is free trade in the interest of exporting countries when there is ecological dumping abstract given conditions of oligopolistic competition the coordinated ban of direct export promoting policies e g in the eu or by gatt increases the income of exporting countries however in the presence of environmental distortions free trade can lead to ecological dumping in exporting countries the question arises if free trade is still in the interest of exporting countries we show that welfare maximizing governments of exporting countries prefer free trade even if countries subsidize their local industries indirectly via ecological dumping the existence of further national policy instruments does not make free trade agreements obsolete

inducing liquidity in thin financial markets through combined value trading mechanisms asset pricing theory hypothesizes that investors are only interested in portfolios individual securities are evaluated only in terms of their contribution to portfolio risk and return yet standard financial market design is that of parallel unconnected markets whereby investors cannot submit orders in one market conditional on events in others when markets are thin this exposes them to substantial execution risk fear of ending up with unbalanced portfolios after trading may even keep investors from submitting orders further eroding liquidity and the ability of markets to equilibrate the suggested solution is a portfolio trading mechanism referred to as combined value trading cvt investors are allowed to submit orders for packages of securities and the system matches trades and computes prices by optimally combining portfolio orders in an open book we study the performance of the cvt mechanism experimentally and compare it to the performance of parallel unconnected double auctions in experiments with similar parametrization and either a similar number of subjects or substantially thicker markets we present evidence that our portfolio trading mechanism facilitates equilibration to the extent that the thicker markets do inspection of order submission and trade activity reveals that subjects manage to exploit the direct linkages between markets enabled by the cvt system

effect of information feedback on bidder behavior in continuous combinatorial auctions combinatorial auctions in which bidders can bid on combinations of goods can increase the economic efficiency of a trade when goods have complementarities recent theoretical developments have lessened the computational complexity of these auctions but the issue of cognitive complexity remains an unexplored barrier for the online marketplace this study uses a data driven approach to explore how bidders react to the complexity in such auctions using three experimental feedback treatments using cluster analyses of the bids and the clicks generated by bidders we find three stable bidder strategies across the three treatments further these strategies are robust for separate experiments using a different setup we also benchmark the continuous auctions against an iterative form of combinatorial auction the combinatorial clock auction the enumeration of the bidding strategies across different types of feedback along with the analysis of their economic implications is offered to help practitioners design better combinatorial auction environments this paper was accepted by lorin hitt information systems

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

the effect of annuity insurance on savings and inequality this paper examines the amount of precautionary savings and wealth inequality arising from life span uncertainty by comparing saving behavior under perfect insurance arrangements with that arising under imperfect arrangements namely when longevity risk can be pooled only with members of one s own family the central findings of the paper are that 1 perfecting insurance arrangements can sharply lower savings in both intergenerationally altruistic and life cycle economies and that 2 in altruistic economies perfecting annuity insurance can greatly influence inequality indeed in the long run in our model switching from imperfect family insurance to perfect insurance can mean the difference between absolute inequality and absolute equality

allocating priority with auctions an experimental analysis there are many examples of markets where resources that were allocated ex ante must be rationed ex post two alternative methods of rationing are considered in this paper priority service see chao and wilson american economic review 77 1987 and wilson econometrica 57 1989 and proportional rationing see spulber international economic review 33 1992 an experimental environment is developed in which the two rules are implemented within two well known institutions the english and the uniform price sealed bid auctions under two different information conditions we find that priority service generates more efficient allocations than proportional rationing and the sealed bid auction performs better than the english both mechanisms and rationing rules are more efficient when there is a lack of common information

multi unit demand auctions with synergies behavior in sealed bid versus ascending bid uniform price auctions abstract we construct a relatively simple model of bidding with synergies and solve it for both open outcry and sealed bid uniform price auctions the essential behavioral forces involved in these auctions are 1 a demand reduction force resulting from the monopsony power that bidders with multiple unit demands have when synergies are relatively inconsequential and 2 bidding above stand alone values in order to capture significant complementarities between units the latter creates a potential exposure problem as bidders may win only parts of a package and earn negative profits bidding outcomes are closer to equilibrium in clock compared to sealed bid auctions however there are substantial and systematic deviations from equilibrium with patterns of out of equilibrium play differing systematically between the two auction formats these patterns of out of equilibrium play are analyzed along with their effects on revenue and efficiency

a parametrization of the auction design space abstract we present an extensive breakdown of the auction design space that captures the essential similarities and differences of many auction mechanisms in a format more descriptive and useful than simple taxonomies this parametrization serves as an organizational framework in which to classify work within the field and uncovers parameter combinations corresponding to novel mechanisms the structured characterization of auction rules can be exploited for the modular design of configurable auction servers it also facilitates the communication of auction rules to software agents enabling the automation of flexible market based negotiation journal of economic literature classification numbers c70 d44

monopoly pricing of capacity usage under asymmetric information the design of monopoly pricing strategies is examined in a general framework with an unknown population distribution of consumer characteristics and downward sloping multi unit consumer demand in addition the monopolist has increasing marginal cost three pricing strategies are shown to implement the profit maximizing allocation reference point pricing multi unit competitive bidding with variable outputs and generalized priority service the analysis of pricing also is extended to include random capacity copyright 1993 by blackwell publishing ltd

an experimental test of combinatorial information markets while a simple information market lets one trade on the probability of each value of a single variable a full combinatorial information market lets one trade on any combination of values of a set of variables including any conditional or joint probability in laboratory experiments we compare the accuracy of simple markets two kinds of combinatorial markets a call market and a market maker isolated individuals who report to a scoring rule and two ways to combine those individual reports into a group prediction we consider two environments with asymmetric information on sparsely correlated binary variables one with three subjects and three variables and the other with six subjects and eight variables thus 256 states

independence of irrelevant alternatives and revealed group preferences it is shown that a pareto optimal and continuous single valued choice function defined on the compact convex subsets of the positive orthant of the n dimensional euclidean space maximizes a real valued function if and only if it satisfies the independence of irrelevant alternatives condition if n 2 and the strong axiom of revealed preference otherwise the results can be applied to consumer demand theory to deal with nonlinear budget sets and to bargaining game theory to generalize the nash bargaining solution

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

hierarchical package bidding a paper pencil combinatorial auction we introduce a new combinatorial auction format based on a simple trans parent pricing mechanism tailored for the hierarchical package structure proposed by rothkopf pekec and harstad 1998 to avoid computational complexity this combination provides the feedback necessary for bidders in multi round auctions to discern winning bidding strategies for subsequent rounds and to coordinate re sponses to aggressive package bids the resulting mechanism is compared to two leading alternatives in a series of laboratory experiments involving varying degrees of value synergies based on these wind tunnel tests the fcc has decided to use hierarchical package bidding in the major upcoming 700mhz auction

a limit of bilateral contracting institutions i introduction the double auction da institution has a solid and deserved reputation as the archetypal efficient market institution beginning with smith 1962 30 years of experimental research shows that the da achieves very high and stable efficiency for a wide variety of underlying market structures davis and holt 1993 the da resembles many naturally occurring market institutions including some of the world s largest financial exchanges in the da any agent may at any time unilaterally make a price quantity quote to other agents revise his or her quote or accept an outstanding quote made by another agent these actions occur publicly at some central location whether spatial or electronic so all traders may continuously view quote and contract activity in both the field and the laboratory these basic rules are often augmented with bid ask improvement rules variations on the display of bid ask queues or books limit orders and so on many of these augmentations improve the da s price stability and trading efficiency smith and williams 1982 but more recent studies e g banks et al 1989 van boening and wilcox 1996 show that the da has its limits in particular it fails to produce stable and efficient allocations when market structures contain nonstandard preferences and or technological features particularly when markets are relatively thin in our own previous work the nonconvexity of batch production was the source of the difficulty walrasian equilibria do not always exist in this case and the da is inefficient in those situations this article describes our attempt to generalize the da institution so that it might encourage efficient nonuniform pricing in such situations taken at face value this attempt must be judged a failure and other past attempts to solve this problem durham et al 1996 archibald et al 2002 have not been wholly satisfying either yet examination of these results and the process of elimination strongly suggest that an implicit restriction to bilateral contracting is an essential part of the received da s limitations as we have briefly described it the da may initially appear to be the very essence of free contracting but it does not provide a mechanism whereby three or more agents may simultaneously negotiate and then enter into a mutually agreeable multiagent contract all contracts are necessarily bilateral ones under the da and in fact under almost all conventional marketlike institutions in market structures where preferences and technologies are convex the restriction to bilateral contracts is generally unimportant but when nonconvexities are severe it may be impossible to reliably achieve efficiency under the constraint of bilateral contracting telser 1987 in this article we show this is true even if the da is modified so that bilateral negotiation and contracting possibilities are made particularly rich we believe these results have important policy implications privatization and deregulation initiatives have gained momentum around the globe over the past 20 years and many economists including us have little doubt of their potential for good nonetheless poorly articulated calls for regulation by the market carry an unnecessary potential for harm although the possible institutional rules governing negotiation and contracting under private property come in nearly infinite varieties regulation by the market typically means the adoption of traditional bilateral contracting institutions like the da yet there are good theoretical reasons to doubt that these are always the best choice telser 1987 and accumulating experimental evidence supports these doubts moreover there are now promising alternatives to traditional bilateral contracting institutions that outperform the da in several nonstandard structural situations bossaerts et al 2002 bykowski et al 2000 ishikida et al 2001 we conclude that calls for regulation by the market are sometimes too vague to unambiguously serve the public interest

voluntary environmental agreements vs emission taxes in strategic trade models the purpose of the paper is to narrow the gap between the widespread use of voluntary agreements and research on the rationale of such approaches a topical example are voluntary agreements of many industries to reduce carbon dioxide emissions because of global warming if the industry anticipates that taxes and fees will be introduced in the coming years it seems rational to act in advance in order to mitigate the tax levels

theory experiment and the federal communications commission spectrum auctions abstract the fcc uses the simultaneous multi round auction sma to assign spectrum licenses congress mandated that the sma be compared to an auction that allows combinatorial bids we review the theoretical and experimental evidence relevant to the sma procedures and their inherent defects results from experiments evaluating the sma in comparison to a combinatorial auction designed by charles river and associates show that several of the sma rules hinder efficiency and create a trade off between efficiency and auction length the combinatorial auction outperforms the sma when license values are superadditive but requires more time to complete and is not robust

nash bargained household decisions reply pierre andre chiappori s 1988 claim that the nash bargaining model is of weak empirical relevance and neither convenient nor really restrictive is incorrect nash bargained household behavior implies a rich set of empirical implications extending well beyond the pareto efficiency of intrafamily distributions by systematically accounting for the impact of opportunities outside the family on resource distribution within the family nash bargained demand theory considerably expands the scope of neoclassical demand theory such expansion can elucidate issues ranging from the impact of alimony and child support laws in developed societies to the intrafamily distribution of nutrition in less developed countries copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the economics of joint ventures in less developed countries the paper examines the microeconomic partial equilibrium behavior of joint ventures established between transnational corporations and domestic partners in less developed countries it focuses on issues relating to resource allocation and profit distribution under various institutional scenarios the analysis places special emphasis on the role of bargaining power transfer pricing stock ownership and profit shares of the parties and the responsiveness of joint ventures to national development goals some of the results apply to wholly owned subsidiaries of transnational corporations local firms and licensing arrangements which emerge as special cases

a binary conflict ascending price bicap mechanism for the decentralized allocation of the right to use railroad tracks the questions posed for study are motivated by controversies over how sweden might change from a centralized system of railroad management to a decentralized system the central rail administration banverket will retain ownership and maintenance responsibility of the tracks but will sell access to the tracks to private firms the questions are about the mechanism that might accomplish this task parties to the controversy have claimed that the technical aspects of networks will as a matter of principle preclude the operation of any decentralized method this paper explores the properties of a mechanism developed as a challenge to that claim the mechanism is examined in the context of a testbed experimental environment that contains many potential problem causing elements in the tests performed the mechanism operated to efficiently allocate access to the network and it did so for behavioral reasons that are understandable in terms of theory the paper closes with suggestions for further study of environments that might present additional challenges to a mechanism

wage bargaining inventories and union legislation this paper analyses a strategic bargaining game where the firm may or may not be able to sell out of its inventory of finished goods during a strike firms and the union are both risk neutral and have the same discount rate it is shown that the wage equilibrium corresponds to the axiomatic nash bargaining solution where the threatpoints are the agents payoffs should bargaining continue indefinitely we use the 1980 and 1982 employment acts to test this theory interpreting that legislation change as changing the firm s threatpoint but not its bargaining power this allows us to identify the value of the firm s threatpoint post 1982 formal tests support the theory also consistent with the theory it is found that union wages decrease with inventories after 1982 but not before and that the union wage gap is smaller after 1982 wage bargaining as described in the strategic bargaining literature is a peaceful affair if there is no agreement workers simply withdraw their labour for one period and there is a consequent one period loss of production for the firm but strikes tend to generate a lot of conflict in the u k in the 1970s striking unions would form picket lines across the factory gates their aim was not only to prevent strikebreakers going to work but also to stop lorries delivering goods conversely firms often with the help of the police would try to get the lorries across those lines the employment acts of 1980 and 1982 stopped this struggle stopping lorries crossing picket lines had always been illegal but this new legislation gave firms power to have picket lines immediately lifted should striking workers act illegally the courts would immediately sequester the union s assets if its members refused to comply with the law using the strategic bargaining approach this paper considers the equilibrium effect of this change in legislation on union wage formation using wage and inventory data from a panel of firms across this time period this paper also formally tests that theory there have been two main approaches to bargaining theory the strategic bargaining

the micro economics of group behavior general characterization abstract we study the demand function of a group of s members facing a global budget constraint any vector belonging to the budget set can be consumed within the group with no restriction on the form of individual preferences the nature of individual consumptions or the form of the decision process beyond efficiency moreover only the group aggregate behavior summarized by its demand function is observable we provide necessary and locally sufficient restrictions that fully characterize the group s demand function with and without distribution factors we show that the private or public nature of consumption within the group is not testable from aggregate data on group behavior

export subsidies as an outcome of the management labor conspiracy a mercantilistic trade policy is often introduced as a tool to generate more jobs in some key industries when employment in an export import industry is perceived to be low the government would be tempted to adopt measures of export promotion import protection to increase it by effectively guaranteeing employment however these policies would reduce incentives for the private sector to reach efficient labor contracts for example the labor union might refuse to sign a profit sharing contract with management and unilaterally demand high wages believing that the resulting loss in competitiveness would not affect the well being of its members since the government would protect the industry it is also conceivable that management and the labor union conspire to reach inefficient contracts so as to invite government intervention in certain cases trade policies only transfer income without any allocative effect this is not merely a theoretical curiosum free trade advocates have often pointed out that protectionist policies would have deleterious effects on the pattern of collective bargaining in the trade sensitive sectors this paper constructs simple models to illustrate this point for export subsidies and so it can be viewed as an addition to the literature that aims to bring attention to the pitfalls of the new mercantilism such as eaton and grossman 1986 dixit and grossman 1986 and horstman and markusen 1986 unlike these studies however the government policies considered here are reactive in the sense that the private sector moves first anticipating the government s response dixit and kyle 1985 carmichael

an efficient dynamic auction for heterogeneous commodities this paper proposes a new dynamic design for auctioning multiple heterogeneous commodities generalizing earlier work that treated identical objects an auctioneer wishes to allocate one or more units of each of k heterogeneous commodities to n bidders the auctioneer announces a vector of current prices bidders report back quantities demanded at these prices and the auctioneer adjusts the prices units are credited to bidders at the current prices as their opponents demands decline and the process continues until every commodity market clears bidders rather than being required to behave as price takers are permitted to strategically exercise their market power nevertheless with pure private values the proposed auction yields walrasian equilibrium prices an efficient outcome results as from a vickrey clarke groves mechanism but bidders are only required to evaluate their demands along a one dimensional path of prices rather than reporting their utilities over the entire k dimensional consumption set the auction is also more transparent and potentially simpler for bidders to understand and has the advantage of assuring the privacy of the upper portions of bidders demands theoretically the new auction provides a new foundation for convergence to walrasian equilibrium in an exchange economy practically it provides an efficient method for simultaneously auctioning two or more related types of securities for example three month and six month treasury bills it is also potentially useful for auctioning multiple types of communications spectrum for example licenses for paired and unpaired spectrum

the microeconomics of efficient group behavior identification1 consider a group consisting of s members facing a common budget constraint p 1 any demand vector belonging to the budget set can be privately or publicly consumed by the members although the intragroup decision process is not known it is assumed to generate pareto efficient outcomes neither individual consumptions nor intragroup transfers are observable the paper analyzes when to what extent and under which conditions it is possible to recover the underlying structure individual preferences and the decision process from the group s aggregate behavior we show that the general version of the model is not identified however a simple exclusion assumption whereby each member does not consume at least one good is sufficient to guarantee generic identifiability of the welfare relevant structural concepts

strategic export promotion in the absence of government precommitment arguments in favor of a strategic trade policy are based on the assumption that the government can credibly precommit to a policy that will not be altered even if it is suboptimal ex post this paper examines the implications of relaxing this assumption to this end a three stage game is considered that accounts for the sunk costs associated with capacity installment it is found that contrary to common belief the time consistent optimal subsidy level is positive though generally lower than the optimal level with precommitment this somewhat counterintuitive result is driven by the commitment value of capacity copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

market architectures and institutional testbedding an experiment with space station pricing policies by the year 2000 the national aeronautics and space administration nasa plans to launch and operate an earth orbiting space station for decades into the future the station is expected to play a dominant role in u s space research and in the commercialization of space if the expectations are correct then the station will be a complex of potentially valuable resources and services much sentiment exists within the government that the allocation of those resources should be based on some sort of market oriented policy a more business like approach this paper is part of a larger project that is intended to ascertain what that policy might be

exploring the vcg mechanism in combinatorial auctions the threshold revenue and the threshold price rule abstract we explore interesting potential extensions of the vickrey clarke groves vcg rule under the assumption of players with independent and private valuations and no budget constraints first we apply the vcg rule to a coalition of bidders in order to compute the second price of the coalition then we introduce and formulate the problem of determining that partition of players into coalitions which maximize the auctioneer s revenue in the case whereby such coalitions take part to a vcg auction each one as a single agent in particular we provide an integer linear formulation of this problem we also generalize this issue by allowing players to simultaneously belong to distinct coalitions in the case that players valuation functions are separable finally we propose some applications of these theoretical results for instance we exploit them to provide a class of new payment rules and to decide which bids should be defined as the highest losing ones in combinatorial auctions

job matching and the wage distribution this paper brings together the microeconomic labor and the macroeconomic equilibrium views of matching in labor markets we nest a job matching model a la jovanovic 1984 into a mortensen and pissarides 1994 type equilibrium search environment the resulting framework preserves the implications of job matching theory for worker turnover and wage dynamics and it also allows for aggregation and general equilibrium analysis we obtain two new equilibrium implications of job matching and search frictions for wage inequality first learning about match quality and worker turnover map gaussian output noise into an ergodic wage distribution of empirically accurate shape unimodal skewed with a paretian right tail second high idiosyncratic productivity risk hinders learning and sorting and reduces wage inequality the equilibrium solutions for the wage distribution and for the aggregate worker flows quits to unemployment and to other jobs displacements hires provide the likelihood function of the model in closed form

nash bargained household decisions a rejoinder this note is a rejoinder to marjorie b mcelroy and mary jean horney s 1990 reply it discusses the scope of mcelroy and horney s previous results and the possibility of estimating a nash bargained model from independent observation of threat points copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

auction design for composite goods the natural gas industry abstract experiments examine the price and efficiency performance of a simple production parallel transmission and wholesale consumption model of a natural gas pipeline system a center determines prices and allocations to buyers producers and transporters to maximize surplus based on the location specific bids of buyers producers and transporters efficiency tends to grow asymptotically to 100 in stationary environments prices stabilize quickly in the neighborhood of predicted competitive equilibrium levels over time agents settle into an equilibrium with elastic bid schedules and numerous tied bids and offers these strategies allow each agent class to protect itself from manipulation by the other classes

auctions with bidder determined allowable combinations abstract combinatorial auctions are desirable as they enable bidders to express the synergistic values of a group of assets and thus may lead to better allocations compared to other types of auctions they keep bidders from being exposed to risks of receiving only parts of combinations that would be valuable to them or from being overly cautious in order to minimize such risks however computation time needed to determine the set of optimal winning combinations in a general combinatorial auction may grow exponentially as the auction size increases and this is sometimes given as a reason for not using combinatorial auctions to determine the winning allocation in a reasonable time a bid taker might try to limit the kinds of allowable combinations but bidders may disagree on what combinations should be allowed and this may make limiting the allowable combinations politically infeasible this paper proposes and tests successfully a new approach to managing the computational complexity of determining the set of winning combinations the main idea is to let bidders themselves determine and prioritize the allowable combinations using bidder determined combinations has two nice properties first by delegating the decision on what is biddable to the bidders who know what combinations are important to them the bid taker is able to be and appear fair second since bidders know their economics and have the incentive to get important combinations included bidder prioritization of combinations will tend to assure that the most economically important combinations are included in determining the winning set of bids if the bid taker is not able to consider all of the combinations submitted by bidders the proposed auction process is useful in situations such as government auctions in which the bid taker is reluctant to limit the allowable combinations

game theory via revealed preferences we investigate equilibrium notions in game theory from the revealed preference approach for extensive game forms with complete information we derive a set of independent necessary and sufficient conditions for the observed outcomes to be rationalized by subgame perfect nash equilibrium journal of economic literature classification numbers c72 c92

export credit subsidies export credit subsidies jacques melitz and patrick messerlin in recent years governments have increasingly resorted to export credit subsidies the major motivation for the proliferation of such schemes seems to be macroeconomic rather than microeconomic in nature the conventional argument namely that they simultaneously increase demand and improve the current account is fundamentally flawed in ignoring the second round effects on prices and the exchange rate the authors investigate whether there is a valid macroeconomic case for export credit subsidies and find that temporary measures can be useful in reducing the recessionary costs of a disinflationary program by permitting a larger appreciation of the exchange rate during the initial stages of the program they also present detailed evidence on the impact across different industries of export credits in france these are heavily concentrated on a small number of industries specifically machine tools construction metalworking aircraft ships and electrical equipment the distortionary effect on industrial structure is consequently large and any beneficial macroeconomic benefits are likely to be outweighed by the microeconomic costs the case for export credit subsidies is not persuasive

on the interpretation of the nash bargaining solution and its extension to non expected utility preferences the paper reexamines the foundations of the axiomatic nash bargaining theory more specifically it questions the interpretation of the nash bargaining solution and extends it to a family of non expected utility preferences a bargaining problem is presented as x d 2 where x is a set of feasible agreements described in physical terms d is the disagreement event and 1 and 2 are preferences defined on the space of lotteries in which the prizes are the elements in x and d the ordinal nash bargaining solution is defined as an agreement y satisfying for all p e 0 1 and for all x e x if px 1 y then py 2 x and if px 2 y then py x where px is the lottery which gives x with probability p and d with probability 1 p revisions of the pareto symmetry and iia axioms characterize the ordinal nash bargaining solution in the expected utility case this definition is equivalent to that of the nash bargaining solution however this definition is to be preferred since it allows a statement of the nash bargaining solution in everyday language and makes possible its natural extension to a wider set of preferences it also reveals the logic behind some of the more interesting results of the nash bargaining solution such as the comparative statics of risk aversion and the connection between the nash bargaining solution and strategic models

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

auction protocols for decentralized scheduling decentralized scheduling is the problem of allocating resources to alternative possible uses over time where competing uses are represented by autonomous agents market mechanisms use prices derived through distributing bidding protocols to determine schedules we investigate the existence of equilibrium prices for some general classes of scheduling problems the quality of equilibrium solutions and the behavior of an ascending auction mechanism and bidding protocol to remedy the potential nonexistence of price equilibria due to complementarities in preference we introduce additional markets in combinations of basic goods finally we consider direct revelation mechanisms and compare to the market based approach journal of economic literature classification numbers c62 c70 d44

allocating uncertain and unresponsive resources an experimental approach we identify an important class of economic problems that arise naturally in several applications the allocation of multiple resources when there are uncertainties in demand or supply unresponsive supplies no inventories and fixed capacities and significant demand indivisibilities rigidities examples of such problems include scheduling job shops airports or supercomputers zero inventory planning and the allocation and pricing of nasa s planned space station using experimental methods we show that the two most common organizations used to deal with this problem markets and administrative procedures can perform at very low efficiencies 60 65 efficiency in a seemingly robust example thus there is a need to design new mechanisms that more efficiently allocate resources in these environments we develop and analyze two mechanisms that arise naturally from auctions used to allocate single dimensional goods these new mechanisms involve computer assisted coordination made possible by the existence of networked computers both mechanisms significantly improve on the performance of administrative and market procedures

international coordination of fiscal policy in limiting economies we examine the limiting behavior of cooperative and noncooperative fiscal policies as countries market power goes to zero we show that these policies converge if countries raise revenues through lump sum taxation however if there are unremovable domestic distortions such as distorting taxes there can be gains to coordination even when a single country s policy cannot affect world prices these results differ from the received wisdom in the optimal tariff literature the key distinction is that contrary to the tariff literature the spending decisions of governments are explicitly modeled

frontiers in spectrum auction design abstract spectrum auction design has seen number innovations in the recent years regulators have used various types of combinatorial auction formats including simple ascending combinatorial clock auctions and first price sealed bid combinatorial auctions the simultaneous multi round auction smra and the two stage combinatorial clock auction cca are the most wide spread auction formats for spectrum sales to date we provide an accessible overview of strategic problems in these auction formats and summarize research challenges in this field for a broader audience of readers in industrial organization

strategic trade policy and welfare foreign equity ownership is shown empirically to weaken significantly and occasionally reverse common strategic trade policy results existing levels of u s cross ownership for example reduce the average optimal export subsidy by 47 relative to the brander and spencer journal of international economics 1985 18 83 100 value in industries with particularly high cross ownership and relatively small imputed labor rents optimal subsidies fall to less than one seventh of their former level previous studies which overlook high rates of cross ownership overstate the effectiveness of strategic policies most sharply in sectors with above average expected profitability scope for strategic investments and barriers to rent dissipation

priority service pricing investment and market organization tingent forward delivery contracts offered by a seller each customer s selection of one contract from the menu determines the customer s service order or priority in each contingency the seller rations supplies by serving customers in order of their selected priorities until the supply is exhausted or all customers are served various forms of priority service are widely

stability and collective rationality the principle of pairwise comparisons is a well established one in social choice theory the idea of collective rationality that social decisions be made consistently with the maximization of some ordering of the alternatives is the most familiar application of this principle and indeed is a defining property of the social welfare functions of bergson 1938 and samuelson 1947 and of arrow 1951 as is well known the idea of collective rationality involves comparing every social state to every other social state in terms of the welfare assigned by those states to a given group of individuals and declaring a social state to be fair or good if it is good when considering all such pairwise comparisons with other social states alternatively one could imagine a social decision process based on comparing every individual to every other individual in terms of the welfare assigned to those individuals by a given social state and declaring a social state to be good or fair if it is fair when considering all such pairwise comparisons of individuals a social decision process in this spirit has been suggested by harsanyi 1959

union firm bargaining and the influence of product market power and production technology on systematic risk the relationship between the capm firm beta and the firm s microeconomic decisions is studied by a model under uncertainty which combines the feature of an ex ante inputs substituable production technology and the existence of a union which bargains over various economic dimensions of the firm it is shown that the earlier findings of a relationship between the firm beta the firm product market power and the labor capital ratio may be reinforced through the indirect channel of labor market bargaining but the relationship becomes more complex and heavily depends on the scope of the union firm bargaining process this yields the empirical prediction confirmed for a panel of belgian firms that any proper estimation of the determinants of firm beta must control for firms in the sample being unionized

an optimal auction for complements abstract this paper considers the optimal selling mechanism for complementary items when buyers are perfectly symmetric the optimal procedure is to bundle the items and run a standard auction in general however bundling the items is not necessarily desirable and the standard auctions do not maximize revenue moreover the optimal auction allocation may not be socially efficient since the auction must discriminate against bidders who have strong incentives to misrepresent their true preferences journal of economic literature classification number d44

subsidized buyer credits atypical results in strategic trade theory using subsidized buyer credit as a policy tool it is shown that the general result of strategic trade policy namely that by committing itself to an export subsidy any government can favorably change the outcome of the cournot oligopoly does not necessarily hold

international procurement as a signal of export quality in 1996 the british government was accused of a protectionist buy british campaign when it awarded a contract for army ambulances to land rover we present a model where the procurement decision of the government affects the perception of consumers in the rest of the world about the quality of the domestic firm s product relative to that of a foreign rival s product the model compares the outcome when the government s only concern is value for money with the outcome when the government takes account of the effect of its decision on export sales of the domestic firm

allocation of track capacity experimental evidence on the use of priority auctioning in the railway industry allocation of track capacity concerns multiple users facing demand indivisibilities running trains over an inelastic supply of railway tracks the paper suggests a vickrey type mechanism to handle incentive aspects of this technically complex optimisation task here the price for operating a train will correspond to the bids foregone by other operators who are pushed off their preferred routes the paper reports the results of 11 experimental markets using variations of this mechanism where each market includes up to 10 trading periods and subjects bid for routes over a highly stylised railway network the experiments generated solutions that capture 90 100 of potential benefits

the continuous combinatorial auction architecture the paper reports the architecture of a continuous combinatorial auction preferences are based on sets of items and feasibility requires the nonintersection of sets countdown clocks replace eligibility and activity requirements typical of rounds based auctions bids remain in the system to be combined with new bids to form winning collections increment requirements dictate improvements over appropriate collections of existing bids the auction evolved from experimental methods and operates at high levels of efficiency field applications are reported and result in natural equilibration in a few hours as opposed to days or weeks required by round based architectures

the control of export credit subsidies and its welfare consequences a two stage bertrand duopoly model demonstrates how the sequence of firm and government actions can explain the origins of export credit subsidies and can affect the welfare consequences of international agreements to adopt subsidy rate ceilings firms act first by stating prices in applications for export credit and can induce positive subsidies by inflating the prices the subsidies transfer rents from governments to firms without changing welfare defined as profits less subsidy expenditures governments become the first to act by adopting subsidy rate ceilings that bind ceilings cause firms to lower prices such that if a positive ceiling binds welfare falls

labor market effects of employer provided health insurance i introduction increasing health insurance coverage is arguably an important policy goal the congressional budget office 2003 estimates that in 1998 20 30 million americans had no health insurance for the entire year approximately 40 million were uninsured at a specific point in time in the year and nearly 60 million were without coverage some time during the year most individuals who have health insurance in the united states obtain it through their employer in 1999 65 8 of nonelderly americans had employer provided insurance also called group insurance or employer sponsored insurance either through their own employer or through the employer of another household member see gruber 2001 employer provided insurance plans generally have lower premiums and offer more benefits than individual insurance plans health insurance providers can offer cheaper and better plans to company employees for at least two reasons first the average administrative cost of such plans is lower than individual plans second employment based plans are typically subject to less adverse selection than individual plans particularly so for large employers furthermore the tax subsidy afforded employment based health insurance renders the effective consumer price substantially lower than the cost see pauly 1986 and gruber 2001 together these various factors give a strong incentive for employers to offer and employees to accept coverage as part of their employment contract as employer provided insurance is by far the most prevalent form of coverage in the private sector policy makers look for further expansion of this base as a way to insure the uninsured while avoiding direct public financing as a way to increase employer based health insurance coverage some states either have or are considering government mandates that require employers to provide insurance to certain types of workers 1 the state of hawaii requires private sector employers to offer health insurance to all workers who work for more than 20 h a week and requires these workers to have insurance the state of california is currently considering a similar mandate there is a considerable interest from policy makers on the effects of such mandates on labor market outcomes in this study we report on an experiment that was designed to provide some insights about possible effects of alternative health insurance regulations on the competitive labor market with a particular focus on mandates since we only considered a competitive market setting with complete contracts and no wage rigidities our results may not be directly applicable to all labor market situations 2 however the study provides useful insights about the interaction of health insurance benefit provision wages and employment structure for labor markets where the competitive wage setting and the complete contracts assumptions are reasonable with these limitations in mind our results can be also generalized to other types of employer provided fringe benefits such as paid vacations or pension plans as any government intervention health insurance regulation may affect the labor market theory predicts that in perfectly competitive labor markets health insurance creates no distortionary effects on the labor market equilibrium as long as the coverage is not mandated and there are no wage rigidities 3 all workers who value insurance above its cost of provision are offered insurance and accept it the wages are adjusted downward see rosen 1986 and gruber 2000 summers 1989 used a simple supply and demand analysis to show that the effect of increases in premiums on equilibrium labor hours and wage depends both on the elasticity of labor demand and labor supply and on how fully workers value changes in the cost of health insurance if the demand or the supply of labor is completely inelastic or if workers fully value the insurance then an increase in the premium would result in an equal decrease shift in wages

learning from a piece of pie we investigate the empirical content of the nash solution to two player bargaining games the bargaining environment is described by a set of variables that may affect agents preferences over the agreement sharing the status quo outcome or both the outcomes i e whether an agreement is reached and if so the individual shares and the environment including the size of the pie are known but neither are the agents utilities nor their threat points we consider both a deterministic version of the model in which the econometrician observes the shares as deterministic functions of the variables under consideration and a stochastic one in which because of latent disturbances only the joint distribution of incomes and outcomes is recorded we show that in the most general framework any outcome can be rationalized as a nash solution however even mild exclusion restrictions generate strong implications that can be used to test the nash bargaining assumption stronger conditions further allow to recover the underlying structure of the bargaining and in particular the cardinal representation of individual preferences in the absence of uncertainty an implication of this finding is that empirical works entailing nash bargaining could and should use much more general and robust versions than they usually do copyright 2012 oxford university press

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

capital investments and price agreements in semicollusive markets we consider a semicollusive market where firms compete in a long run variable such as investment in capital or capacity and collude with respect to a short run variable such as price or market shares our concern is with the potential destabilizing effect of the long run competition on the short run collusion we show that under a certain refinement of the equilibrium the set of equilibria is reduced to include just the one in which the collusive agreement is stable we then lend some support to the phenomenon of an inverse association between advertising and competition by investigating the conditions under which overcapitalization occurs in the above equilibrium

bargaining power fear of disagreement and wage settlements theory and evidence from u s industry the paper develops and estimates a theoretical model of wage determination and union nonunion wage differentials in order to overcome the institutional ctiticisms of the formal bargaining literature the paper generalizes the nash zeuthen harsanyi model by linking the solution to the institutional concepts of bargaining power and fear or cost of disagreement and by making the outcome depend not only on endogenous but also on exogenous factors an operational specification of bargaining power and fear of disagreement allows the model to be estimated with data covering twelve companies and trade unions during the period from mid 1950 s to the late 1970 s while giving limited support to the nashzeuthen harsanyi solution the empirical analysis indicates that the bargaining outcome usually deviates from the nash zeuthen harsanyi point and in accordance with the institutionalist claim that it varies significantly with exogenous factors contrary to the traditional labor economics view the results do not support the general conclusion that the bargaining solution lies on the marginal revenue product curve of labor instead the relevant coefficients suggest that for many firms and unions the outcome might be better characterized by the efficient contract vertical contract curve

optimal export subsidy when demand is uncertain abstract a standard result in export subsidy tax game models is that if governments can credibly precommit themselves to a particular trade policy an export subsidy tax is optimal when firms engage in quantity price respectively competition brander and spencer 1985 eaton and grossman 1986 in this paper we consider a model of dynamic duopoly when demand in the importing country is uncertain we show that in a symmetric equilibrium a subsidy is generally optimal for price competition

testing the theory of emissions trading experimental evidence on alternative mechanisms for global carbon trading abstract simulation models and theory prove that emission trading converges to market equilibrium this paper sets out to test these results using experimental economics three experiments are conducted for the six largest carbon emitting industrialized regions two experiments use auctions the first a single bid auction and the second a walrasian auction the third relies on bilateral sequential trading the paper finds that in line with the standard theory both auctions and bilateral sequential trading capture a significant part 88 to 99 of the potential cost savings of emission trading as expected from trade theory all experiments show that the market price converges although not fully to the market equilibrium price in contrast to the theory the results also suggest that not every country might gain from trading in both the bilateral trading experiment and the walrasian auction one country actually is worse off with trade in particular bilateral sequential trading leads to a distribution of gains significantly different from the competitive market outcome this is due to speculative behavior imperfect foresight and market power

on the testable implications of collective choice theories we analyze collective choices in game forms from a revealed preference viewpoint we call the joint choice behavior of n agents nash respectively pareto rationalizable if there exist n preferences over the conceivable joint actions such that the joint actions selected from each game form coincide with the nash equilibria respectively the pareto optima of the corresponding game in the two agent case we show that every deterministic joint behavior which is nash rationalizable is also pareto rationalizable the converse is false we further identify general necessary and sufficient conditions for nash rationalizability of an n agent joint choice behavior we also define and characterize partial versions of the nash and pareto rationalizability requirements journal of economic literature classification numbers c72 c92

combinatorial clock auctions price direction and performance abstract the lack of price guidance towards efficiency relevant packages in ascending combinatorial clock auctions acca can lead to a low efficiency allocation of goods we propose a descending price combinatorial clock auction dcca with a newly devised pricing strategy to improve on this problem using agent based simulations we document that the dcca provides significant improvements over the acca and we are able to understand in which environments these improvements are likely to be the strongest we test these predictions in the laboratory with human subjects and find evidence that the dcca generates improvements in auction efficiency and revenue

export subsidies for differentiated products abstract export subsidies in differentiated product markets are examined in a framework where the decision to establish subsidy programs occurs first but firms set prices before governments set subsidy levels in contrast to earlier results that governments should tax the exports of bertrand firms when subsidy levels are set before prices positive subsidies can be optimal adoption of a subsidy program by one producer s government does not necessarily hurt the unsubsidized competitor the subsidy itself hurts but the program facilitates collusion the results highlight the importance of timing and the distinction between the effects of policy regimes and policy instruments

a new and improved design for multiobject iterative auctions in this paper we present a new improved design for multiobject auctions and report on the results of experimental tests of that design we merge the better features of two extant but very different auction processes the simultaneous multiple round smr design used by the fcc to auction the electromagnetic spectrum and the adaptive user selection mechanism ausm of banks et al 1989 allocating uncertain and unresponsive resources an experimental approach rand journal of economics vol 20 no 1 pp 1 25 then by adding one crucial new feature we are able to create a new design the resource allocation design rad auction process which performs better than both our experiments demonstrate that the rad auction achieves higher efficiencies lower bidder losses higher net revenues and faster times to completion without increasing the complexity of a bidder s problem

public export credit guarantees and foreign trade structure evidence from austria foreign trade is usually not based on cash transactions but rather sales on credit are the rule the resulting monitoring costs for lenders and the risk of default on accounts receivable are part of the costs associated with cross border goods transactions relative to domestic trade credit cross border credit creates trade barriers due to differences in language business practice jurisdiction and payment enforceability between trading partners export credit insurance has long been a domain of public export credit agencies only since the early 1980s private insurance is gaining ground using disaggregated panel data for goods exports from austria over the period 1996 to 2002 we show that public export credit guarantees have a less than proportional positive effect on international trade volume they predominantly affect the country structure of foreign trade but leave the industry specialisation almost unchanged

multi object auctions with package bidding an experimental comparison of vickrey and ibea abstract the use of package auctions for complex resource allocation has been rapidly increasing in recent years in this paper we study two package auction mechanisms in a laboratory setting a sealed bid vickrey auction and an ascending version of vickrey the i bea auction unlike the single unit vickrey auction where bidders tend to overbid in the laboratory most of our bidders either underbid or bid their true values furthermore at the aggregate level while the vickrey auction generates significantly higher revenue than does i bea the i bea auction generates significantly higher bidder profit and efficiency additionally a significantly larger proportion of i bea auctions achieves 100 efficiency than does the vickrey auction we also find that human bidders learn from their robot opponents when the robot strategies are myopic best responses

avoidable cost ride a double auction roller coaster the double auction trading institution has been highly efficient across diverse marginal cost market structures whether human subjects or zero intelligence robots populated those markets accordingly many researchers suspect that double auction performance transcends market structure and agent strategy but the authors show that large avoidable costs undermine the efficiency and stability of human subject double auctions and these low human efficiencies are simultaneously well above zero intelligence efficiencies their results dramatically illustrate the potential havoc wrought by highly competitive institutions when they must cope with nonconvex technologies copyright 1996 by american economic association

modeling competitive bidding a critical essay in analyzing bidding modeling matters this paper is a critical analysis of the models available to aid competitive bidding decision making bidding strategy and auction design in real transactions after an introductory overview this paper describes the contexts in which auctions arise reviews the mainstream theory of single isolated auctions and discusses the important work involved in enrichment of this theory in doing so it indicates results that have been obtained and the sort of changes in analytical approach that are needed to tackle other critical enrichments the paper summarizes briefly what is known about the direct use of models by bidders and auction designers a general theme of this paper is that enriched models are needed to bring bidding theory closer to direct applicability in decision making

on auction protocols for decentralized scheduling abstract this note shows that for the combinatorial market goods defined by wellman et al 2001 there may not exist an optimal allocation that is in equilibrium moreover this result holds even if the value of each processed job is independent of its completion time the proposed algorithm for finding an equilibrium allocation using an assignment model fails due to complementarity even for instances that admit an optimal allocation which is in equilibrium

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

side communication yields efficiency of ascending auctions the two items case we analyze an ascending auction with anonymous item prices when there are two items that are substitutes this popular auction format entails increased opportunities for bidders to coordinate bids as the bidding process is longer and since bidders see the other bids and can respond to various signaling this has happened in many real auctions e g in the netherlands 3g telecom auction and in the fcc auctions in the us

the empirical content of cournot competition we consider the testable implications of the cournot model of market competition our approach is nonparametric in the sense that we abstain from imposing any functional specification on market demand and firm cost functions we derive necessary and sufficient conditions for reduced form equilibrium market price and quantity functions to be consistent with the cournot model in addition we present identification results for the corresponding inverse market demand function and the firm cost functions finally we use our approach to derive testable restrictions for the models of perfect competition collusion and conjectural variations this identifies the conditions under which these different models are empirically distinguishable from the cournot model we also investigate empirical issues measurement error and omitted variables related to bringing our testable restrictions to data

the determination of price and output quotas in a heterogeneous cartel applying a selection criterion that uses both subgame perfection and the nash bargaining solution this paper investigates the relationship between firms cost functions and collusive behavior it is found that the optimal collusive price exceeds the price that the low cost firm would set if it was a monopolist comparative statics reveal that the optimal collusive price is increasing in the low cost firm s unit cost but is decreasing in the high cost firm s unit cost when the cost differential between firms is sufficiently large copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

combinatorial auction design combinatorial auctions have two features that greatly affect their design computational complexity of winner determination and opportunities for cooperation among competitors dealing with these forces trade offs between desirable auction properties such as allocative efficiency revenue maximization low transaction costs fairness failure freeness and scalability computational complexity can be dealt with algorithmically by relegating the computational burden to bidders by maintaining fairness in the face of computational limitations by limiting biddable combinations and by limiting the use of combinatorial bids combinatorial auction designs include single round first price sealed bidding vickrey clarke groves vcg mechanisms uniform and market clearing price auctions and iterative combinatorial auctions combinatorial auction designs must deal with exposure problems threshold problems ways to keep the bidding moving at a reasonable pace avoiding and resolving ties and controlling complexity

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

better faster cheaper an experimental analysis of a multiattribute reverse auction mechanism with restricted information feedback the majority of reverse auctions for procurement use a single attribute price format while providing constraints on nonprice attributes such as quality and lead time alternatively a buyer could choose to conduct a multiattribute auction where bidders can specify both a price and levels of nonprice attributes while such an auction may provide higher theoretical utility to the buyer it is not clear that this theoretical improvement will be realized given the increased complexity of the auction in this research we present an ascending auction mechanism for a buyer whose utility function is known and dependent on three attributes motivated by a supply chain procurement problem setting we consider quality and lead time for the two attributes in addition to price the auction mechanism provides the bidders with restricted feedback regarding the buyer s utility function we explore experimentally the performance of this multiattribute auction mechanism as compared to a price only auction mechanism compared with the price only auction we find that our mechanism design is effective in increasing both buyer utility and bidder supplier profits

export subsidies and oligopoly with switching costs abstract i examine export policy using a two period model of oligopolistic competition with switching costs a switching costs model captures the idea that market share in one period affects profits and welfare in future periods if consumers are impatient firms and governments are patient and switching costs are significant then governments subsidize first period exports and tax second period exports otherwise governments tax exports in both periods although governments may subsidize first period exports each country is made worse off when both countries subsidize in addition firms dump p mc under conditions similar to those required for export subsidies