renegotiation on incomplete procurement contracts abstractthis article examines the impact of incomplete contracts on procurement costs in road construction auctions ex ante contracts in these auctions often fail to specify all of the potential construction contingencies and consequently changes in scope are necessary after construction begins using vermont road construction contract data this study finds evidence that there is a statistically significant difference in costs of firms between auctions with and without extra work adjustments substantial adaptation costs are responsible for the higher procurement outlays in incomplete contract i also find that bidders inflate their bids to incorporate risk premiums in incomplete contracts however my estimates suggest that this bidding behaviour does not affect their profit margins

deciding between competition and collusion we develop an approach to identify and test for bid rigging in procurement auctions first we introduce a general auction model with asymmetric bidders second we study the problem of identie cation in our model we state a set of conditions that are both necessary and sufe cient for a distribution of bids to be generated by a model with competitive bidding third we discuss how to elicit a prior distribution over a e rm s structural cost parameters from industry experts given this prior distri bution we use bayes s theorem to compare competitive and collusive models of industry equilibrium finally we apply our methodology to a data set of bidding by construction e rms in the midwest the techniques we propose are not computationally demanding use e exible functional forms and can be programmed using most standard statistical packages

the mineral economy a model for the shape of oil production curves abstract the production and the depletion of mineral resources and especially oil and fossil fuels has been an object of extensive predictive modeling these predictions are often derived from hubbert s model which is based on the fitting of the experimental data to a symmetric bell shaped curve although this model describes several historical cases in particular crude oil production in the lower 48 us states not all theoretical models for the mineral economy are based on symmetric curves also not much attention has been dedicated so far to the mechanisms which lead to such a behavior in particular scarce attention has been dedicated to the factors which may make the production curve asymmetric e g a decline in production more abrupt than the growth in the present paper the author uses a stochastic model to examine factors affecting these phenomena the results of the simulations indicate that the production curves of a non renewable resource may be asymmetric in dependence on factors such as the search strategy or the presence of technological improvements considering worldwide oil production the simulations indicate that the after peak downward slope might turn out to be considerably more steep than the upward slope something that could have unpleasant effects on the economy

optimal nonparametric estimation of first price auctions this paper proposes a general approach and a computationally convenient estimation procedure for the structural analysis of auctioni data considering first price sealed bid auction models within the independent private value paradigm we show that the underlying distribution of bidders private values is identified from observed bids and the number of actual bidders without any parametric assumptions using the theoiy of minimax we establish the best rate of uniform convergence at which the latent density of private values can be estimated nonparametrically from available data we then propose a two step kernel based estimator that converges at the optimal rate

investigating bid preferences at low price sealed bid auctions with endogenous participation abstract at procurement auctions with bid preferences qualified firms are treated special a common policy involves scaling the bids of preferred firms by a discount factor for the purposes of evaluation only introducing such an asymmetry has three effects first preferred firms may inflate their bids yet still win the auction second nonpreferred firms may bid more aggressively than in the absence of preferences third the preference policy can affect participation for different cost distributions we solve numerically for the equilibrium bid functions under different discounts and then simulate behaviour our approach allows us to quantify the relative importance of the three effects we find that the participation effect is relatively unimportant and in most cases a positive cost minimizing preference rate exists download download video 34mb video 1

nonparametric estimation of sample selection models sample selection models provide an important way of accounting for economic decisions that combine discrete and continuous choices and of correcting for nonrandom sampling nonparametric estimators for these models are developed in this paper these can be used for estimating shapes and important economic quantities as in standard nonparametnc regression endogeneity of regressors of interest is allowed for series estimators for these models are developed which are useful for imposing additivity restnctions that arise from selection corrections convergence rates and asymptotic normality results are derived an application to returns to schooling among australian young females is given

empirical implications of equilibrium bidding in first price symmetric common value auctions this paper studies federal auctions for wildcat leases on the outer continental shelf from 1954 to 1970 these are leases where bidders privately acquire at some cost noisy but equally informative signals about the amount of oil and gas that may be present we develop tests of rational and equilibrium bidding in a common values model that are implemented using data on bids and ex post values we also use data on tract location and exposr values to test the comparative static prediction that bidders may bid less aggressively in common value auctions when they expect more competition we find that bidders are aware of the winner s curse and their bidding is largely consistent with equilibrium

subcontracting and the survival of plants in the road construction industry a panel quantile regression analysis this paper investigates how subcontracting parts of contracted work shapes entrants success and survival we find that newly developed quantile regression approaches can be adapted to study survival of firms competing for government contracts in road construction the method is applied on a data set that includes patterns of firm entry exit and auction related information we find an apparent increase in the business life of firms who subcontract out part of their projects in texas these subcontracting effects appear to be more pronounced for firms with few or no options outside the industry and among firms who contract out part of their work to disadvantaged business enterprises

how reasonable are oil production scenarios from public agencies according to the long term scenarios of the international energy agency iea and the u s energy information administration eia conventional oil production is expected to grow until at least 20

market structure and resource depletion a contribution to the theory of intertemporal monopolistic competition a the theory of resource extraction in the model we present there exists a produced substitute to the natural resource the primary question with which we are concerned is the interaction of the resource and its substitute the model we present can thus be thought as providing a link between rent and production based price theories one of the general results in the earlier literature on resource extraction is that deposits with lower extraction costs will be exploited first the analysis

the possible role of nuclear energy in italy italy after the vote of the referendum in 1987 stopped producing electricity from nuclear fuel for the energy demand this paper analyses the current italian energy outlook and clarifies how the choice to abandon the nuclear option damaged our economy nowadays the possible reintroduction of civil nuclear option is hindered by groups claiming that nuclear energy is not convenient and is incredibly dangerous in this paper it is clarified with international references how this is not correct and why italy should start thinking seriously and without prejudices at future energy options

oil vulnerability index of oil importing countries abstract this paper assesses the relative oil vulnerability of 26 net oil importing countries for the year 2004 on the basis of various indicators the ratio of value of oil imports to gross domestic product gdp oil consumption per unit of gdp gdp per capita and oil share in total energy supply ratio of domestic reserves to oil consumption exposure to geopolitical oil market concentration risks as measured by net oil import dependence diversification of supply sources political risk in oil supplying countries and market liquidity the approach using the principal component technique has been adopted to combine these individual indicators into a composite index of oil vulnerability such an index captures the relative sensitivity of various economies towards developments of the international oil market with a higher index indicating higher vulnerability the results show that there are considerable differences in the values of individual indicators of oil vulnerability and overall oil vulnerability index among the countries both inter and intraregional

escape dynamics in learning models this article illustrates and characterizes how adaptive learning can lead to recurrent large fluctuations learning models have typically focused on the convergence of beliefs towards an equilibrium however in stochastic environments there may be rare but recurrent episodes where shocks cause beliefs to escape from the equilibrium generating large movements in observed outcomes i characterize the escape dynamics by drawing on the theory of large deviations developing new results which make this theory directly applicable in a class of learning models the likelihood frequency and most likely direction of escapes are all characterized by a deterministic control problem i illustrate my results with two simple examples

a study of cartel stability the joint executive committee 1880 1886 this article employs weekly time series data on the joint executive committee railroad cartel from 1880 to 1886 to test empirically the proposition that observed prices reflected switches from collusive to noncooperative behavior an equilibrium model of dynamic oligopoly with asymmetric firms together with explicit functional form assumptions about costs and demand determines the estimating equations and stochastic structure of the econometric model the hypothesis that no switch took place so that price and quantity movements were solely attributable to exogenous shifts in the demand and cost functions is then tested against this alternative and rejected

learning convergence and stability with multiple rational expectations equilibria abstract for a linear model with multiple rational expectations equilibria ree we discuss the set of possible ree solutions include i locally unique minimal state variable solutions taking an ar 1 form and ii continua of solutions which may depend on sunspots we analyze the convergence of econometric learning to the different ree there exist cases with more than one stable ar 1 solution it is also possible for a continuum of solutions to be stable but this property is not robust to overparametrization an application is developed and it is suggested that the exhibited phenomena may arise in applied macroeconomic models

oligopoly equilibria in nonrenewable resource markets abstract most nash cournot oligopoly models of nonrenewable resources apply open loop equilibrium concepts and are based on physical resource depletion this paper studies feedback equilibria and economic depletion assuming affine quadratic functional forms the existence uniqueness and explicit solutions for the equilibria are derived for duopoly and n player oligopoly with multiple resource stocks for the cases of nonquadratic criteria we develop a numeric solution scheme for the nash feedback equilibrium this scheme is an application of a discrete time discrete state controlled markov chain approximation method originally developed for solving deterministic and stochastic dynamic optimization problems in our nash cournot equilibrium the degree of concentration in supply declines over time whereas the previous models with physical depletion and open loop equilibrium concepts predict that a nash cournot resource market will develop in the direction of monopoly supply

on the portents of peak oil and other indicators of resource scarcity economists have studied various indicators of resource scarcity but largely ignored the phenomenon of peaking due to its connection to non economic physical theories of resource exhaustion i consider peaking from the economic point of view where economic forces determine the shape of the equilibrium extraction path within that framework i ask whether the timing of peak production reveals anything useful about scarcity i find peaking to be an ambiguous indicator if someone announced the peak would arrive earlier than expected and you believed them you would not know whether the news was good or bad however i also show that the traditional economic indicators of resource scarcity price cost and rent fare no better and argue that previous studies have misconstrued the connection between changes in underlying scarcity and movements in these traditional indicators

long term oil prices abstract in this paper we propose a model to estimate and simulate long term oil prices our model is based on properties of demand and supply for oil and it is able to reproduce historical real oil prices well we use the model to estimate and simulate future real oil price scenarios the results show that if we are not able to significantly increase demand elasticity the yearly real oil price change can reach 12 in the years following the peak production level without taking a scarcity rent into account until peak production level is reached the long term real oil price changes stemming from fundamental supply and demand changes are expected to be negative our simulation results based on an expected peak production year of 2020 and a scarcity rent of 3 suggest an expected real crude oil price of 169 bbl in 2040 for comparison the eia outlook predicts a real oil price of 141 bbl for the same year we also provide an on line appendix that allows the readers to change the assumptions underlying our analysis and see the results immediately

major oil exporters may profit rather than lose in a carbon constrained world the organization of petroleum exporting countries opec claims compensation for losses in expected oil export revenues due to co2 mitigation measures in developing countries these losses are expected for two primary reasons a reduction in the consumption of oil in importing countries and a reduction in the producer price of oil taxation in an importing country implies a transfer of rents from producers to consumers so far most studies have focused on these two mechanisms and corroborated that revenue losses for opec are to be expected however there are also mechanisms that may be expected to raise the price of oil products in a cost effective regime for dealing with climate change i e a regime in which all or most countries participate and in which the same carbon price is applied on all carbon emitting activities the cost of using unconventional oil or synthetic diesel from coal will increase even more than the cost of using conventional oil given that reserves of conventional oil are expected to dwindle over time heavy oils and coal to liquids might set the long run price for liquid fuels which means that the price of oil would increase beyond the carbon fee i e the rent on conventional oil would increase we use an energy economic optimization model to analyze these three mechanisms we find that the net present value of opec revenue from conventional oil increases slightly at most by 4 percent with a global co2 restriction regime we also consider conditions under which this result does not hold

rules of thumb versus dynamic programming this paper studies decision making with rules of thumb in the context of dynamic decision problems and compares it to dynamic programming a rule is a fixed mapping from a subset of states into actions rules are compared by averaging over past experiences this can lead to favoring rules which are only applicable in good states correcting this good state bias requires solving the dynamic program we provide a generalframework and characterize the asymptotic properties we apply it to provide a candidate explanation for the sensitivity of consumption to transitory income jel eoo c63 c61 e21

integrating sustainable chain management with triple bottom line accounting abstract triple bottom line accounting is widely advanced as a way in which firms can realise broader societal objectives in addition to increasing shareholder value in our analysis of the australian economy we integrate financial input output tables that describe the interdependencies between economic sectors with national social and environmental accounts to construct numerate triple bottom line accounts for 135 discrete sectors the accounts are portrayed against the numeraire of one dollar of gdp thus for a sector of the economy financial aspects of performance can be expressed for example as dollars of export earnings per dollar of gdp social aspects such as employment can be portrayed as minutes of employment generated per dollar greenhouse issues can be portrayed as kilograms of carbon dioxide emitted per dollar since these indicators of triple bottom line performance are referenced against financial units and are consistent with the system of national accounts they can be applied to financial accounts of a firm a service or a product and allow a robust triple bottom line account to be developed across a range of scales the critical advantage of this approach is that it includes both the direct or immediate effects as well as the indirect or diffuse effects associated with a large and distant chain of supply paths the incorporation of most indirect or upstream effects therefore expands the range of issues and effects within the analytical boundary and also includes imports and exports both products and firms can then be assessed properly in sustainable chain management scm terms thus a firm that uses a key intermediate input that requires a large amount of water for example cannot hide the environmental implications since they are revealed in the analysis of the full production chain this revelation can also underpin progress when firms acknowledge both the direct and indirect effects and improve their selection of key inputs on a wider range of criteria rather than on price alone our analysis is well developed at the economic sector level for australia and is also being applied to number of government institutions firms and individual products before the full benefits of numerate triple bottom line accounting can be applied to the equity issues of globalisation trade interdependencies between groups of typical countries will have to be analysed using these whole economy approaches this will allow country specific intensities to be applied to important items in the international production chain

global oil gas depletion an overview abstract the world s production of conventional hydrocarbons will soon decline hydrocarbon shortages are inevitable unless radical changes occur in demand or in the supply of non conventional hydrocarbons the details are as follows global conventional oil supply is currently at political risk this is because the sum of conventional oil production from all countries in the world except the five main middle east suppliers is near the maximum set by physical resource limits should middle east suppliers decide to substantially curtail supply the shortfall cannot be replaced by conventional oil from other sources world conventional oil supply will soon be at physical risk the middle east countries have only little spare operational capacity and this will be increasingly called upon as oil production declines elsewhere large investments in middle east production if they occur could raise output but only to a limited extent a partial exception is iraq but even here there would be significant delays before prospects are confirmed and infrastructure is in place if demand is maintained and if large investments in middle east capacity are not made the world will face the prospect of oil shortages in the near term even with large investments resource limits will force middle east production to decline fairly soon and hence also global conventional oil production the date of this resource limited global peak depends on the size of middle east reserves which are poorly known and unreliably reported best estimates put the physical peak of global conventional oil production between 5 and 10 years from now the world contains large quantities of non conventional oil and various oil substitutes but the rapidity of the decline in the production of conventional oil makes it probable that these non conventional sources cannot come on stream fast enough to fully compensate the result will be a sustained global oil shortage for conventional gas the world s original endowment is probably about the same in energy terms as its endowment of conventional oil since less gas has been used so far compared to oil the world will turn increasingly to gas as oil declines but the global peak in conventional gas production is already in sight in perhaps 20 years and hence the global peak of all hydrocarbons oil plus gas is likely to be in about 10 or so years

a theory of oil igopoly cournot equilibrium in exhaustible resource markets with fixed supplies the emergence of an effective and powerful cartel in the international petroleum market has stimulated considerable effort among economists to develop models of pricing and supply behavior for this industry 2 this modeling task poses two basic difficulties first as in the standard oligopoly problem one must characterize the behavior of several sellers in a market aware of each other and of their effect on market price second there is here the added difficulty of treating the explicitly intertemporal nature of suppliers decision wherein a limited stock must be optimally allocated over time this paper studies the implications of the simplest non trivial postulates about these two aspects of the problem it is assumed that suppliers are non cooperative cournot nash players each of whom is imagined to select an optimal supply strategy taking as given the strategies of the others moreover it is hypothesized that the feasible strategies are limited to open loop paths chosen at the initial date to maximize the present value of profits in light of the paths of supply which the others have chosen 3 these basic postulates together with a few technical assumptions concerning the structure of resource demand permit one to demonstrate the existence of at least one non cooperative equilibrium concerning thisequilibrium we show that 1 the average and marginal return on resource stocks is inversely related to the size of a player s initial endowment 2 aggregate production decreases over time until all stocks are exhausted while firms with smaller stocks exhaust their supplies no later than firms with larger stocks do 3 the present value of price net of extraction cost declines over time 4 industry production maximizes a weighted average of intertemporal consumer s surplus and producers profits

affirmative action and the utilization of minority and women owned businesses in highway procurement i introduction affirmative action programs in public procurement are among the more important government programs intended to advance self employment opportunities for minorities and women in 2002 6 75 of federal procurement dollars were awarded to disadvantaged business enterprises dbes through the small business administration and preferential treatment for minority firms is a common feature of many state and local government agencies recent court decisions and state measures have reduced the scope of and in some settings eliminated affirmative action programs based on race or gender which has given renewed importance to understanding the role of affirmative action in the success of self employed minorities and women the use of affirmative action is particularly widespread in the highway procurement industry since the late 1970s and early 1980s most states have employed affirmative action to award contracts to minority owned firms and since 1982 the federal highway administration fhwa has required states use affirmative action in awarding projects using federal funds in 1998 states awarded 14 6 billion of construction and repair contracts using federal funds of which 1 9 billion was awarded to firms owned by minorities and women as blanchflower and wainright 2005 note in the intervening years states have increasingly been able to use race neutral measures to meet goals which has had an adverse effect on utilization of minority owned firms understanding the effects of affirmative action in this industry is made important by the significance of the public sector according to the 2002 census of industries 72 6 of the revenue earned by firms in the highway street and bridge construction industry was from government owned projects as a result changes in public procurement policy will have a strong effect on firms in the highway construction industry despite the importance of affirmative action in this industry our understanding of the effects of these programs is limited states generally use percentage goals for the participation of minority owned subcontractors by prime contractors past research has established the response of dbe utilization to large episodic changes in affirmative action such as the elimination by certain states or cities of affirmative action programs blanchflower and wainright 2005 however little evidence exists regarding the intensive margin of affirmative action in public procurement that is as participation goals are raised or lowered what is the response of the utilization of dbes generally and minority and women owned firms specifically higher dbe goals do not necessarily raise the utilization of firms owned by minorities and women for two reasons first the dbe goal may not be binding in which case the marginal effect of small changes to the goal would be zero second goals for the utilization of dbes are often not perfectly enforced for instance a contractor facing a requirement to subcontract a fraction of a contract to dbes can skirt this requirement by documenting a good faith effort to employ firms owned by minorities and women the goal of this paper is to provide new evidence regarding the effectiveness of affirmative action programs in highway procurement at increasing purchases from firms owned by minorities and women two sources of variation are employed to answer this question the first is variation in dbe goals across states over time and the second is variation across projects within a state i begin by examining state level data regarding affirmative action goals and dbe utilization over the entire history of the fhwa s affirmative action program i utilize changes in affirmative action goals over time within states to identify the effect of affirmative action intensity on the level of dbe purchases i find that increasing goals for the utilization of dbe goals substantially raise the utilization of minority owned business enterprises mbes

oil exploration and perceptions of scarcity the fallacy of early success abstract it has been suggested that oil exploration may lead to false perceptions of decreasing scarcity we perform a simulation of the exploration process using bayesian updating the approach enables us to isolate the information effect on the success rate and also to quantify the subjective expectation of the total resource size the area under exploration consists of a number of regions which may differ in their oil content exploration is performed with the goal to maximize the expected success rate the resulting information about the distribution of oil and the total resource size is assumed public knowledge a number of scenarios with variations in the dimensions of the area under exploration the oil distribution and initial beliefs are considered the results indicate that the information effect on the success rate is significant but brief it might have a considerable impact on price but is an unlikely mechanism behind a long term declining price trend however the information effect on expectations is gradual and persistent since exploration is performed in regions where the expected success rate is the highest the historical success rate will not be representative of the area as a whole an explorer will tend to overestimate the total resource size thereby suggesting an alternative mechanism for false perceptions of decreasing scarcity a mechanism that could be called the fallacy of early success

sovereign default and the euro the introduction of the euro meant that countries with sovereign debt problems could not use monetization and devaluation as a way to prevent default the institutional structures of the euro were also widely thought to prevent a country in difficulties being bailed out by other euro members or having its sovereign debt purchased by the european central bank ecb despite these restrictions there was relatively little discussion about sovereign default in pre economic and monetary union debates among economists and financial markets priced in almost no default risk in the pre crisis years the crisis has seen bailouts and bond purchases by the ecb but there has also been a sovereign default inside the euro and further defaults seem likely the introduction of the euro was intended to bring greater stability by ending devaluations triggered by self fulfilling runs on a currency while this particular scenario can no longer happen this paper discusses mechanisms whereby expectations that a country may leave the euro can lead to this outcome occurring copyright 2013 oxford university press

assessing the date of the global oil peak the need to use 2p reserves combining geological knowledge with proved plus probable 2p oil discovery data indicates that over 60 countries are now past their resource limited peak of conventional oil production the data show that the global peak of conventional oil production is close many analysts who rely only on proved 1p oil reserves data draw a very different conclusion but proved oil reserves contain no information about the true size of discoveries being variously under reported over reported and not reported reliance on 1p data has led to a number of misconceptions including the notion that past oil forecasts were incorrect that oil reserves grow very significantly due to technology gain and that the global supply of oil is ensured provided sufficient investment is forthcoming to turn resources into reserves these misconceptions have been widely held including within academia governments some oil companies and organisations such as the iea in addition to conventional oil the world contains large quantities of non conventional oil most current detailed models show that past the conventional oil peak the non conventional oils are unlikely to come on stream fast enough to offset conventional s decline to determine the extent of future oil supply constraints calculations are required to determine fundamental rate limits for the production of non conventional oils as well as oil from gas coal and biomass and of oil substitution such assessments will need to examine technological readiness and lead times as well as rate constraints on investment pollution and net energy return

the end of cheap oil bottom up economic and geologic modeling of aggregate oil production curves there is a lively debate between concerned and unconcerned analysts regarding the future availability and affordability of oil we critically examine two interrelated and seemingly plausible ar

views on peak oil and its relation to climate change policy abstract definitions of fossil fuel reserves and resources and assessed stock data are reviewed and clarified semantics explain a large stake of conflict between advocate and critical voices on peak oil from a holistic sources sinks perspective limited carrying capacity of atmospheric sinks not absolute scarcity in oil resources will impose tight constraints on oil use eventually observed peaks in oil production in nearby years will result from politically imposed limits on carbon emissions and not be caused by physical lack of oil resources peak oil belief induces passive climate policy attitudes when suggesting carbon dioxide emissions will peak naturally linked to dwindling oil supplies active policies for reducing emissions and use of fossil fuels will also encompass higher energy end use prices revenues obtained from higher levies on oil use can support financing energy efficiency and renewable energy options but when oil producers charge the higher prices they can pump new oil for many decades postponing peak oil to occur while extending carbon lock in

price adjustment policies in procurement contracting an analysis of bidding behavior the fluctuations in fuel prices over the past decade led a number of government agencies to introduce price adjustment clauses in procurement contracting those clauses were primarily designed to reduce contractors uncertainty without considering the impact of such initiatives on bidding and the budget we analyze a newly constructed detailed panel of observations on bids for construction contracts and compare bidding behavior across periods and projects and across items within projects estimates from a difference in differences approach indicate that bidding becomes more aggressive and less dispersed after the implementation of this policy the difference is more pronounced when we consider itemized bids than overall project bids alternative techniques of regression discontinuity and nonparametric estimation are applied and yield consistent results

the mineral economy how prices and costs can falsely signal decreasing scarcity abstract natural resource prices and costs of extraction have declined simultaneously with increasing quantities of extraction for a long time in a hotelling sense this indicates decreasing scarcity since low cost resources normally would be used first and quantities of extraction normally would decrease over time the main reason for the trend being opposite to hotelling characteristics is usually thought to be due to technological innovation however an alternative reason for decreasing costs and prices and increasing quantities of extraction may be due to georgescu roegen s georgescu roegen nicholas 1972 energy and economic myth in georgescu roegen nicholas ed energy and economic myths institutional and analytical economic essays published 1976 pergamon press new york pp 3 36 concept of bonanza where there is only the appearance of decreasing scarcity norgaard s norgaard r b 1990 economic indicators of resource scarcity a critical essay j environ econ manage 19 1 19 25 mayflower problem can be used to model an alternative neo classical approach to resource extraction and scarcity in this paper a model of resource exploration is developed where the explorer does not know total reserves of the resource base as he searches for and extracts the natural resource the explorer never entirely knows how big the resource base is but does gain information about the potential location of new reserves as discovery proceeds that reduces exploration costs the lower exploration costs can cause the price to fall over time until eventually scarcity of the resource causes the price to rise the true scarcity is only revealed towards the end of exhaustion the model shows that it is possible to have several years of increasing production simultaneous with lower prices and costs until a sudden intense price rise occurs with a huge cut in production when technology is able to cut costs and increase the reserve base the decline in prices and costs and the increase in production can last longer however even with better technology it is still possible for a sharp increase in price as long as demand is growing faster than technological innovation the problem is that the true size of the resource base is never known society does not know if technology is actually overcoming scarcity or not until demand for a resource outstrips supplies it is even possible for a price shock of incredible magnitude to surprise an economy within one or two years after a hundred years of declining prices and increasing production

availability addiction and alternatives three criteria for assessing the impact of peak minerals on society abstract the concept of peaks in the production of natural resources has attracted attention in the area of energy production with concerns about peak oil driving recent research and investment in alternative sources of energy there are fundamental and important differences between a peak in the production of oil and peaks in the production of metalliferous minerals but in both cases production changes from easier and less expensive early in a resource s life to difficult and expensive as time progresses the impacts of this change in production circumstances require critical consideration in the governance of national and sub national mineral endowments this paper develops a framework for evaluating the impacts of changing patterns of mineral production the framework considers three criteria availability of a resource considering its geological characteristics and geographical distribution society s addiction to the resource its centrality and criticality to economic social and environmental systems and the possibility of finding alternatives whether the resource can be substituted or recovered an initial assessment against these criteria provides an overview of how a production peak might affect the production of minerals in australia and the impacts that this might have on the australian economy assessing important resources against these three criteria will be imperative in future considerations regarding the roles minerals and metals play as service providers in our economic social and environmental systems additionally this analysis should prompt a reassessment of the value of minerals beyond economic measures indicators derived from these criteria will inform strategies that can address future changes in production characteristics meeting challenges with strong governance and realising opportunities with proactive policy

learning about monetary policy rules abstract we study macroeconomic systems with forward looking private sector agents and a monetary authority that is trying to control the economy through the use of a linear policy feedback rule we use stability under recursive learning a la evans and honkapohja learning and expectations in macroeconomics princeton university press princeton new jersey 2001 as a criterion for evaluating monetary policy rules in this context we find that considering learning can alter the evaluation of alternative policy rules

learning and price volatility in duopoly models of resource depletion the aim of this paper is to provide a theoretical model that can account for price fluctuations in depletable resource markets we do so by introducing learning into a hotelling style duopoly model of optimal resource depletion before the depletable resource becomes scarce the self confirming equilibrium of the model mirrors noncooperative rational expectations equilibrium in that supply is high and price is low although learning does induce occasional upward price spikes that are followed by a long period of falling price once the depletable resource becomes scarce the dynamics of the market change significantly with the self confirming equilibrium mirroring the cooperative rather than noncooperative rational expectations equilibrium supply is low and price is high price spikes still occur but against a background of increasing prices when scarcity is sufficient then the market is permanently in a self confirming equilibrium that is equivalent to cooperative rational expectations equilibrium

stage financing and the role of convertible securities venture capital financing is characterized by extensive use of convertible securities and stage financing in a model where a venture capitalist provides staged financing for a project we illustrate an advantage of convertible debt or warrants over a mixture of debt and equity essentially when the venture capitalist retains the option to abandon the project the entrepreneur has an incentive to engage in window dressing and bias positively the short term performance of the project reducing the probability that it will be liquidated an appropriately designed convertible security prevents such behaviour because window dressing also increases the probability that the venture capitalist will exercise the conversion option becoming the owner of a substantial fraction of the project s equity

self confirming equilibrium and the lucas critique we examine the role of off path superstitions in macro economics and show how a false belief about off path play is the key element underlying both the lucas critique and the game theoretic concept of self confirming equilibrium however the impact of false beliefs in these two cases is different in the lucas case a policy maker s incorrect beliefs about off path play can lead to the adoption of mistaken policy innovation however the consequences of such an innovation provide evidence that the belief that motivated them was wrong in contrast play may never escape an undesirable self confirming equilibrium as the action implied by the mistaken belief does not generate data that contradicts it escape from the self confirming equilibrium requires that players do a sufficient amount of experimentation with off path actions

government procurement and international trade abstract we model the bidding for a government contract in which there is imperfect competition each bidder is better informed about his own costs than either his rival bidders or the government and the distribution of the domestic firms costs differs from the distribution of foreign firms costs because of comparative advantage effects we find that the government minimizes its expected procurement cost by operating a price preference policy not necessarily purchasing from the lowest bidder

estimating coal production peak and trends of coal imports in china more than 20 countries in the world have already reached a maximum capacity in their coal production peak coal production such as japan the united kingdom and germany china home to the third largest coal reserves in the world is the world s largest coal producer and consumer making it part of the big six at present however china s coal production has not yet reached its peak in this article logistic curves and gaussian curves are used to predict china s coal peak and the results show that it will be between the late 2020s and the early 2030s based on the predictions of coal production and consumption china s net coal import could be estimated for coming years this article also analyzes the impact of china s net coal import on the international coal market especially the asian market and on china s economic development and energy security

disadvantaged business enterprise goals in government procurement contracting an analysis of bidding behavior and costs programs that encourage the participation of disadvantaged business enterprises dbe as subcontractors have been a part of government procurement auctions for over three decades in this paper we examine the impact of a program that requires prime contractors to subcontract out a portion of a highway procurement project to dbe firms we study how dbe subcontracting requirements affect bidding behavior in federally funded projects within a symmetric independent private value framework we use the equilibrium bidding function to obtain the cost distribution of firms undertaking projects either with or without subcontracting goals we then use nonparametric estimation methods to uncover and compare the cost of firm bidding on a class of asphalt projects related to surface treatment in texas the analysis shows little differences in the cost structure between projects that have subcontracting goals and those that do not

forecasting natural gas supply in china production peak and import trends china s natural gas consumption has increased rapidly in recent years making china a net gas importer as a nonrenewable energy the gas resource is exhaustible based on the forecast of this article china s gas production peak is likely to approach in 2022 however china is currently in the industrialization and urbanization stage and its natural gas consumption will persistently increase with china s gas production peak china will have to face a massive expansion in gas imports as the largest developing country china s massive imports of gas will have an effect on the international gas market in addition as china s natural gas price is still controlled by the government and has remained at a low level the massive imports of higher priced gas will exert great pressure on china s gas price reform

impacts of unconventional gas development on china s natural gas production and import abstract china has become a net importer of natural gas as a result of rapidly increasing consumption in recent years a production peak would exist since natural gas is an exhaustible resource as conventional natural gas production peak approaches the development of unconventional natural gas is attracting increasing attention china s unconventional natural gas reserves are abundant but exploration is still in its infancy stage thus with the increasing quest for low carbon development and china s natural gas price reform studying the impacts of unconventional gas development on china s natural gas supply and price reform under different scenarios has practical significance in this paper we predict china s natural gas production trends in different scenarios and forecast natural gas demand this paper concludes that the exploitation of unconventional natural gas will greatly improve china s annual natural gas production and delay the production peak year this is important for china s natural gas supply security as it can decrease dependence on imported gas furthermore as the cleanest fossil fuel it will enable more time and space for renewable energy development given the many costs and controversies surrounding its development in china

oil reserve life and the influence of crude oil prices an analysis of texas reserves oil producing exploration and production companies generate revenue from reserves which from any given well are depleting over time the reserve life index measures how long reserves would last at the current production rate if there were no additions to reserves in this study we examine the time series behavior of the reserve life index for each of the twelve onshore oil producing districts in texas specifically we model the relationship between reserve life and the real price of oil within a nonlinear ardl framework among the results we find evidence of both long run and short run asymmetries in the response of reserve life to increases decreases in real oil prices further the magnitude of the effect is greater for positive changes in real oil prices than for negative changes in real oil prices the findings are important to operators investors and policymakers interested in sustainability

world oil production trend comparing hubbert multi cycle curves worldwide shale oil resources in the u s china russia poland and france could mean that potential world oil production could double or triple in the next few decades however not all of these new reserves may be as large or as productive as north dakota s bakken shale oil in addition reserves of shale oil look to be a lot less in relative terms than the reserves of shale gas as evidenced by the price of natural gas in the u s compared to the price of oil this suggests that the u s and world supplies of shale oil may be limited in this article we will look to attempt a different type of forecast for oil using a modified hubbert curve oil production forecast we look at possible world oil production trends rather than just u s oil production trends two interesting comparisons of the world oil production trend to other regional trends are the former soviet union s oil production trend and the u s oil production trend if we compare the current world oil production trend to those previous trends using indexation then we can get an idea of what may happen to world oil production in the future

asymmetry in first price auctions with affiliated private values collusion and heterogeneity across firms may introduce asymmetry in bidding games a major difficulty in asymmetric auctions is that the bayesian nash equilibrium strategies are solutions of an intractable system of differential equations we propose a simple method for estimating asymmetric first price auctions with affiliated private values considering two types of bidders we show that these differential equations can be rewritten using the observed bid distribution we establish the identification of the model characterize its theoretical restrictions and propose a two step non parametric estimation procedure for estimating the private value distributions an empirical analysis of joint bidding in ocs auctions is provided copyright 2003 john wiley sons ltd

implications of a long term increase in oil prices for tourism it is expected that global oil prices will increase in the future assessing the overall economic impacts on tourism is difficult as oil price rises will be concomitant with global changes in other commodity prices exchange rates and incomes a general equilibrium perspective is therefore presented in this paper the model couples a global general equilibrium model with a purpose built cge model of new zealand which focuses on describing tourism supply and demand in some detail the results indicate a decrease in real gross national disposable income of 1 7 for a doubling of oil price and a 9 reduction in the real value of tourism exports as a result of segment specific price increases and differing income and exchange rate effects and elasticities the reduction in demand for tourism in new zealand by 18 segments differs substantially the greatest reduction in demand is observed for tourists from the united kingdom

a theory of commodity price fluctuations this paper studies the price fluctuations of storable commodities that are traded in open markets and are subject to random shocks to demand or more particularly to supply it relaxes the common assumption that the shocks are identically and independently distributed in favor of temporally dependent and periodic disturbances the existence of a unique stationary rational expectations equilibrium is demonstrated for each of the models analyzed and testable implications of the models are derived an illustrative empirical investigation is then undertaken for the model with periodic disturbances using monthly time series observations for seven commodities over the period 1960 93

identification and estimation of auction models with unobserved heterogeneity in many procurement auctions the bidders unobserved costs depend both on a common shock and on idiosyncratic private information assuming a multiplicative structure i derive sufficient conditions under which the model is identified and propose a non parametric estimation procedure that results in uniformly consistent estimators of the cost components distributions the estimation procedure is applied to data from michigan highway procurement auctions private information is estimated to account for 34 of the variation in bidders costs it is shown that accounting for unobserved auction heterogeneity has important implications for the evaluation of the distribution of rents efficiency and optimal auction design

a meta analysis investigation of the direction of the energy gdp causal relationship implications for the growth degrowth dialogue abstract the complex relation between energy use and the economic process has long attracted attention issues such as the scarcity of energy resources energy theory of value degrowth and a growth approaches are closely related to the relationship between energy and development the present study traces the implications of the energy gdp causality dialogue for the context of the growth degrowth debate where the energy development link plays a decisive role in that context the present research investigates the possible existence of a fundamental macro direction of causality between energy use and economic growth that is not influenced by study specific characteristics and events towards this objective we perform a meta analysis that takes into account 158 studies on causality between energy and gdp covering the period 1978 2011 this is the first time to our knowledge that meta analysis has been applied to investigate the direction of the energy and gdp causal relationship the meta analysis results neither support the existence of a fundamental macro direction nor the so called neutrality hypothesis e gdp in the causal relationship between energy consumption and economic growth

opec and venezuelan oil production evidence against a cartel hypothesis abstract this study revisits the opec cartel hypothesis using a case study a test is conducted to see if venezuela has its production granger cause its opec quota or whether the opec quota for venezuela granger causes venezuelan production the results show both occur at different times in the short run opec s oil production quota for venezuela granger causes venezuelan production however shortly after cuts venezuela cheats on agreements suggesting a tit for tat oligopoly game which is not anti competitive in the long run we show that venezuelan oil production granger causes opec s quota for venezuela but not vice versa having venezuelan oil production granger cause opec quotas for venezuela in the long run suggests opec does not coordinate outputs as much as it reacts to them the evidence suggests venezuela is not a part of an opec anti competitive syndicate even though we show that venezuelan oil production is low an alternative explanation for why venezuela and possibly other opec members have low oil production outputs is that institutions and risk aversion not cartel participation is the cause a vector error correction model shows that there is no tendency for venezuelan oil production to converge to opec s quota for venezuela

the effect of federal davis bacon and disadvantaged business enterprise regulations on highway maintenance costs the author compares winning bids on state and federal highway maintenance projects in colorado between 2000 and 2011 to determine whether federal prevailing wage and disadvantaged business enterprise regulations are associated with increased construction costs the effect of the davis bacon act is evaluated when average wage rates prevail for almost all workers involved in highway maintenance for most of the period of the study the federal minimum for work completed by disadvantaged businesses is 10 the goal for colorado exceeds this minimum by two to three percentage points summary data indicate that federal projects are more expensive than state projects but projects funded by the federal government are also larger and more complex regression results indicate that with controls for project size and complexity no statistically significant difference is found in the cost of federal and state projects results also indicate that federal regulations are not associated with reduced bid competition a

the impact of public information on bidding in highway procurement auctions a number of papers in the theoretical auction literature show that the release of information regarding the seller s valuation of an item can cause bidders to bid more aggressively this widely accepted result in auction theory remains largely untested in the empirical literature recent theoretical work has also shown that this effect can be more pronounced in auctions with larger common cost uncertainty we examine the impact of a policy change by the oklahoma department of transportation that led to the release of the state s internal estimate of the costs to complete highway construction projects we perform a differences in differences analysis comparing bidding in texas a state that had a uniform policy of revealing the same information all throughout the period of analysis to bidding in oklahoma our results show that in comparison to texas auctions the average bid in oklahoma fell after the change in engineers cost estimate ece policy this decline in bids was even larger for projects where the common uncertainty in costs is greater moreover the within auction standard deviation of bids fell after the change in ece policy with the most significant decline observed again in projects with greater common cost uncertainty

developing indicators for managing tourism in the face of peak oil abstract in its present form tourism is dependent on the availability of oil and is comparatively oil intensive while forecasts for future tourism growth are optimistic there is also increasing evidence about the imminence of a peak in oil production and the economic effects that this would cause globally and on a destination level it will be necessary to consider how a transition towards fossil fuel free economies might look like for tourism it is therefore timely and prudent for the tourism sector to consider its current oil requirements and derive indicators for monitoring its oil consumption in particular destinations need indicators of the amount of oil consumed by the various markets from which they receive visitors new zealand is used as an example for assessing the oil intensity of its top 10 countries of origin based on the 10 indicators overall the least exposed markets for new zealand with respect to oil are australia china singapore and taiwan although a more detailed analysis would be required for markets that display very heterogeneous travel behaviour among the indicators eco efficiency is particularly important as it allows comparison of resource inputs with economic outputs

european monetary union a cointegration analysis this paper employs systems based cointegration techniques developed by johansen 1988 1995 to determine which european union countries would form a successful economic and monetary union emu based on long run behavior of the nominal convergence criteria laid down in the maastricht treaty the original 12 european union countries are analyzed together nominal exchange rates real exchange rates longterm interest rates and government budget deficits are each analyzed for co movements among the 12 countries and various subgroups of them the results suggest that not all of the 12 original countries of the european union could possibly form a successful emu over time unless several countries made significant adjustments

are bid preferences benign the effect of small business subsidies in highway procurement auctions abstract bid preferences in procurement auctions allow firms from an identifiable group an advantage in bidding against unfavored firms while economic efficiency is expected to fall as a result of bid preferences government procurement costs may either increase or decrease depending on the competitive response of favored and unfavored firms this paper uses data from california auctions for road construction contracts where small businesses receive a 5 percent bid preference in auctions for projects using only state funds and no preferential treatment on projects using federal aid i show that while firms bidding behavior matches theoretical predictions procurement costs are 3 8 percent higher on auctions using preferences the higher procurement cost in preference auctions is attributed to reduced participation by lower cost large firms structural estimates of latent firm costs are then used to evaluate how efficiency and the division of surplus between firms and the government are impacted by bid preferences firm profits are 3 1 percent lower under bid preferences however this is overwhelmed by the efficiency loss due to reduced large firm participation the efficiency loss conditional on firm participation is estimated to represent around 0 1 percent of overall procurement costs including the adverse effect of preferences on the participation of large firms increases the estimated efficiency loss to 3 6 percent which represents 27 cents for each additional dollar awarded to small businesses through the program counterfactual simulations indicate that if participation were instead inelastic to bid preferences the 5 percent bid preference would be close to the optimal level

how costly is affirmative action government contracting and california s proposition 209 abstract this paper investigates the effect of disadvantaged business enterprise subcontractor goals on the winning bids for highway construction contracts using california s proposition 209 which prohibited the consideration of race or gender in awarding state funded contracts after proposition 209 prices on state funded contracts fell by 5 6 relative to federally funded projects for which preferences still applied most of the price decline after proposition 209 resulted from the mix of subcontractors employed which seems to arise from the higher costs of firms located in high minority areas finally short run barriers to entry and expansion may increase the cost of affirmative action