intertemporal cost dependence in the presence of managerial impatience abstract a multi period agency problem arising in the presence of intertemporal cost dependence is investigated the principal delegates production decisions to a manager who is impatient the manager has private information on the nature of cost dependence that takes the form of an experience effect since the impatient manager would not invest enough to gain experience the principal designs a second best scheme to motivate the manager to increase intertemporal profit for the firm the second best scheme is obtained as a direct revelation mechanism that specifies outputs prices as well as the manager s compensation a significant result is that unlike the first best case impatience is not necessarily a disadvantage with asymmetric information impatience can be exploited to reduce the manager s information rent resulting in preferred outcomes for the principal

are household production decisions cooperative evidence on pastoral migration and milk sales from northern kenya market based development efforts frequently create opportunities to generate income from goods previously produced and consumed within the household production within the household is often characterized by a gender and age division of labor market development efforts to improve wellbeing may lead to unanticipated outcomes if household production decisions are noncooperative we develop and test models of household decision making to investigate intrahousehold decision making in a nomadic pastoral setting from kenya our results suggest that household decisions are contested with husbands using migration decisions to resist wives ability to market milk

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

marriage market divorce legislation and household labor supply this paper provides a theoretical framework for analyzing the impact of the marriage market and divorce legislation on household labor supply in our approach the sex ratio in the marriage market and the rules governing divorce are examples of distribution factors these factors are defined as variables that affect the household members bargaining position but not preferences or the joint budget set we extend the collective labor supply model developed by chiappori to allow for distribution factors we show that our model imposes new restrictions on the labor supply functions and eases the identification of individual preferences and the intrahousehold decision process the model is estimated using psid data for the year 1988 our results do not reject the restrictions imposed by the model also the sex ratio and divorce laws deemed favorable to women are found to affect labor supply behavior and the decision process in the directions predicted by the theory and to have sizable effects

collective labor supply and household production this paper emphasises the importance of incorporating household production into the collective model of the household and considers how and to what extent the results of chiappori 1992 can be extended to this case this abstract was borrowed from another version of this item

the impact of carbon emission costs on manufacturers production and location decision abstract this paper investigates how emerging carbon emission costs may affect the joint production and location decisions for a manufacturer across the world s regions specifically we develop a new theoretical model which explicitly links product demand production costs and carbon emission levels to location decisions and investigate the manufacturer s optimal decisions between two distinct regions the results show that the influence of carbon emissions on manufacturers decisions can vary greatly under different circumstances both off shoring and near shoring are possible under rising carbon emission costs manufacturers with high or low demand have different tolerance levels to the rising carbon emission costs when considering an alternative location trade costs can change the pattern of relocation to gain policy insights for those who pursue reducing carbon emissions different product examples are used to calculate the critical carbon price which triggers different location choices the results suggest that if production technology is stable raising carbon cost itself has only limited effects on reducing total carbon emissions especially for high value low emission industries the location shift which is more sensitive to changes in variable carbon emissions may lead to a significant emission reduction when completed additional pricing decision from the manufacturer shows no significant effect on the location decisions however if demand is linked directly to carbon emission footprint of the product then it is more hopeful that a raised carbon price would reduce the carbon emissions significantly through relocation

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

commitment and fairness in a dynamic regulatory relationship this paper considers a multiperiod model of a regulated firm that has stationary private information which may be revealed through performance if it cannot make commitments to future policies the regulator has an incentive to exploit any information the firm reveals and laffont and tirole show that there is no regulatory policy that is separating over any closed interval a fairness arrangement is proposed in which the firm agrees not to quit if in future periods the regulator allows it to earn a nonnegative profit given the type it revealed in earlier periods the properties of such arrangements are studied and an example is presented in which both the firm and the regulator prefer a fairness arrangement to a policy feasible without commitment

agricultural household models extensions applications and policy this book presents the basic model of an agricultural household that underlies most of the case studies undertaken so far the model assumes that households are price takers and is therefore recursive the decisions modeled include those affecting production and the demand for inputs and those affecting consumption and the supply of labor comparative results on selected elasticities are presented for a number of economies the empirical significance of the approach is demonstrated in a comparison of models that treat production and consumption decisions separately and those in which the decisionmaking process is recursive the book summarizes the implications of agricultural pricing policy for the welfare of farm households marketed surplus the demand for nonagricultural goods and services the rural labor market budget revenues and foreign exchange earnings in addition it is shown that the basic model can be extended in order to explore the effects of government policy on crop composition nutritional status health saving and investment and to provide a more comprehensive analysis of the effects on budget revenues and foreign exchange earnings methodological topics primarily the data requirements of the basic model and its extensions along with aggregation market interaction uncertainty and market imperfections are discussed the most important methodological issues the question of the recursive property of these models is also discussed

eoq models for a coordinated two level international supply chain considering imperfect items and environmental impact abstract for a two level supply chain models are presented to determine the optimal production shipment policy for items with imperfect quality in three different scenarios a both the vendor and the buyer are in the same country b the vendor and the buyer are in different countries where the stochastic behavior of the exchange rate between the two countries is modeled using a mean reverting process and c environmental impact is incorporated in determining the optimal production shipment policy by taking into account the fixed and variable carbon emission costs the objective is to minimize the total expected cost per unit time for each scenario considering equal shipment size the total expected cost per unit time is derived and the solution procedure is proposed numerical examples are presented and the results are discussed

endogenous gender power household labor supply and the demographic transition abstract we present a microeconomic model of the household in which there exists no difference in spousal preferences but childrearing is more time costly for women bargaining between the wife and the husband forms the basis of household decisions marital bargaining power is determined according to the incomes of the spouses which in turn help to determine their reservation utility levels outside the marriage the endogeneity of bargaining power introduces a non cooperative element to the couples decision making problem because both the husbands and the wives take into account how their pre marital education decisions affect their marital power and the share they extract from household resources in the future the model predicts that wives invest more than is pareto efficient in their education in order to increase their bargaining power in marriage as a consequence couples have fewer children and consume more when exogenous structural changes lead women to invest more in education a corollary of the model is that empowering women directly through social reforms such as a lower gender wage gap leads to lower fertility and higher spousal consumption and leisure

optimal pricing policy in the presence of experience effects i introduction in this paper we analyze the problem of optimal intertemporal pricing for a monopolist when cur rent and past output affect future cost and or demand conditions through experience in production and or in consumption learning by doing the experience curve contagion habit formation bandwagon and snob effects are all examples of terminologies used to describe such situations we call these experience effects for convenience and explore profit maximizing pricing behavior when such effects exist in the traditional profit maximization model a firm chooses the price output combination so as to maximize short run i e current profits the familiar mc mr equality given that price is higher than average variable cost and a nonbind ing capacity constraint is a necessary condition for price takers as well as price makers this as sumes that the current pricing decision has no bearing on the future so that long run profit is maximized by a series of short run maximizing

multi period contracts between principal and agent with adverse selection abstract multi period contracts with adverse selection at the time of contracting are studied with risk neutrality and independent private information all inefficiency arises in the first period only with positive serial correlation inefficiency is more pervasive but declines over time

optimal employment contracts in a principal agent relationship abstract two unique characteristics of modern japanese labor management practice are the prevalence of lifetime employment and of biannual bonuses in contrast these practices are relatively infrequent in the united states many of the explanations offered so far attribute the difference to cultural and or institutional differences in the two countries in this paper we present a different point of view one that provides an economic rationale for various practices the model developed is based upon the framework of the principal agent relationship the principal employer offers to the agent employee a contract which specifies contract length wage rate and profit sharing schedule so as to maximize the expected value of a stream of future profits the agent in turn accepts this contract if and only if he can make himself better off in doing so if the appropriate level of effort can be specified and enforced by the principal there is no agency problem the resulting outcome is said to be first best on the other hand in many situations the principal is not able to enforce the effort level due to for example monitoring costs or lack of observability thus in the presence of this agency problem the appropriate level of effort is chosen for any given contract by the agent in such a way that his expected utility is maximized the optimal contracts in this framework are said to be second best the main focus in the paper is on the second best case we find that the optimal contracts depend upon various factors such as labor productivity disutility of effort risk aversion alternate market opportunity transaction cost demand conditions and discount rates by using numerical examples obtained by dynamic programming we illustrate that any form of employment policy can be optimal for the appropriate situations in addition we estimate the agency cost or the incentive gap between the first best and second best solutions

identification of random resource shares in collective households without preference similarity restrictions abstractresource shares defined as the fraction of total household spending going to each person in a household are important for assessing individual material well being inequality and poverty

agrarian structure and agricultural practice typology and application to western sudan a typology of models that explain patterns of variation in farm endowments and farm practices and yields shows that insecurity in renting land financing constraints and the absence of insurance generate patterns of factor use quite different from the famous inverse relationship caused by labor supervision problems one might expect to observe positive relationships between wealth and yields village level data from western sudan confirm that such positive relationships are not a theoretical curiosity wealthy farmers have higher levels of output per hectare because they use more labor per hectare insurance and financing constraints appear to be the crucial market failures

carbon leakage from unilateral environmental tax reforms in europe 1995 2005 abstract studies of the effects of the kyoto protocol have shown carbon leakage typically from tax and permit schemes with lump sum revenues recycling to be in the range of 5 20 using static computable general equilibrium models however in practice researchers have found that carbon leakage from the implementation of the eu ets is unlikely to be substantial because transport costs local market conditions product variety and incomplete information all tend to favour local production this study investigates potential carbon leakage from six eu member states mss that implemented environmental tax reform etrs unilaterally over the period 1995 2005 the study uses the large scale multisectoral integrated energy environment economy e3 model of 27 european countries energy environment economy model of europe e3me to undertake a dynamic comparative analysis to assess any carbon leakage effects over the longer term 1995 2012 a counterfactual reference case is constructed assuming that the six countries did not introduce etrs then alternative scenarios are developed to assess the effects of the etrs including effects on co2 emissions for the eu25 economies most mss recorded a reduction in co2 emissions when comparing the baseline case to the reference case the results show that carbon leakage is very small and in some cases negative due to technological spillover effects

do husbands and wives pool their resources evidence from the united kingdom child benefit common preference models of family behavior imply income pooling a restriction on family demand functions such that only the sum of husband s income and wife s income affects the allocation of goods and time testing the pooling hypothesis is difficult because most family income sources are not exogenous to the allocations being analyzed in this paper we present an alternative test based on a natural experiment a policy change in the united kingdom that transferred a substantial child allowance to wives in the late 1970s using family expenditure survey data we find strong evidence that a shift toward greater expenditures on women s clothing and children s clothing relative to men s clothing coincided with this income redistribution

gender and say a model of household behaviour with endogenously determined balance of power the evidence that the same total income can lead a household to choose different consumption vectors depending on who brings in how much of the income has led to an effort to replace the standard unitary model of the household with the collective model which recognizes that the husband and the wife may have different preferences and depending on the balance of power between them the household may choose differently one weakness of this new literature is that it fails to recognize that the household s choice could in turn influence the balance of power once this two way relation between choice and power is recognized we are forced to confront some new questions concerning how to model the household this paper tries to answer these by defining a household equilibrium examining its game theoretic properties and drawing out its testable implications it is shown for instance that once we allow for dynamic interaction a household can exhibit inefficient behavior and that for a certain class of parameters children will be less likely to work in a household where power is evenly balanced than one in which all power is concentrated in the hands of either the father or the mother the paper also draws out the implications for female labor supply

optimal production planning with emissions trading emissions trading is a market based mechanism for curbing emissions and it has been implemented in europe north america and several other parts of the world to study its impact on production planning we develop a dynamic production model where a manufacturer produces a single product to satisfy random market demands the manufacturer has access to both a green and a regular production technology of which the former is more costly but yields fewer emissions to comply with the emissions regulations the manufacturer can buy or sell the allowances in each period via forward contracts in an outside market with stochastic trading prices while needing to keep a nonnegative allowance account balance at the end of the planning horizon we first derive several important structural properties of the model and based upon them we characterize the optimal emissions trading and production policies that minimize the manufacturer s expected total discounted cost in particular the optimal emissions trading pol

a cournot nash model of family decision making this paper models a two person family each family member is utility maximising yet family members are interdependent because of caring and public goods within the family the two family members interdependent utility maximisation problems are first solved using a non cooperative or cournot nash game theoretic framework the cournot nash equilibrium is then used as a threat point in a bargaining game the paper provides a rigorous derivation of the properties of household demands a full analysis of the determinants of intra household resource allocation including the effect of varying household bargaining power and consideration of policy implications

equilibrium evolution and learning abstract in their evolutionary theory of economic change nelson and winter 1982 developed a model based on winter 1971 in which agents have limited information processing capacities nelson s and winter s belief that the model would always generate a static selection equilibrium is shown to be incorrect despite that error simulation experiments based on their model yield a number of interesting implications about the effects of learning on evolutionary mechanisms when decision makers learn simulated competitive industries are much less volatile than when they do not moreover the most orthodox results are found when entry is difficult and there are large fixed costs of production perfect contestability implies extreme volatility

gender differences in the relationship between land ownership and managerial rights implications for intrahousehold farm labor allocation abstract recent research has increased interest in the intersection of land tenure and gender roles in african agriculture while formalization of land ownership has been found to have important gender impacts time use and management remain critical to both the productivity of agricultural operations as well as the welfare of household members thus it is important to understand how gender intersects with the relationship between the ownership and operation of plots we use plot level data from nationally representative household surveys in ethiopia and malawi to characterize the structure sole male sole female or joint and domain plot ownership plot management or output management of control over land in each household we then answer the following research questions 1 are there any gender gaps in the degrees of the concordance among different domains of controls and 2 how does the structure of ownership and managerial rights affect labor allocations on plots we find that for both males and females sole managerial rights are most likely to occur in plots owned exclusively by either gender however on jointly owned plots instances of sole planting rights are almost exclusively male we also find that while females supply more of their own labor to plots they control the pattern of own gender bias in labor allocation varies with each structure domain combination the heterogeneity suggests gender inequality analyses related to land rights are sensitive to the choice of domain of control

contracts and asymmetric information in the theory of the firm abstract this paper extends the coase notation of firms as intermediaries between consumers and input owners to incorporate asymmetric information we show that in some cases it is optimal for consumers to pay a fixed price for a product and to ignore how the firm operates and the profit that it makes if firms have private information that consumers cannot cheaply obtain however we demonstrate that the optimal contract may require constraints on firms internal operations and profits our work provides conditions under which cost plus contracts are optimal and demonstrates when nonprofit firms are the preferred organization structure

the profits of power land rights and agricultural investment in ghana we examine the impact of ambiguous and contested land rights on investment and productivity in agriculture in akwapim ghana we show that individuals who hold powerful positions in a local political hierarchy have more secure tenure rights and that as a consequence they invest more in land fertility and have substantially higher output the intensity of investments on different plots cultivated by a given individual corresponds to that individual s security of tenure over those specific plots and in turn to the individual s position in the political hierarchy relevant to those specific plots

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

static and intertemporal household decisions we discuss the most popular static and dynamic models of household behavior our main objective is to explain which aspects of household decisions different models can account for using this insight we describe testable implications identification results and estimation findings obtained in the literature particular attention is given to the ability of different models to answer various types of policy questions

the dynamics of incentive contracts the paper studies a simple two period principal agent model in which the principal updates the incentive scheme after observing the agent s first period performance the agent has superior information about his ability the principal offers a first period incentive scheme and observes some measure of the agent s first period performance cost or profit which depends on the agent s ability and unobservable first period effort the relationship is entirely run by short term contracts in the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit the strategies are required to be perfect and updating of the principal s beliefs about the agent s ability follows bayes rule the central theme of the paper is that the ratchet effect leads to much pooling in the first period first for any first period incentive scheme there exists no separating equilibrium second when the uncertainty about the agent s ability is small the optimal scheme must involve a large amount of pooling the paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty

agency costs and innovation abstract stylized facts indicate that small firms are responsible for a disproportionate share of innovative research there are many possible explanations for this fact the paper seeks to understand this phenomenon as the outcome of an optimal assignment of tasks across individuals and organizations it is shown that incentive costs associated with a given task depend on the total portfolio of tasks that an individual or an organization undertakes mixing hard to measure activities innovation with easy to measure activities routine is particularly costly since it will either lead to misallocation of attention across tasks or to misallocation of risk larger firms are at a comparative disadvantage in conducting highly innovative research because of the costs associated with managing a heterogeneous set of tasks it is further argued that optimal organizational responses to coordination and control of routine tasks will lead to bureaucratization within the firm and to financial constraints imposed by capital markets both of which are hostile to innovation

yours mine and ours do divorce laws affect the intertemporal behavior of married couples divorce laws establish spouses individual property rights over household resources and determine when divorce is allowed this paper examines how such laws inuence the intertemporal behavior and the welfare of u s married couples i build a model of household choice about consumption labor supply and divorce under multiple divorce law regimes and i estimate it using exogenous variation in u s divorce laws from the 1970s to the 1990s couples responded to equal division of property and unilateral divorce by increasing tangible assets up to 19 which suggests the presence of a strong income eect for the primary earner and by reducing female employment by over 5 percentage points because the threat of divorce granted additional bargaining power to married woman the bargaining weight of women implied by these responses in the model corresponds to a third of the weight of men this indicates that equal division of assets beneted women when it was

short term contracts and long term agency relationships abstract long term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow we show that commitments are unnecessary and hence short term contracts are sufficient if 1 all public information can be used in contracting 2 the agent can acess a bank on equal terms with the principal 3 recontracting takes place with common knowledge about technology and preferences and 4 the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times

farms families and markets new evidence on completeness of markets in agricultural settings the farm household model has played a central role in improving the understanding of small scale agricultural households and non farm enterprises under the assumptions that all current and future markets exist and that farmers treat all prices as given the model simplifies households simultaneous production and consumption decisions into a recursive form in which production can be treated as independent of preferences of household members these assumptions which are the foundation of a large literature in labor and development have been tested and not rejected in several important studies including benjamin 1992 using multiple waves of longitudinal survey data from central java indonesia this paper tests a key prediction of the recursive model demand for farm labor is unrelated to the demographic composition of the farm household the prediction is unambiguously rejected the rejection cannot be explained by contamination due to unobserved heterogeneity that is fixed at the farm level local area shocks or farm specific shocks that affect changes in household composition and farm labor demand we conclude that the recursive form of the farm household model is not consistent with the data developing empirically tractable models of farm households when markets are incomplete remains an important challenge

the learning curve and optimal production under uncertainty this article examines the implications of the learning curve in a world of uncertainty we consider a competitive firm whose costs decline with cumulative output because the price of the firm s output evolves stochastically future production and cumulative output are unknown and are contingent on future prices and costs we derive an optimal decision rule that maximizes the firm s market value produce when the price exceeds a critical level which is a declining function of cumulative output we show how the shadow value of cumulative production the total value of the firm and the decision to produce depend on the volatility of the price and other parameters uncertainty increases the critical price required for the firm to produce but also increases the value of thefirm thus during periods of high volatility firms facing a learning curve ought to be producing less but are worth more

household intertemporal behaviour a collective characterization and a test of commitment in this paper a formal test of intra household commitment is derived and performed to that end two models of household intertemporal behaviour are developed in both models household members are characterized by individual preferences in the first formulation household decisions are always on the ex ante pareto frontier in the second model the assumption of intra household commitment required by ex ante efficiency is relaxed it is shown that the full efficiency household euler equations are nested in the no commitment euler equations using this result the hypothesis that household members can commit to future allocations of resources is tested using the consumer expenditure survey i strongly reject this hypothesis it is also shown that the standard unitary framework is a special case of the full efficiency model however if household members are not able to commit household intertemporal behaviour cannot be characterized using the standard life cycle model these findings have two main implications first policy makers can change household behaviour by modifying the decision power of individual household members second to evaluate programmes designed to improve the welfare of household members it would be beneficial to replace the standard unitary model with a characterization of household behaviour that allows for lack of commitment

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

tenure insecurity and investment in soil conservation evidence from malawi tenure insecurity can have important consequences for the conservation of natural resources this paper focuses on two main sources of tenure insecurity informal short term tenancy contracts and customary gender biased inheritance practices using a large plot level dataset from malawi the analysis employs a linear probability model with household fixed effects and finds that both sources of insecurity have a negative effect on soil conservation investments these findings suggest that future land reforms should deal with the informality of the land rental market and address the gap between users and owners of land created by existing customary practices

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

managing carbon footprints in inventory management abstract there is a broad consensus that mankind must reduce carbon emissions to mitigate global warming it is generally accepted that carbon emission trading is one of the most effective market based mechanisms to curb the amount of carbon emissions this paper investigates how firms manage carbon footprints in inventory management under the carbon emission trading mechanism we derive the optimal order quantity and analytically and numerically examine the impacts of carbon trade carbon price and carbon cap on order decisions carbon emissions and total cost we make interesting observations from the numerical examples and provide managerial insights from the analytical results

gender agricultural production and the theory of the household virtually all models of the household assume that the allocation of resources is pareto efficient within many african households agricultural production occurs on many plots controlled by different members of the household pareto efficiency implies that factors should be allocated efficiently across these plots i find in contrast that plots controlled by women are farmed much less intensively than similar plots within the household controlled by men the estimates imply that about 6 percent of output is lost because of inefficient factor allocation within the household the paper suggests a new approach to modeling intrahousehold allocation consistent with the empirical results

noncooperative household demand we study noncooperative household models with two agents and several voluntarily contributed public goods deriving the counterpart to the slutsky matrix and demonstrating the nature of the deviation of its properties from those of a true slutsky matrix in the unitary model we provide results characterising both cases in which there are and are not jointly contributed public goods demand properties are contrasted with those for collective models and conclusions drawn regarding the possibility of empirically testing the collective model against noncooperative alternatives and the noncooperative model against a general alternative

asymmetric information incentives and intrafirm resource allocation this paper considers the question how should a firm allocate a resource among divisions when the productivity of the resource in each division is known only to the division manager obviously if the divisions as represented by their managers are indifferent among various allocations of the resource the headquarters can simply request the division managers to reveal their private information on productivity knowing that the managers have no incentive to lie the resource allocation problem can then be solved under complete or at least symmetric information this aspect is a flaw in much of the recent literature on this topic i e there is nothing in the models considered which makes divisions prefer one allocation over another thus although in some cases elaborate allocation schemes are proposed and analyzed they are really unnecessary in the model we develop a division can produce the same output with less managerial effort if it is allocated more resources and effort is costly to the manager we further assume that this effort is unobservable by the headquarters so that it cannot infer divisional productivity from data on divisional output and managerial effort given these assumptions we seek an optimal resource allocation process our results show that certain types of transfer pricing schemes are optimal in particular if there are no potentially binding capacity constraints on production of the resource then an optimal process is for each division to choose a transfer price from a schedule announced by the headquarters division managers receive a fixed compensation minus the cost of the resource allocated to them at the chosen transfer price resources are allocated on the basis of the chosen transfer prices if there is a potentially binding constraint on resource production a somewhat more complicated but similar scheme is required

spousal control and intra household decision making an experimental study in the philippines i elicit causal effects of spousal observability and communication on financial choices of married individuals in the philippines when choices are private men put money into their personal accounts when choices are observable men commit money to consumption for their own benefit when required to communicate men put money into their wives account these strong treatment effects on men but not women appear related more to control than to gender men whose wives control household savings respond more strongly to the treat ment and women whose husbands control savings exhibit the same response changes in information and communication interact with underlying control to produce mutable gender specific outcomes

the learning curve and pricing in the chemical processing industries data on 37 chemical products are used to test a number of hypotheses about the learning curve and industrial price behavior the results document a strong and consistent learning effect learning is found to be a function of cumulated industry output and cumulated investment rather than calendar time standard economies of scale appear significant but small in magnitude relative to the learning effect variations in the slope of the learning curve are linked to differences in r d expenditures and capital intensity market concentration is found to be a strong influence on price flexibility and the timing of learningrelated price changes

plastic cars in china the significance of production location over markets for technology competitiveness in the united states versus the people s republic of china abstract this paper demonstrates the significance of location specific differences in manufacturing characteristics and in consumer demand for technology competitiveness it looks in particular at the economic viability of emerging polymer composite automobile body technologies if produced in the united states u s versus if produced in the people s republic of china p r c the results show that polymer composite bodies when produced locally for the local market are competitive for significantly fewer cars in the p r c 7 than in the u s 29 despite consumer demand characteristics in the p r c being more favorable for composites differences in production characteristics between the two locations dominate the overall effect these results suggest that in cases such as automobile bodies where markets and manufacturing location are tightly coupled firms may need to put as much emphasis on understanding the impact of local production differences on technology competitiveness as in understanding local markets

intra household resource allocation an inferential approach if household income is pooled and then allocated to maximize welfare then income under the control of mothers and fathers should have the same impact on demand with survey data on family health and nutrition in brazil the equality of parental income effects is rejected unearned income in the hands of a mother has a bigger effect on her family s health than income under the control of a father for child survival probabilities the effect is almost twenty times bigger the common preference or neoclassical model of the household is rejected if unearned income is measured with error and income is pooled then the ratio of maternal to paternal income effects should be the same equality of the ratios cannot be rejected there is also evidence for gender preference mothers prefer to devote resources to improving the nutritional status of their daughters fathers to sons

repeated auctions of incentive contracts investment and bidding parity with an application to takeovers this article considers a two period model of natural monopoly and second sourcing the incumbent supplier invests in the first period after observing the incumbent s first period performance the buyer may break out in the second period the investment may or may not be transferable to the second source and it may be monetary or take the form of human capital we determine whether the incumbent should be favored at the reprocurement stage and how the slope of his incentive scheme should evolve over time we find that the gains from second sourcing are not so large as one might hope finally we reinterpret the second source as a raider and the breakout as a takeover we discuss the desirability of defensive tactics and obtain a rich set of testable implications concerning the size of managerial stock options the extent of defensive tactics the firm s performance and the probability of a takeover

descent rules and strategic transfers evidence from matrilineal groups in ghana abstract traditional descent systems can roughly be divided into patrilineal and matrilineal in the latter a man s heir is not his own child but rather his sister s son the paper examines the implications of this social norm for the pattern of inter vivos transfers using household level data from rural ghana where the largest ethnic group is traditionally matrilineal in particular it tests the predictions of a model of strategic behavior according to which children should respond to the threat of disinheritance by increasing transfers to their parents during lifetime to induce a donation of land before the default matrilineal inheritance is enforced i find that the credibility of customary norms enforcement as proxied by the presence of a nephew in the father s household significantly increases the probability of receiving transfers from children for akans but not for the other groups the effect is specific to nephews and not to other co resident boys this pattern of behavior can affect asset accumulation decisions across generations

repeated principal agent relationships with lending and borrowing abstract it is shown optimal long term contracts are strictly better than a series of unrelated short term contracts for two reasons long term contracts allow risk to be spread over time and the agent s intertemporal choices provide information about the unobservable random variable

the mobilization of women s labor for cash crop production a game theoretic approach in the last decade or so economists have modeled phenomena such as household labor supply fertility behavior and child survival rates using the household as the unit of analysis this paper presents data that call into question the assumption that the household is a joint decision making unit which maximizes a neoclassical household utility function the data come from a study of the mobilization of women s labor by their husbands for irrigated rice production in north cameroon the first section of this paper describes briefly the massa rice and sorghum farming system and then considers the relationship between the amount of compensation women receive from their husbands for their labor on rice production and the amount of labor they allocate to rice production the findings suggest that a bargaining model may describe the intrahousehold relations of production and distribution better than the neoclassical model the second section specifies a nash bargaining model and contrasts it with the neoclassical model of the household using the bargaining framework the third section explores in more detail possible explanations of the allocative inefficiency which seems to characterize many of the rice cultivating households

managerial incentives for short term results a comment in managerial incentives for short term results narayanan 4 examines the manager s incentive to make a suboptimal decision in particular an incentive to choose projects that yield short term profits even when the manager is compensated with a long term contract this incentive to act myopically at the expense of shareholders welfare is attributed to the manager s very concern for the long term impact of current actions that is the desire to enhance reputation earlier to boost wages although this type of myopic behavior is a cause for great concern and narayanan s approach is interesting the particular model he develops has a serious drawback we discuss briefly in this note how the shareholders can easily anticipate and prevent the manager from making a suboptimal decision by providing proper incentive contracts using the model by harris and holmstrom 1 as a benchmark narayanan sets up a multiperiod principal agent relationship in which the manager s ability is unknown and project choice is unobservable by the shareholders since the manager s ability is unknown compensation depends upon the observable output not being able to observe the project choice the shareholders update their prior on the manager s ability according to their conjecture of the manager s project choice the manager in turn chooses a project so as to maximize expected future wage which depends upon the shareholders perception of the manager s ability by choosing a quicker return project the manager may induce the shareholders to attribute the extra dollars to higher ability resulting in greater wages in the future thus we have a game theoretic situation the illustrated game in the paper deals with two alternative projects yielding a 2 x 2 bimatrix nonconstant sum game with payoffs determined by the strategies and cash flows from the project given this game structure narayanan is able to obtain a unique nash equilibrium where both players use dominant strategies the choices of strategies for both players depend upon the value of 5k the difference between the manager s expected total wage from projects a and b regardless of the shareholders strategy conjecture on the project choice if 4k is positive negative both players choose a b as their dominant strategy this equilibrium can be summarized by a usual 2 x 2 matrix as follows

collusive market structure under learning by doing and increasing returns learning by doing and increasing returns are often perceived to have similar implications for market structure and conduct we analyse this in the context of an infinite horizon price setting game learning is shown to not reduce the viability of market sharing collusion between a given number of firms whereas intra period increasing returns invariably does we subsequently develop a model where the number of active firms is determined endogenously under the assumption that the post entry game is collusive in this model learning has no effect on concentration while scale economies increase concentration

globalization and location choice an analysis of us multinational firms in 1980 and 2000 in this paper we examine foreign location choices of the top 100 us multinational corporations mncs in 1980 and 2000 we first ask whether there has been a change in mnc foreign location choice in this two decade period second we explore the underlying reasons of location change by focusing on country level factors accounting for firm industry and regional level explanations our findings suggest first that the extent of mncs activities around the globe is more extensive than assumed by regionalists arguments and well beyond ohmae s triad but still less widespread than claimed by the globalists the two main traditions within the globalization regionalization debate second we uncover an interesting de location pattern in this period third we develop an integrative framework where both economic and institutional cultural arguments are shown to influence mncs foreign location choice in different ways we conclude with a discussion of our findings and provide suggestions for future research

noncooperative decision making in the household evidence from malawi this paper proposes a novel test of productive efficiency in the household that also allows a test of noncooperative decision making i extend the collective model chiappori 1988 1997 to allow labor choices to affect future bargaining power by raising the value of outside options even if household consumption sharing is efficient labor choices are no longer efficient using data on malawi where there is predetermined variation in land rights that determine outside options in marriage i show that individuals spend more time on agricultural labor and less time on wage labor when household land is theirs they also have lower overall income and consumption the results are inconsistent with the fully efficient collective model but consistent with a noncooperative model with limited commitment where individuals allocate their labor supply to maximize future bargaining power limited commitment can lead to inefficient allocations that reduce household welfare

separate spheres bargaining and the marriage market this paper introduces the separate spheres bargaining model a new model of distribution within marriage it differs from divorce threat bargaining models e g manser brown mcelroy horney in that the threat point is not divorce but a noncooperative equilibrium within marriage this noncooperative equilibrium reflects traditional gender roles the predictions of our model thus differ from those of divorce threat bargaining models in the separate spheres model cash transfer payments to the mother and payments to the father can but need not imply different equilibrium distributions in existing marriages in the long run the distributional effects of transfer policies may be substantially altered by changes in the marriage market equilibrium

is risk fully pooled within the household evidence from ghana using detailed household survey data from ghana this paper examines whether the transitory incomes of individual household members affect household expenditure patterns divided into six sections the themes include risk sharing networks household survey data from ghana theoretical framework of risk sharing within households estimating transitory income and effects on household budget shares the conclusion that transitory incomes earned by different members of the household have different effects on household expenditure patterns this implies that household members do not engage in full risk pooling with each other moreover it is not always the case that all women or all men display similar preferences or risk pooling behavior this suggests complex features within the household risk sharing structure which is more complex than might be hypothesized by a simplistic analysis framed along gender lines

should we write prenuptial contracts abstract a successful marriage requires for both parties to make investments in their relationship and marital assets how such assets would be divided if and when the parties divorce is an important factor determining each party s ex ante investment incentives using the incomplete contracting approach we characterize the optimal asset division rule one that provides the parties with the best investment incentives we then discuss the circumstances under which the spouses would agree in equilibrium to contract out state imposed rules governing the allocation of marital assets upon divorce we conclude by exploring the implications of our results in the context of various asset division rules currently discussed by policy makers

on integrating theories of international economics in the strategic planning of global supply chains and facility location abstract this paper relates three theories of international economics comparative advantage competitive advantage and competitiveness and formulates the thesis that incorporating them in the form of readily available individual competitiveness indicators in or ms models offers promise to enhance decision support for the strategic planning of global supply chains in general and for locating facilities in particular the purpose of this paper is to relate these theories from the field of international economics to give a roadmap of related measures that are provided by annual competitiveness reports and to pose several research questions as challenges to the or ms community as it seeks to improve models to support the strategic planning process accordingly specific objectives of this paper are to relate each of these theories and to describe their interrelationships to describe measures provided by two well known annual competitiveness reports and to illustrate application of the theories as a means of supporting the thesis of the paper and justifying the research questions we pose for future research while this paper discusses topics relative to the broader background of global supply chain design it illustrates applications associated with facility location a component of the global supply chain design since it has a rich history within the or ms community and since it is central to strategic planning in the global economy

income and outcomes a structural model of intrahousehold allocation there is evidence from several sources that one cannot treat many person households as a single decision maker if this is the case then factors such as the relative incomes of the household members may affect the final allocation decisions made by the household we develop a method of identifying how incomes affect outcomes given conventional family expenditure data the basic assumption we make is that household decision processes lead to efficient outcomes we apply our method to a sample of canadian couples with no children we find that the final allocations of expenditures on each partner depend significantly on their relative incomes and ages and on the level of lifetime wealth

managerial incentives and capital management the paper shows how career concerns rather than effort aversion can induce a natural incongruity in risk preferences between managers and superiors a model based on learning about managerial talent is developed to study second best contractual remedies we show that the optimal wage contract is an option of the value of the manager s human capital for insurance reasons and that consequently rationing of capital is often required to counterbalance the manager s resulting incentive to overinvest rationing is strictly superior to price decentralization offering one reason for the prevalence of centralized capital budgeting procedures

capital rationing and organizational slack in capital budgeting this paper reconciles three stylized facts about capital budgeting in firms and shows that they are tied to the presence of asymmetric information among the several members of the firm each with his or her own objectives and decisions the facts of interest are 1 the existence of organizational slack 2 the rationing of resources within organizations 3 the stated cut off rate for accepting capital projects in firms is often greater than the market rate of interest organizational slack is defined as the excess of resources allocated over the minimum necessary to accomplish the tasks assigned resource rationing is defined as the under allocation of resources i e an increase in the amount allocated would generate revenues in excess of its costs rationing and slack are both manifestations of ex post inefficiencies an lp model is used to show that these inefficiencies can occur in ex ante efficient organizational designs when asymmetric information is present the optimal allocation policy involves a hurdle rate criterion in which the hurdle rate is strictly in excess of the cost of capital thus inducing rationing in some states of the world typically resources are optimally allocated such that slack exists in other states the optimal allocation policy trades off these two inefficiencies