi layered decision support framework that combines empirical data with simulation optimization and econometric methods to address this problem our framework allows sellers to i compare revenue performances of limited information sequencing strategies ii quantify benchmark revenue levels that can be achieved via the optimal sequence based on detailed buyer information iii determine the costs of limited information and strategic buyers to the seller and iv identify the moderators of sequencing strategy performance we illustrate our framework through two applications in a business to business used car auction setting contrary to previous studies reporting practitioners tendency to sequence items from the lowest value to the highest our results suggest that the best performing limited information sequencing strategy depends on buyers bidding behavior we also find that the revenue difference between the optimal sequence and a limited information sequencing strategy can be substantial our results show that a significant portion of this revenue difference is associated with the seller s limited information on buyers budgets and product valuations our applications also provide various sensitivity analyses and develop new propositions on the moderators of the relationship between the seller s revenue and sequencing strategies

foreign investment and technology transfer a simple model abstract this paper develops a model in which international technology transfer through foreign direct investment emerges as an endogenized equilibrium phenomenon resulting from the strategic interaction between subsidiaries of multinational corporations and host country firms the model explicitly recognizes two types of costs the costs to the multinational of transferring technology to its subsidiaries and the learning costs of domestic firms the analysis points to the importance of the learning efforts of host country firms in increasing the rate at which mncs transfer technology the paper also explores some of the reasons why learning investment in host country firms may be suboptimal

industrialisation and the factor content of latin american exports of manufactures this article shows that latin american exports of manufactures that grow consistently over time arise from both traditional as well as policy induced sources of comparative advantage case studies for argentina colombia and venezuela show that manufactures originally developed for the domestic market were exported with consistent growth rates and came to represent an important proportion of total manufacturing exports the study also shows that inter country differences in the factor content of these exports reflect both differences in original resource endowments as well as the effects of industrialisation policy

spatial differentiation and price discrimination in the cement industry evidence from a structural model we estimate a structural model of the cement industry that incorporates spatial differentiation and price discrimination focusing on the us southwest over 1983 2003 we leverage the structure of the model to obtain consistent estimates of the underlying parameters using data on market outcomes that are substantially aggregated our results indicate that transportation costs around 0 46 per tonne mile rationalize the data this friction enables relatively isolated plants to obtain higher prices from nearby customers we further find that disallowing price discrimination would create 30 million in consumer surplus annually and show how the model can identify suitable divestitures in merger analysis

changing labor market conditions and economic development in hong kong the republic of korea singapore and taiwan china in the newly industrializing economies nies of hong kong the republic of korea singapore and taiwan china the entire working population has benefited from labor market institutions the east asian nies attained and maintained generally full employment improved their job mixes raised real earnings and lowered their rates of poverty this article reaches two principal conclusions first labor market conditions continued to improve in all four economies in the 1980s at rates remarkably similar to their rates of aggregate economic growth second labor market repression was not a major factor in the growth experiences of these economies in the 1980s it thus appears that labor market repression is neither necessary nor desirable for outward oriented economic development

sequential auctions of heterogeneous objects abstract we consider sequential second price auctions in which heterogeneous objects are sold to bidders with unit demand and a single dimensional type we show that a symmetric increasing equilibrium exists if objects are ordered in terms of dispersiveness of value distributions equilibrium price declines when objects are equivalent on average and additional conditions hold

trade liberalisation and poverty what are the links this paper asks whether a developing country s own trade liberalisation could translate into increased poverty and what information would be required to identify whether it will do so it plots the channels through which such effects might operate identifying the static effects via four broad groups of institutions households distribution channels factor markets and government and the dynamic issues of volatility long term economic growth and short term adjustment stresses an increase in the price of something a household sells labour good service increases its welfare thus the paper first explores the likely effects of trade liberalisation on the prices of goods and services taking into account the distribution sector also critical is whether trade reform creates or destroys markets trade reform is also likely to affects factor prices of which the wages of the unskilled is the most important for poverty purposes if reform boosts the demand for labour intensive products it boosts the demand for labour and wages and or employment will increase however not all developing countries are relatively abundant in unskilled labour and trade can boost demand for semi skilled rather than unskilled labour hence poverty alleviation is not guaranteed trade reform can affect tariff revenue but much less frequently and adversely than is popularly imagined even if it does it is a political decision not a law of nature that the poor should suffer the resulting new taxes or cuts in government expenditure opening up the economy can reduce risk and variability because world markets are usually more stable than domestic ones but sometimes it will increase them because stabilisation schemes are undermined or because residents switch to riskier activities the non poor can generally tide themselves over adjustment shocks from a liberalisation so public policy should focus on whether the initially poor and near temporary setbacks the key to sustained poverty alleviation is economic growth there is little reason to fear that growth will not boost the incomes of the poor similarly while the argument that openness stimulates long run growth has still not been completely proven there is every presumption that it will

income inequality and fdi evidence with turkish data abstractthis article explores how foreign direct investment fdi and other determinants impact income inequality in turkey in the short and long run we apply the nonlinear auto regressive distributed lag ardl modelling approach which is suitable for small samples the data for the study cover the years from 1970 to 2008 the empirical results indicate the existence of a co integration relationship among the variables with asymmetric adjustment of the income distribution in the short and long run the negative impact of fdi on the gini coefficient decreasing income inequality is statistically significant in the short and long run though with a quantitatively small impact in both cases in the short run gdp growth increases inequality initially an effect that is reversed in the next period increases in domestic gross capital formation decreases inequality and increases in the literacy rate have very minor adverse effects on income equality however in the long run these variables have no sta

catalogue vs order of sale effects in sequential auctions theory and evidence from a rare book sale we examine bidding in a rare book sequential auction that has features of a natural experiment lots were arranged in alphabetical order the reserve set non strategically and half the bids placed by mail in bidders we distinguish between the effects induced by the print order of the catalogue from those by the sequential nature of the sale we document the existence of distinct catalogue effects on prices number of bids and price variability and determine their causes we demonstrate that these catalogue effects also influence floor bidder behaviour we derive a theoretical model that generates key aspects of floor bidder behaviour copyright 2004 royal economic society

equilibrium reserve prices in sequential ascending auctions abstract we study a model where bidders have perfectly correlated valuations for two goods sold sequentially in two ascending price auctions the seller sets a reserve price before the beginning of each auction despite the lack of commitment by the seller we characterize an equilibrium and study its properties strategic non disclosure of information takes the form of non participation in the early auction by low valuation bidders while high valuation bidders bid up to their true valuations some buyers who would profitably buy at the reserve price refrain from participating in order to decrease the second auction reserve price

does foreign direct investment affect wage inequality an empirical investigation we use a panel of more than 100 countries for the period 1980 2002 to analyse the relationship between inward foreign direct investment fdi and wage inequality we particularly check whether this relationship is nonlinear in line with a theoretical discussion we find that the effect of fdi differs according to the level of development we depict two different patterns one for oecd developed and one for non oecd developing countries results suggest the presence of a nonlinear effect in developing countries wage inequality increases with fdi inward stock with such effect diminishing with further increases in fdi for developed countries wage inequality decreases with fdi inward stock and there is no robust evidence to show that this effect is nonlinear

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

on the internal contradictions of the law of one price as stated originally the venerable law of one price succinctly describes long run equilibrium in a perfectly competitive market the law was later amended defining a market as the geographic area within which the same thing sells for the same price at the same time allowance being made for transportation costs modified in that way the law has two plausible interpretations by one interpretation every production site is a market by the other prices in fact do not differ by transportation costs the transportation cost amendment thus introduces internal contradictions that render the revised law of one price either useless or wrong jel d40 l10 a market according to the masters is the area within which the price of a commodity tends to uniformity allowance being made for transportation costs that is two places are in the same market for a good if the prices at the two places differ by transportation costs stigler 1987 77 economic terms seem to pass in their historical development through a series of stages which without pretension to rigidness may be described as follows first no definition is given but it is assumed that every one has a sufficiently clear idea of the subject to make a formal definition unnecessary second a definition is attempted and a number of exceptional forms are noted third with the further increase of data the relative importance of the various forms changes confusion in discussion is introduced logomachy takes the place of constructive investigation fourth a complete classification of the forms embraced under the original term is made and problems are investigated with reference to these classes the bewildering vagueness of economic theory is largely due to the fact that the terms used are in all of these stages of development moore 1906 211 i introduction delineating the boundaries of markets engaged economists attention early on many product attributes are important to consumers but price is an objectively measurable margin along which rivalry is sharply engaged market prices transmit information about changing demand and supply conditions to buyers and sellers and widening price cost margins signal profit opportunities to which alert entrepreneurs respond price consequently has held center stage in economists attempts to define markets augustin cournot 1927 51 for instance wrote that a market is the entire territory of which the parts are so united by the relations of unrestricted commerce that prices take the same level throughout with ease and rapidity alfred marshall 1930 325 supplied a similar definition in his celebrated declaration that the more nearly perfect a market is the stronger is the tendency for the same price to be paid for the same thing at the same time in all parts of the market more recently joseph stiglitz 1993 19 summarized what he called the law of the single price stating that under this law there is a uniform price in the market and price differences are quickly eliminated by arbitrage 1 marshall 1930 325 introduced an important qualification however when he observed that but of course if the market is large allowance must be made for the expense of delivering the goods to different purchasers each of whom must be supposed to pay in addition to the market price a special charge on account of delivery that qualification subsequently found its way into stigler s price theory textbook quoted in the epigraph intentionally or not the law of one price was thereby converted into a law of different prices other economists subsequently added transaction costs and information costs to the list of caveats culminating in a multiplicity of prices nevertheless claimed to be consistent with the law of one price economics has few laws

auctions with online supply abstract online advertising auctions present settings in which there is uncertainty about the number of items for sale we study mechanisms for selling identical items when the total supply is unknown but is drawn from a known distribution items arrive dynamically and the seller must make immediate allocation and payment decisions with the goal of maximizing social welfare we devise a simple incentive compatible mechanism that guarantees some constant fraction of the first best solution a surprising feature of our mechanism is that it artificially limits supply and we show that limiting the supply is essential for obtaining high social welfare although common when maximizing revenue commitment to limit the supply is less intuitive when maximizing social welfare the performance guarantee of our mechanism is in expectation over the supply distribution we show that obtaining similar performance guarantee for every realization of supply is impossible

nonlinear autoregressive leading indicator models of output in g 7 countries this paper studies linear and nonlinear autoregressive leading indicator models of business cycles in g 7 countries our models use the spread between short term and long term interest rates as leading indicators for gdp we examine data admissibility by determining whether these models have the ability to produce time series with classical cycles that resemble the observed classical cycles in the data and then we ask whether this data admissibility lends itself to better predictions of the probability of recession copyright 2007 john wiley sons ltd

a nonresidual estimation of welfare gains from research the case of public r d in a forest product industry ment since the increases in economic welfare measured by this method are presumed to be generated by the shifting of the supply curve due to a new technology this type of study will be referred to as the supply function or sf approach in practice this approach has been applied to particular innovations in particular industries in a residual manner any observable outward shift of the supply curve is attributed to the particular innovation so that the benefit of the r d is calculated residually in a manner to be made clear later the other type of approach involves the estimation of a production function where research effort or expenditures are used in the econometric estimation so that the effects of r d are measured directly for this reason this method may be called a nonresidual approach this approach allows the researcher to estimate the marginal productivity of research and the value of the marginal product of research investment or the marginal internal rate of return on research investment this approach is referred to as the production function or pf approach economists have been critical of the residual sf approach griliches 9 92 3 faults the usual sf approach for its use of historical case studies of particular innovations since they tend to

equilibrium price paths in sequential auctions with stochastic supply abstract in many sequential auctions supply is unknown ex ante consequently price formation depends on information regarding supply uncertain supply reduces the option value and yields declining prices however prices increase if it becomes known that supply falls short of expectations

trade openness and wage inequality evidence for malaysia this article examines the impact of trade openness on wage inequality in malaysia during the period 1984 1997 malaysia has operated a very open trade regime since the 1960s and has pursued aggressive import substitution and export supporting policies this development strategy is very different to that adopted in many other emerging economies where trade liberalisation has been associated with greater wage inequality the aim of the present study is to examine whether malaysia s more open approach to international trade has had a similar effect on wage inequality the results suggest in fact that this is not the case

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

bidding behavior in sequential cattle auctions the objectives of this study are to investigate the institutional speciflcs of sequential cattle auctions and their role as determinants of prices institutional speciflcs are the order of sale according to quality a secret reserve price bidders multi unit demand and difierent types of bidders prices decline and bidders with a higher demand pay on average lower prices the estimation results show that declining prices are caused by the order of sale according to quality and the secret reserve price the results further show that bidders take the strategic efiect of sequential auctions and multi unit demand into account

research note strategic bid shading and sequential auctioning with learning from past prices this paper analyzes sequential auctioning of single units of an indivisible good to a fluctuating population composed of overlapping generations of unit demand bidders two phenomena emergent in such a market are investigated forward looking bidding strategies and closed loop selling strategies that involve learning from past prices the buyers shade their bids down i e bid less than they would in a single isolated auction whenever they expect the seller to sell another unit of the good in the near future unlike in exogenous sequences of auctions the optimal bidding strategy thus depends on the seller s selling strategy the converse dependence also occurs the seller can learn about current demand from past realized prices and sell only in periods with high enough demand such learning depends on the extent of bid shading because the seller needs to invert the bidding strategy to learn in equilibrium buyer bid shading persists even when the seller does not sell in every period but it is self regulating in that it eventually vanishes when the existence of the market is threatened by low seller profits in this sense auction markets have a self preservation instinct general properties of learning about current demand from past auction prices are also investigated and characterized

manufactured exports of developing countries and their terms of trade since 1965 abstract during the last 40 years since the prebisch singer terms of trade deterioration hypothesis was first proposed the commodity composition of exports of developing countries has undergone a major change in the direction of dominance of manufactures in their nonfuel exports with strong growth in the volume of their manufactured exports but this did not allow developing countries to escape unequal exchange relations with the industrial countries their barter terms of trade in manufactures showed signs of weakness rather than improvement and clearly failed to reflect the respective productivity trends leading to deterioration in factoral terms of trade

south south trade and skill premia contrary to the predictions of the 2 2 2 heckscher ohlin model empirical evidence shows that the skill premium increased in some developing countries and decreased in others after trade liberalisation this paper attempts to reconcile the empirical evidence with the theoretical predictions by introducing a model where south south trade can produce the observed patterns of skill premia in the south in this context south south trade expands the import range of the country that reduces the tariff this increases the demand for and the cost of skilled workers in the other country this also leads the country that reduces the tariff to expand its export range and reduce its import range therefore the country that reduces the tariff experiences an increase in its export range which leads to an increase in the skill premium as the impact on the import range is ambiguous it is possible that the other country experiences a decline in the skill premium thus trade liberalisation between southern countries can cause an increase in the skill premium in one and a decrease in the skill premium in another

trade liberalisation in brazil creating or exporting jobs using the growth accounting and factor content approaches this article looks at the impact of trade liberalisation on the structure and level of employment in brazil over the 1990 97 period the results support the argument that trade liberalisation in developing countries have a negative short term impact on employment relatively small in brazil s case which tends to be outweighed in the long run by a more labour intensive output mix

on the basing point system comment in on the basing point system bruce benson melvin greenhut and george norman 1990 1 properly correct a misunderstanding by jacques thisse and xavier vives 1988 2 concerning my 1982 paper on basing point prices but bgn then take exception with several of the conclusions i had reached or that they thought i had reached although i have insufficient space to deal with all the points they raise i will address the most important ones in 1981 most economists believed that a model of profit maximizing basing point pricing would have to assume collusion my model as bgn seem to agree showed that it need not atomistic competition at one production site accompanied by local monpolies elsewhere may lead to basing point pricing and freight absorption without collusion 3 conversely tv showed that the practice as observed empirically will not arise if all production sites contain noncooperative local monopolies bgn establish yet another important theoretical result noncooperative oligopoly at one site could generate the f o b prices or f o b plus transport that in my model led local monopolies elsewhere to adopt freight absorbing basing point prices the three models would seem to be complements i a paradox

the role of economic theory in modelling the long run this argues for a closer link between the modelling of the long run relations in applied economics and the intertemporal equilibrium notion from economic theory this abstract was borrowed from another version of this item

a discrete long term location price problem under the assumption of discriminatory pricing formulations and parametric analysis we consider a competitive location problem in which a new firm has to make decisions on the locations of several new facilities as well as on its price setting in order to maximise profit under the assumption of discriminatory prices competing firms set a specific price for each market area the customers buy one unit of a single homogeneous price inelastic product from the facility that offers the lowest price in the area the consumers belong to three customer choice rules are considered in order to break ties in the offered prices we prove that considering long term competition on price this problem can be reduced to a problem with decisions on location only for each one of the choice rules the location problem is formulated as an integer programming model and a parametric analysis of these models is given to conclude an application with real data is presented

export processing zones in the dominican republic transforming manufactures into commodities this paper examines the performance of export processing zones in the dominican republic it shows that in specializing in unskilled labor intensive export processing in the context of competitive devaluations between central american countries the dominican republic has experienced immiserizing employment growth in these circumstances the export of labor intensive manufactures is akin to that of primary commodities exporting countries which rely on unskilled labor and which fail to make the transition to higher value added production exports are thus likely to experience declining terms of trade the conclusions of this case study are considered to have wider relevance to world bank and international monetary fund inspired structural adjustment programs in the region

bottom fishing and declining prices in sequential auctions abstract we study standard sequential auctions in which the seller chooses the order of sale and right to choose auctions in which the winner chooses her preferred item from the remaining items empirically prices in sequential auctions tend to decline and sellers often hold right to choose auctions in our setting the right to choose format guarantees declining prices and efficiency in the standard auction a buyer may submit a low bid for the first item bottom fishing despite its being her less preferred item an example shows that the standard auction has declining prices is inefficient and gives lower expected revenue than the right to choose journal of economic literature classification numbers d44 d82

declining prices in sequential auctions with complete revelation of bids abstract in a sequential auction setting the expected winning prices are shown to decline across two stages when all bids are revealed between the stages the prices decline because bidders desire to hide their private valuation information the hiding also leads to inefficient allocations

sequential auctions of stochastically equivalent objects abstract we show that in sequential auctions of a large enough number of stochastically equivalent objects with bounded values prices will on average have a downwards trend

signal jamming in a sequential auction abstract in a sequence of first price auctions with stable private values bidders strategically conceal their private information until the last auction we characterize equilibrium bidding and explore how such signal jamming affects the dynamics of equilibrium prices

foreign direct investment and income inequality in mexico 1990 2000 in this article we explore the relationship between the investments of multinational corporations foreign direct investment and income inequality in mexico we argue that mexico s liberalization of foreign direct investment fdi inflows in the 1990s provides a natural experiment to test how fdi affects income inequality in a middle income country we use an instrumental variables approach as our identification strategy to mitigate problems of endogeneity and omitted variable bias in an empirical test of the determinants of changes in income inequality from 1990 to 2000 we find that increased fdi inflows are associated with a decrease in income inequality within mexico s thirty two states the authors would like to thank lawrence broz john freeman matt gabel geoff garrett quan li eddy malesky layna mosley katie ridgeway pablo pinto john stringer and andy sobel for comments and suggestions jacob gerber and mariana medina provided excellent research assistance thanks also to patricio aroca gonzalez for generously providing us with his data we acknowledge the financial support of the weidenbaum center on the economy government and public policy nate jensen s contribution to this article was written as a global fellow at ucla s international institute

on the basing point system reply david d haddock s 1990 contention is really that the jacques f thisse and xavier vives 1988 and the bruce l benson melvin l greenhut and george norman 1990 papers do not provide a collusive model that yields base point pricing bpp he apparently believes his paper 1982 established competitive bpp and suggests in 1990 that the collusive model and hard empirical work alone remain however no collusive model is required since it has already been well demonstrated in the literature on plant location and spatial price theory that firms at feasible distance locations from a production center would accept bpp only because they fear that to do otherwise would subject them to retaliatory actions by the larger more powerful firms at the production center moreover the paper by thisse vives 1988 henceforth tv and benson greenhut norman 1990 henceforth bgn indicated sufficiently that other systems would arise than haddock s competitive bpp especially since the restrictive conditions necessary for the latter militate against its use haddock in fact appears to accept these conditions in his references to arthur r burns proposals 1936 of nearbase point pricing nbpp hard empirical analysis would indeed be in order in determining the extent of nbpp not competitive bpp this paper responds to the above noted issues in three main sections section i briefly provides some historical data on the collusive uses of bpp for any future researcher who seeks empirically to uncover a

mill pricing versus spatial price discrimination under bertrand and cournot spatial competition this paper asks two questions about spatial competition first does spatial price discrimination lead to lower prices and higher welfare than mill pricing if firms hold the bertrand conjecture the answer is yes for most values of fixed cost but for the cournot conjecture the opposite is true second does the introduction of space into the oligopoly models of bertrand and cournot change their results the answer is generally no however spatial bertrand prices exceed marginal cost unlike their spaceless counterparts these answers are obtained using models of spatial competition of which the cournot mill pricing models are new in spatial competition significant transport costs and economies of scale bestow market power upon firms this paper addresses two questions about spatial competition first does spatial price discrimination yield lower prices and higher social welfare producer plus consumer surplus than fo b mill pricing under spatial price discrimination differences in the delivered prices charged by a firm bear no necessary relationship to differences in transport costs in contrast a mill pricing firm sets a single price at its plant and customers bear the cost of transport this paper answers this question for the cases in which firms adopt the bertrand or cournot conjectures concerning how rivals will react to price and output changes this question is important because of the superficial appeal of mill pricing which stems from its imitation of the spatial structure of marginal costs the presence of spatial price discrimination by contrast is often considered to be evidence of the presence of market power at least in part for these reasons the us robinson patman antitrust act and great britain s price commission favor mill pricing nevertheless spatial price discrimination remains ubiquitous in the us europe and japan greenhut 1981 the second question is how does the introduction of space into the original oligopoly models of cournot and bertrand change their results cournot

competition of firms discriminatory pricing and location1 two costlessly mobile firms are to be located in a market region a subset of the plane the firms compete by setting locations and delivered price schedules to study this competitive stiuation an appropriate extensive form game is defined along with an appropri ate noncooperative solution concept existence and general properties of the equilibrium are demonstrated among the results are each firm increases its profit by locating so as to decrease total cost to both firms of serving the market firms will never locate coinciden tally if they have identical production costs and transport cost rates or if these are different and the firms are located in a circular market region having a uniform demand distribution this paper studies competition between two profit maximizing firms in space who are costlessly mobile and may discriminate in price we will allow the firms to set locations and delivered price schedules and we will be concerned with the existence and properties of equilibria in location and price starting with hotelling 9 the spatial competition literature has focused on location on bounded linear markets by two or more firms hotelling assumed identical firms that produced a single good with constant cost of production and considered consumers to be uniformly distributed and to have inelastic demand he also assumed that the consumers pay transport cost and purchase the good from the cheapest source hotelling claimed that a nash equilibrium in locations for the two firm market existed and yielded back to back locations at the center of the market many authors most recently d aspremont gabszewicz and thisse 2 have noted that an equilbrium in prices and location does not exist for hotelling s model however if the firms employ identical exogeneously specified prices hotelling s conclusions hold subsequent work by smithies 14 hartwick and hartwick 7 and eaton 3 claimed to show that a nash equi librium in f o b prices and locations can exist in markets with a uniform distribu tion of consumers each of whom have identical elastic demand functions for the two and three firm problems the work of d aspremont et al casts doubt on these conclusions without the adoption of restrictive conditions our work contrasts with these works and related research which has dealt with linear markets with uniform distributions of customers and with identical firms our work will involve markets that are subsets of the plane having nonuniform distributions of customers our firms will be allowed to be different that is have differences in production and transport costs however the fundamental difference in our approach is that our firms will set discriminatory prices and not price f o b in many ways our work will represent the discriminatory pricing

imperfect competition and basing point pricing evidence from the softwood plywood industry the federal trade commission s action to eliminate basing point pricing in the soft plywood industry during the mid 1970s created a natural experiment the author finds that the ftc s action had no effect on the delivered price of the base site product douglas fir plywood but decreased the delivered price of the non base site product pine plywood for many consumers the evidence suggests that the detrimental effects of basing point pricing for economic welfare were reflected entirely in the behavior of non base site firms copyright 1992 by american economic association