the effect of initial inequality on meritocracy a voting experiment on tax redistribution abstract according to alesina and angeletos 2005 societies are less redistributive but more efficient when the median voter believes that effort and talent are much more important than luck in determining income we test these results through a lab experiment in which participants vote over the tax rate and their pre tax income is determined according to their performance in a real effort task with leisure time subjects receive either a high or a low wage and this condition is either obtained through their talent in a tournament or randomly assigned we compare subjects decisions in these two different scenarios taking into consideration different levels of wage inequality in our framework this initial income inequality turns out to be crucial to support the theoretical hypothesis of alesina and angeletos 2005 overall we find that only if the wage inequality is high subjects choose a lower level of income redistribution and provide a higher effort level in the scenario in which high wage subjects are selected based on their talent through a tournament than when it is randomly assigned thus we confirm almost all theoretical results in alesina and angeletos 2005 when the wage inequality is high enough the big exception is for efficiency measured as the sum of total payoffs since theoretical results are not significant for both wage inequality scenarios

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

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

on the existence of pure strategy monotone equilibria in asymmetric first price auctions we establish the existence of pure strategy equilibria in monotone bidding functions in first price auctions with asymmetric bidders interdependent values and affiliated one dimensional signals by extending a monotonicity result due to milgrom and weber 1982 we show that single crossing can fail only when ties occur at winning bids or when bids are individually irrational we avoid these problems by considering limits of ever finer finite bid sets such that no two bidders have a common serious bid and by recalling that single crossing is needed only at individually rational bids two examples suggest that our results cannot be extended to multidimensional signals or to second price auctions

a glimpse through the veil of ignorance equality of opportunity and support for redistribution abstract this study is an experimental investigation into preference for redistribution of income it had been hypothesized that belief in equality of opportunity in a society diminishes support for the welfare state this could potentially explain the low taxes and social benefits in the united states vis a vis europe to verify this hypothesis participants in an experiment were assigned different probabilities of winning and matched in groups of four next before finding out who would actually win they selected preferred transfers to be paid by the winners to the group as a whole it was found that the average transfers were about 20 lower in the sessions in which winning was determined by performance in a task rather than by sheer luck this difference cannot be explained by overconfidence in predicting own score it corroborates the conjecture that perceived determinants of success i e whether poverty results from laziness or bad luck affect the support for redistribution on the other hand greater inequality of opportunity measured simply by dispersion of probabilities of winning within a group did not lead to higher transfers

structural estimation of the affiliated private value auction model we consider the structural estimation of the affiliated private value apv model in first price sealed bid auctions the model allows for bidders individual efficiencies and opportunity costs while permitting dependence among bidders private values through affiliation we establish the nonparametric identification of the apv model characterize its theoretical restrictions and propose a computationally convenient and consistent two step nonparametric estimation procedure for estimating the joint private value distribution from observed bids using simulated bid data we provide a step by step guide on how to implement our procedure and show the good behavior of our estimator in small samples

mergers in symmetric and asymmetric noncooperative auction markets the effects on prices and efficiency abstract united states antitrust merger analysis has recently focused on simulating the unilateral effects of mergers we develop a model to simulate the unilateral price increase from a merger in an auction market we illustrate our results in the context of hospital mergers in the u s and calibrate our simulations to known market parameters we compare the price increases in our model to those suggested by analytically simpler models the simulation results suggest that the unilateral price increases predicted by our model are modest in general we also simulate the merger cost savings that are needed to offset the price effects

group loyalty and the taste for redistribution interpersonal preferences preferences that depend on the characteristics of others are typically hard to infer from observable individual behavior as an alternative approach this paper uses survey data to investigate interpersonal preferences i show that self reported attitudes toward welfare spending are determined not only by financial self interest but also by interpersonal preferences these interpersonal preferences are characterized by a negative exposure effect individuals decrease their support for welfare as the welfare recipiency rate in their community rises and racial group loyalty individuals increase their support for welfare spending as the share of local recipients from their own racial group rises these findings help to explain why levels of welfare benefits are relatively low in racially heterogeneous states

asymmetric private values auctions with application to joint bidding and mergers abstract much of the theoretical auction literature assumes that there are no observable differences between the bidders of an auction in this paper i present an asymmetric auction model where the distribution of a bidder s value depends on some commonly observed characteristics the model is applied to joint bidding and mergers in auction markets the results provide additional evidence that first price auctions are less susceptible to the acquisition and exercise of market power than open auctions

the effect of income taxation on labor supply in the united states the effect of income taxation on the labor supply of prime age married men and women in the united states is examined using econometric methods similar to those used in the influential work of jerry hausman male labor supply is found to be relatively invariant to the net wage and virtual income in all specifications estimated the estimated impact of taxation on the labor supply of married women depends critically on the method used to estimate the labor supply function estimated net wage and virtual income elasticities are considerably larger when data on nonparticipants are included than when the estimation is conducted conditional on hours being greater than zero

collusion in second price auctions with heterogeneous bidders abstract we show that efficient collusion by any subset of bidders in second price private value auctions is possible even when the bidders are heterogeneous an important property of efficient collusion is that a bidder s net payoff from participating in collusion is independent of her valuation we show that the cooperative game whose characteristic function evaluated at a coalition is the ex ante collusive surplus of that coalition has a nonempty core a feature of more technical interest is the mechanism characterization when the private information of agents does not enter in a linear or even piecewise linear manner

immigration ethnic diversity and political outcomes evidence from denmark i study the impact of immigration and increasing ethnic diversity on political outcomes in immigrant receiving countries focusing on immigration and election outcomes in danish municipalities 1981 2001 a rich set of control variables isolates ethnic diversity eects from those of other immigrant characteristics and a novel iv strategy based on historical housing stock data addresses issues of endogenous location choices of immigrants increases in local ethnic diversity lead to right ward shifts in election outcomes by shifting electoral support away from traditional big government left wing parties and towards anti immigrant nationalist parties in particular these eects appear in both local and national elections

a study of collusion in first price auctions this paper examines the bidding for school milk contracts in florida and texas during the 1980s in both states firms were convicted of bid rigging the data and legal evidence suggest that the cartels in the two states allocate contracts in different ways one cartel divides the market among members while the other cartel also uses side payments to compensate members for refraining from bidding we show that both forms of cartel agreements are almost optimal provided the number of contracts is sufficiently large in the auction the cartel bidder may face competition from non cartel bidders the presence of an optimal cartel induces an asymmetry in the auction the selected cartel bidder is bidding as a representative of a group and has on average a lower cost than a non cartel bidder the data support the predicted equilibrium bidding behaviour in asymmetric auctions in accordance with optimal cartels

the political economy of xenophobia and distribution the case of denmark for the first time in many years a conservative government came to power in denmark in 2001 due primarily to the citizenry s dissatisfaction with social democratic policies on immigartion we represent political competition in denmark as taking place on two issues the size of the public sector and immigration and model political equilibrium using the party unanimity nash equilibrium concept pune which generates equilibria on multi dimensional policy spaces where parties form endogenously by fitting the model to danish data we argue that citizen xenophobia may be expected to decrease the size of the danish public sector by an amount equal to one half of a standard deviation of the probability distribution of citizens views as to what the optimal size of public sector is

favoring domestic firms in procurement contracts abstract this paper studies the rationale for giving preference to domestic firms in the award of government contracts when the regulator is interested in maximizing domestic welfare it is seen that in the absence of comparative advantages the regulator should discriminate in favor of the domestic firms because foreign firms profits do not enter in domestic welfare furthermore i show that the form of the discrimination function depends on the mechanism being used in order to simplify the implementation of an optimal policy the regulator should choose mechanisms based on second price auctions

social ideology and taxes in a differentiated candidates framework many observers argue that political polarization particularly on social and cultural issues has increased in the united states how does this influence the political competition on economic issues we analyze this question using a framework in which two officemotivated candidates differ in their fixed ideological position and choose a level of government spending to maximize their vote share in equilibrium candidates cater to a set of swing voters who contain socially conservative and economically liberal voters as well as socially liberal and economically conservative voters we analyze how voters cultural preferences and candidates cultural positions influence equilibrium economic positions jel d72 e62 h50 z13 many observers have argued that polarization between the two major parties in the united states particularly on noneconomic cultural matters has increased this is reflected both at the elite level in particular in congress poole and rosenthal 1984 1985 2000 and among democratic and republican activists and voters abramowitz and saunders 2008 harbridge and malhotra 2011 in the american national election survey respondents report their own ideological position on a scale from 1 very liberal to 7 very conservative the number of respondents who report one of the extreme positions 1 2 6 or 7 has grown from 20 and 21 percent in 1972 and 1976 to 31 and 30 percent in the 2004 and 2008 respectively moreover liberal and conservative voters have become considerably more reliable supporters of democrats and republicans respectively over the last generation 1 if we accept the widespread view that reagan s conservative revolution has created a cultural wedge between the parties that only widened in the 1990s and 2000s what consequences for the parties economic policies should we expect

collusive bidder behavior at single object second price and english auctions models of collusive bidder behavior at single object second price and english auctions are provided the ind ependent private values model is generalized to permit the formulatio n of coalitions and a strategic response by the auctioneer cooperati ve strategies are found to be dominant in these models coalitions of any size are viable and the payoff to each member increases with th e size of the coalition in addition the collusive strategies of the coalition represent a noncooperative equilibrium the optimal respon se of the auctioneer is to establish a reserve price that is a functi on of the coalition s size these and other features of the model are found to be consistent with the essential features of actual behavio r copyright 1987 by university of chicago press

informational rents in oil and gas concession auctions in brazil abstract this article aims to estimate the informational rents earned by winning bidders in oil and gas exploration and production auctions in brazil we estimate the distributions of bids and bidders private valuations using a nonparametric structural model and assuming independence and asymmetry between participants petrobras the brazilian state owned petroleum giant and former oil sector monopolist was considered a competitor that was distinct from other competitors thus we investigate a database based on information from all auctions held between 1999 and 2008 the results suggest that petrobras earned significantly higher information rents than other competitors such rents ranged from 15 to 63 depending on the number and type of competitors

on the analysis of asymmetric first price auctions we provide a new set of tools for studying asymmetric rst price auctions connecting their equilibria to the concavity of the underlying type distributions and showing how one can use surplus expressions related to symmetric auctions to bound equilibrium behavior in asymmetric auctions we apply these tools to studying procurement auctions in which as is common in practice one seller is given an advantage re ecting for example better reliability or quality we show conditions under which for any given rst price handicap auction there is a second price auction with bonuses that outperforms it with most of our results involving ex post dominance

who s afraid of atmospheric stabilisation making the link between energy resources and climate change abstract the distribution of fossil fuel reserves and resources between different regions and deposits has strong implications for climate change economics and policy the task of stabilising the atmosphere is intimately linked to the question of long term energy supplies as conventional petroleum reserves deplete notwithstanding debates about the scope for reserve extension through continued exploration and development it suggests a supply side component to complement the consumption orientation of existing climate policies the task is to ensure that investment and innovation moves towards the low carbon frontier instead of the high carbon frontier this also implies that the opec countries have little to fear about the long run impact of climate change policy the priority is to deter development of more carbon intensive unconventional petroleum deposits and technologies and to ensure that the existing trends to diversify power generation sources continue and extend more widely over time supply side constraints will not solve the climate problem in themselves but they make the task a lot easier if the opportunities are taken

measuring the security of energy exports demand in opec economies one of the objectives of opec is the security of demand for the crude oil exports of its members achieving this objective is imperative with the projected decline in oecd countries crude oil demand among other crude oil demand shocks this paper focuses on determining the external crude oil demand security risks of opec member states in assessing these risks this study introduces two indexes the first index risky energy exports demand reed indicates the level of energy export demand security risks for opec members it combines measures of export dependence economic dependence monopsony risk and transportation risk the second index contribution to opec risk exposure core indicates the individual contribution of the opec members to opec s risk exposure this study utilises the disaggregated index approach in measuring energy demand security risks for crude oil and natural gas and involves a country level analysis with the disaggregated approach the study shows that opec s energy export demand security risks differ across countries and energy types

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

an empirical study of an auction with asymmetric information this paper examines federal auctions for drain age leases on the outer continental shelf from 1959 to 1969 these are leases that are adjacent to tracts on which a deposit has been discovered the authors find that the data strongly support the hypotheses that neighbor firms are better informed about the value of a lease than nonneighbor firms that neighbor firms coordinate their bidding decisions and that both types of firms bid strategically in accordance with the bayesian nash equilibrium model for first price sealed bid auctions with asymmetric information

detecting collusion on highway procurement this paper proposes a procedure to detect collusion in asymmetric first price procurement the main objective is twofold first to provide a methodology to detect collusion using a structural approach and second to apply the methodology to field data on procurement auctions for highway construction in california i identify two different sets of firms as potential ring members relying on an exogenous number of bidders and the assumption that within each type bidders are symmetric i find evidence supporting the collusive scheme for the two mentioned sets of firms by comparing a model of competition and a model of collusion

identification in first price and dutch auctions when the number of potential bidders is unobservable within the ipv paradigm we show nonparametric identication of model primitives forrst price and dutch auctions with a binding reserve price and auction specic unobservable sets of potential bidders

can affirmative action be cost effective an experimental examination of price preference auctions one of the most controversial questions facing our economy and society in recent years is the question of affirmative action the debate centers around an issue of minority representation in which the rights of the majority are depicted as being compromised by affirmative action programs set up to increase the welfare of minorities implicit in this discussion is the assumption that all affirmative action programs must be cost increasing this result it is claimed follows trivially from economic theory since any interference into the competitive process which prevents the most capable from being chosen must be wasteful and costly in this paper we challenge this claim with experimental results demonstrating that pricepreference auctions in which high cost minority firms are given preferential treatment in the awarding of contracts in such a way that it is possible for these firms to win a contract but not have submitted the lowest bid can be programs that both enhance minority representation and are cost effective in that they decrease the cost of government procurement in the theoretical literature on asymmetric auctions eric maskin and john riley 1995 and the optimal auction literature roger myerson 1981 it has been shown that in asymmetric auctions in which firms draw their costs from

macroeconomic pathways of the saudi economy the challenge of global mitigation action versus the opportunity of national energy reforms abstract we analyse the mid term macroeconomic challenge to saudi arabia of a global low carbon transition reducing oil revenues versus the opportunity of national energy reforms we calibrate a compact dynamic recursive model of saudi arabia on original energy economy data to explore scenarios we first assess the consequences of oil prices declining from their levels in the new policies scenario nps of the iea to their levels in its sustainable development scenario sds by 2030 the saudi economy loses 1 4 gdp points 1 6 employment points and usd 504 billion trade surplus accumulation its cumulated public deficit rises to 92 8 of gdp national reforms gradually aligning saudi energy prices on international prices and inducing structural change of saudi activity away from energy intensive industries mitigate these costs if a share of the public income from energy price deregulation is directed to investment however they reduce the cumulated trade surplus and fail to control public deficit accumulation sensitivity analysis confirms the capacity of national energy reforms to mitigate the activity cost of global mitigation action but aggravates the threat of an escalating public deficit these results underline the importance of broader economic and fiscal reforms as part of the ambitious vision 2030 saudi initiative

gains from cartelisation in the oil market in this paper we ask whether opec still gains from cartelisation in the oil market despite low producer prices and a modest market share we apply two intertemporal equilibrium models of the global oil market one consisting of a cartel and a fringe and one describing a hypothetical competitive market comparing the outcome of these models we conclude that there are positive cartelisation gains of about 18 percent in the oil market in comparison with what pindyck 1978 found for the 1970s this may be considered as quite modest moreover we study whether the cartelisation gains to opec are altered by different moves by non opec producers or consumer countries generally we find that the relative cartelisation gains are unchanged one exception is exploration activities where we find that a major increase in non opec reserves could remove the cartelisation gains to opec completely in this case the opec countries could find themselves better off without the cartel

the effect of bidders asymmetries on expected revenue in auctions abstract bidders asymmetries are widespread in auction markets yet their impact on behavior and ultimately revenue and profits is still not well understood this paper defines a natural benchmark auction environment to which to compare any private values auction with asymmetrically distributed valuations the main result is that the expected revenue from the benchmark auction dominates that from the asymmetric auction both in the first price auction and the second price auction moreover for classes of distributions that lend themselves to a quasi ordering of more or less asymmetric configurations we prove that the expected revenue is lower the more asymmetric bidders are these results formalize the idea that competition is reduced by bidders asymmetries applications to merger analysis joint bidding and investment are discussed

is subsidizing inefficient bidders actually costly a widespread practice particularly in public sector procurement and dispersal is to subsidize a class of competitors believed to be at an economic disadvantage arguments for such policies vary but they typically assume that benefits of subsidization must be large enough to outweigh a presumed economic cost of the subsidy when disadvantaged competitors compete in auctions the subsidy serves to make them more competitive rivals other bidders rationally respond by bidding more aggressively we consider a model of procurement auctions and show that a policy of subsidizing inefficient competitors can lower expected project cost and also enhance economic efficiency some subsidy is generally better than no subsidy for a wide range of parameters

uniqueness of equilibrium in sealed high bid auctions abstract for the case of two buyers we show that equilibrium in the sealed high bid auction is unique when i buyers reservations prices are drawn independently from distributions with finite support and positive mass at the lower endpoint ii buyers have private values and iii buyers preferences are log supermodular for more than two buyers we obtain the same result under the additional assumptions that iv buyers with the same reservation price have the same preferences v buyers are risk neutral or risk averse with non increasing absolute risk aversion and vi the supports of the different buyers distributions of reservation prices have the same upper endpoint

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

bridging trade theory and labour econometrics the effects of international migration this paper surveys current theoretical and empirical research on international migration with a particular emphasis on the links between trade theory and labour empirics

self fulfilling beliefs about social status abstract human beings care a lot about being viewed as smart this paper defines social status as the public beliefs about one s smartness inferred from one s publicly observed social mobility experience this status motive can easily generate multiple equilibria based upon self fulfilling beliefs it also tends to amplify the inequality of economic success between agents with different social origins this theory of persistent inequality is compared with other theories of inequality based upon self fulfilling beliefs such as the model of statistical discrimination and the model of learning about one s chances of mobility in the absence of a status motive as well the sociological theories of merton boudon and bourdieu

numerical analysis of asymmetric first price auctions abstract we propose numerical algorithms for solving first price auction problems where bidders draw independent valuations from heterogeneous distributions the heterogeneity analyzed in this work is what might naturally emerge when subsets of distributionally homogeneous bidders collude bid functions and expected revenues are calculated for two special cases extensions to more general asymmetric first price auctions are discussed journal of economic literature classification numbers d44 c63 c72 d82

redistribution pork and elections why might citizens vote against redistributive policies from which they would seem to benefit many scholars focus on wedge issues such as religion or race but another explanation might be geographically based patronage or pork we examine the tension between redistribution and patronage with a model that combines partisan elections across multiple districts with legislation in spatial and divide the dollar environments the model yields a unique equilibrium that describes the circumstances under which poor voters support right wing parties that favor low taxes and redistribution and under which rich voters support left wing parties that favor high taxes and redistribution the model suggests that one reason standard tax and transfer models of redistribution often do not capture empirical reality is that redistributive transfers are a less efficient tool for attracting votes than are more targeted policy programs the model also underlines the central importance of party discipline during legislative bargaining in shaping the importance of redistribution in voter behavior and it describes why right wing parties should have an advantage over left wing ones in majoritarian systems

party formation and minority ideological positions we develop a model where voters differ in their exogenous income and in their ideological views with racism as an illustration electoral competition takes place between an endogenous number of parties which propose platforms consisting of both an ideological and an economic dimension our objective is to explain the emergence of minority ideological positions and to understand the role played by political parties in this emergence we first show that in a pure citizen candidate model where parties are absent the only equilibrium consists of the majority ideological position we then show that allowance for the formation of political parties generates equilibria with minority ideological positions

opec s response to international climate agreements this paper studies a game between a group of countries that have agreed to participate in an international climate agreement the signatories and opec the purpose of the signatories is to design carbon taxes that maximize their total net income given a goal on global carbon emissions as a response to the climate agreement opec imposes an oil tax on its member states that maximizes opec s profits within a numerical model we find the subgame perfect equilibrium of a game in which each player chooses when to fix his decision variables it is shown that in equilibrium the group of signatories chooses to be the leader and opec chooses to be the follower it is demonstrated however that for both agents the order of move is of minor numerical importance hence the players have limited incentives for strategic behaviour

the grey paradox how fossil fuel owners can benefit from carbon taxation abstract this paper considers the distributional impact of optimal carbon taxation on fossil fuel owners a carbon emitting exhaustible resource competes with a dirtier abundant resource and a clean backstop a time dependent carbon tax is set to optimally use these resources under a cap constraint over co 2 atmospheric concentration as the cap is tightened the dirtier resource becomes less competitive compared to the exhaustible resource the competition effect but the timing and duration of extraction of the exhaustible resource is modified the timing effect we provide analytical expressions of these effects and determine conditions over size of reserves pollution contents extraction costs and demand elasticity such that the exhaustible resource owners profits increase as the ceiling is tightened calibrations for the transport and power sectors suggest that the profits of conventional oil and natural gas owners increase compared to a baseline without regulation for plausible carbon ceiling values

understanding preferences for income redistribution abstract recent research suggests that income redistribution preferences vary across identity groups we employ statistical learning methods that emphasize pattern recognition classification and regression trees cart and random forests randomforests to uncover what these groups are using data from the general social survey we find that out of a large set of identity markers only race gender age and socioeconomic class are important classifiers for income redistribution preferences further the uncovered identity groupings are characterized by complex patterns of interaction amongst these salient classifiers we explore the extent to which existing theories of income redistribution can explain our results but conclude that current approaches do not fully explain the findings

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

the anatomy of distributional preferences with group identity abstract the increasing diversity of societies raises questions about the consequences for redistributive preferences this paper assesses the impact of social identity on distributional preferences in a modified dictator game i estimate individual level utility functions with two parameters that govern the trade offs between equity and efficiency and giving to self and to other subjects on average put less weight on income of the out group the out group treatment also changes the distribution of equity efficiency concerns however the experiment also uncovers a large individual heterogeneity of preferences an analysis of garp violations reveals that choices in both treatments overwhelmingly stem from well behaved yet systematically different underlying utility functions hence the evidence presented here suggests that the rational choice approach is a useful tool for understanding the effect of social identity on preferences

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

nonparametric identification of risk aversion in first price auctions under exclusion restrictions this paper studies the nonparametric identification of the first price auction model with risk averse bidders within the private value paradigm first we show that the benchmark model is nonindentified from observed bids we also derive the restrictions imposed by the model on observables and show that these restrictions are weak second we establish the nonparametric identification of the bidders utility function under exclusion restrictions our primary exclusion restriction takes the form of an exogenous bidders participation leading to a latent distribution of private values that is independent of the number of bidders the key idea is to exploit the property that the bid distribution varies with the number of bidders while the private value distribution does not we then extend these results to endogenous bidders participation when the exclusion restriction takes the form of instruments that do not affect the bidders private value distribution though derived for a benchmark model our results extend to more general cases such as a binding reserve price affiliated private values and asymmetric bidders last possible estimation methods are proposed

equilibrium in sealed high bid auctions there is a voluminous theoretical literature on sealed high bid auctions auctions in which bids are sealed and the high bidder pays his bid see for example vickrey 1961 myerson 1981 riley and samuelson 1981 milgrom and weber 1982 matthews 1983 maskin and riley 1984 holt 1980 cox smith and walker 1988 a critical property on which this literature relies is the existence of equilibrium in which buyers bidding strategies are monotonic in their types this enables the analyst to perform comparative statics as the distribution of types changes and to compare the welfare properties of the high bid auction with those of other auction institutions one case in which the existence of monotonic equilibrium is readily established is that in which buyers types are distributed smoothly independently and symmetrically in this case there exists a symmetric equilibrium one in which all bidders share the same bidding behaviour as a function of their valuations and this bid function is the solution to a first order differential equation

econometrics of first price auctions in this paper we propose an estimation method for the empirical study of theoretical auction models we focus on first price sealed bid and descending auctions and we adopt the private value paradigm where each bidder is assumed to have a different private value only known to him for the object that is auctioned following mcfadden 1989 and pakes and pollard 1989 our proposed method is based on simulations specifically the method relies on a simulated nonlinear least squares objective function appropriately adjusted so as to obtain consistent estimates of the parameters of interest we illustrate the proposed method by studying a market of agricultural products where descending auctions are used our analysis takes into account heterogeneity of the auctioned objects and the fact that only the winning bid is observed we estimate the parameters that characterize the distribution of the unobserved private values for each auctioned object

why the poor do not expropriate the rich an old argument in new garb we consider a political economy with two partisan parties each party represents a given constituency of voters if one party labour represents poor voters and the other christian democrats rich voters if a redistributive tax policy is the only issue and if there are no incentive considerations then in equilibrium the party representing the poor will propose a tax rate of unity if however there are two issues tax policy and religion for instance then this is not generally the case the analysis shows that if a simple condition on the distribution of voter preferences holds then as the salience of the non economic issue increases the tax rate proposed by labour in equilibrium will fall possibly even to zero even though a majority of the population may have an ideal tax rate of unity 1998 elsevier science s a all rights reserved

us and them the origin of identity and its economic implications we investigate the origins of identity and the innate proclivity to draw a distinction between insiders and outsiders we propose an evolutionary explanation we argue that identity arises because it facilitates survival in an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would draw a distinction between insiders and outsiders we then work out the implications of such preferences in two contemporary scenarios one entailing rent seeking behavior and the other involving public good provision our results are in conformity with empirical evidence

the effect of bidder heterogeneity on combinatorial conservation auction designs in an iterative combinatorial auction bidders can submit bids on individual and or on combinations of projects in a series of intermediate rounds where bid prices are revised before a final allocation is made the iterative format is useful for conservation service procurement as landholders can rely on market information revealed through the rounds to evaluate their choices of projects and bid prices however there is no single way of providing the market information different designs for generating price information have been proposed little is known about the performance of iterative combinatorial auction designs when heterogeneous bidders with different cost structures participate in an auction using an agent based model we evaluate a selected set of designs under different bidder heterogeneity scenarios we observe that higher degrees of heterogeneity lead to lower auction efficiency and that auction outcomes are highly sensitive to price feedback design choices

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

bidder collusion at forest service timber sales allegations of bidder collusion at forest service timber sales in the pacific northwest were common in the 1970s of course prices may be low for reasons other than collusion we formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions noncooperative behavior in which a single unit is sold the standard auction model is a special case it is found to be definitively outperformed by a model of collusion we also find that supply effects are dominated by collusion in determining the winning bids in the market

redistribution and affirmative action abstract the paper develops an integrated political economy model in which individuals are distinguished by earning ability and an ascriptive characteristic race the policy space is a transfer payment to low income workers financed by a flat tax on wages and an affirmative action constraint on firms hiring decisions the distribution of income and the policy are endogenous with the latter being the outcome of a legislative bargaining game between three legislative blocs the model provides support for the common claim that racial divisions reduce support for welfare expenditures even when voters have color blind preferences we show that relatively advantaged members of both the majority and minority group benefit from the introduction of a second dimension of redistribution while the less advantaged members of the majority are the principal losers

endogenous asymmetry in a dynamic procurement auction we show how to numerically solve for a markov perfect equilibrium of a dynamic auction game where a procurer repeatedly purchases construction services from capacity constrained firms we find that the procurer is best off scheduling frequent auctions for small project sizes otherwise firm capacity utilization rates become larger and more asymmetric which softens competition and increases procurement costs we also find that forward looking bidding dampens the competition softening effects of asymmetry farsighted firms compete more intensely than myopic ones this can undermine the goal of a bid preference style affirmative action program more farsighted firms respond less to the asymmetry induced via bid preferences

monetary compensations in climate policy through the lens of a general equilibrium assessment the case of oil exporting countries this paper investigates the compensations that major oil producers have claimed for since the kyoto protocol in order to alleviate the adverse impacts of climate policy on their economies the amount of these adverse impacts is assessed through a general equilibrium model which endogenizes both the reduction of oil exportation revenues under international climate policy and the macroeconomic effect of carbon pricing on middle east s economy we show that compensating the drop of exportation revenues does not offset gdp and welfare losses because of the time profile of the general equilibrium effects when considering instead compensation based on gdp losses the effectiveness of monetary transfers proves to be drastically limited by general equilibrium effects in opened economies the main channels of this efficiency gap are investigated and its magnitude proves to be conditional upon strategic and policy choices of the middle east this leads us to suggest that other means than direct monetary compensating transfers should be discussed to engage the middle east in climate policies

estimating risk aversion from ascending and sealed bid auctions the case of timber auction data estimating bidders risk aversion in auctions is a challeging problem because of identification issues this paper takes advantage of bidding data from two auction designs to identify nonparametrically the bidders utility function within a private value framework in particular ascending auction data allow us to recover the latent distribution of private values while first price sealed bid auction data allow us to recover the bidders utility function this leads to a nonparametric estimator an application to the us forest service timber auctions is proposed estimated utility functions display concavity which can be partly captured by constant relative risk aversion

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

asymmetry in procurement auctions evidence from snow removal contracts differences in cost efficiency and productivity across firms may introduce asymmetries in procure ment auctions relying on a structural approach this article investigates potential asymmetry among firms bidding for snow removal contracts in montrthe empirical results show that firms located in close proximity have a cost advantage relative to other firms in the most urbanised part of montrbecause of prohibitive equipment storage costs the extent of inefficiency due to asym metry is empirically assessed various policy experiments are performed a bidding preference policy shows that the city could expect to reduce its costs for allocating snow removal contracts when bidders willingness to pay depends in part on observable variables the princi pal s interest is not best served by creating a level auction playing field this article studies procurement auctions for snow removal contracts in montrit investigates the degree to which companies in disadvantageous locations should win even if they do not submit the lowest bid from the submitted bids a novel empirical methodology estimates the extent of cost variation across firms along with its variation within loca tion although the dispersion is substantial the gain from treating bidders unequally is limited when observed individual characteristics affect the firms costs and their bidding strategies all bidders cannot be treated alike these differences in characteristics or asymmetries among bidders may arise from their size as noted by laffont et al 1995 their capacity constraints as in jofre bonet and pesendorfer 2003 or the possession of better information as in hendricks and porter 1988 and hendricks et al 1994

entry and r d in procurement contracting abstract a model of competitive procurement and contracting is presented in this paper the key features of the model include precontract r d an endogenous number of homogeneous firms and sealed bid auction rules both diminishing and constant returns to scale drs and crs in r d expenditure technologies are considered i find that the sealed bid first price auction fpa is equivalent to the second price auction spa under drs technology the revenue equivalence theorems breaks down under crs because multiple equilibria arise in the r d stage when spa is used howerer spa yields a unique perfect equilibrium given sufficient heterogeneity among potential firms the free entry perfect equilibrium is also characterized the buyer prefers free entry through an appropriate selection of the reservation price

ethnic diversity public spending and individual support for the welfare state a review of the empirical literature we review the empirical literature that studies the effect of ethnic diversity on public spending and on individual support for the welfare state the survey puts a particular focus on the fast growing literature that uses experiments to study the effects of ethnic diversity many of these studies have appeared since the pioneering survey by alesina and la ferrara and have not been covered by a survey before

racism and redistribution in the united states a solution to the problem of american exceptionalism abstract the two main political parties in the united states in the period 1976 1992 put forth policies on redistribution and on issues pertaining directly to race we argue that redistributive politics in the us can be fully understood only by taking account of the interconnection between these issues in political competition we identify two mechanisms through which racism among american voters decreases the degree of redistribution that would otherwise obtain in common with others we suggest that voter racism decreases the degree of redistribution due to an anti solidarity effect that some voters oppose government transfer payments to minorities whom they view as undeserving we suggest a second effect as well that some voters who desire redistribution nevertheless vote for the anti redistributive republican party because its position on the race issue is more consonant with their own and this too decreases the degree of redistribution in political equilibrium this we name the policy bundle effect we propose a formal model of multi dimensional political competition that enables us to estimate the magnitude of these two effects and estimate the model for the period in question we compute that voter racism reduced the income tax rate by 11 18 points the total effect decomposes about equally into the two sub effects we also find that the democratic vote share is 5 38 points lower than it would have been absent racism the magnitude of this effect would seem to explain the difference between the sizes of the public sector in the us and northern european countries

first price auctions in the asymmetric n bidder case i consider the first price auction when the bidders valuations may be differently distributed i show that every bayesian equilibrium is an essentially pure equilibrium formed by bid functions whose inverses are solutions of a system of differential equations with boundary conditions i then prove the existence of an equilibrium i prove its uniqueness when the valuation distributions have a mass point at the lower extremity of the support i give sufficient conditions for uniqueness when every valuation distribution is one of two atomless distributions i establish inequalities between equilibrium strategies when relations of stochastic dominance exist between valuation distributions

political economy of the kyoto protocol the kyoto protocol negotiated in december 1997 is the first international treaty to limit emissions of greenhouse gases but kyoto does not mark the conclusion to international cooperation on climate change it is really just a beginning this paper shows that in the aggregate the benefits of undertaking the kyoto reductions should exceed the corresponding costs provided these are achieved cost effectively but although kyoto seeks to promote cost effectiveness it may yet prove very costly moreover the agreement may not even achieve the reductions that it promises either because emissions will relocate to the countries that are not required to stay within kyoto prescribed ceilings or because paper trades will be promoted by the protocol s mechanisms more fundamentally kyoto does not deter non compliance and it only weakly deters non participation these flaws need to be mended but the nature of the problem makes that an especially difficult task copyright 1998 by oxford university press

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

intergenerational conflict and the political economy of higher education funding abstract we examine how a population s age distribution and a growing divide between the ethnic composition of older and young generations is likely to affect support for higher education funding using detailed survey data on voter preferences for higher education funding and precinct level vote returns from locally funded community college bond referenda in california we find that older voters are significantly less supportive of higher education funding than younger voters and that support among older non hispanic white voters is particularly weak when those voters reside in a jurisdiction where the college age population is more heavily hispanic

limits to oil pricing scenario planning as a device to understand oil price developments abstract the bad record of oil price forecasting indicates that conventional oil market models should be critically reassesed scenario planning may be one alternative approach this approach does not contradict other theories of the market but it claims that no single discipline is able to tell the whole truth about the market the sp approach stresses and clarifies the role of uncertainty it argues that without a cross disciplinary approach with an adequate choice of parameters at the right level of in depth discussion the analysis may either lose essential imput or drown in detail as an example of the methodology an analysis of the oil market in the 1990s is presented this shows low upper and lower limits for the price can be constructed and which actual price development can be expected in a combination of economic and political reasoning

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

a nonparametric test for comparing valuation distributions in first price auctions this article proposes a nonparametric test for comparing valuation distributions in first price auctions our test is motivated by the fact that two valuation distributions are the same if and only if their integrated quantile functions are the same our method avoids estimating unobserved valuations and does not require smooth estimation of bid density we show that our test is consistent against all fixed alternatives and has nontrivial power against root n local alternatives monte carlo experiments show that our test performs well in finite samples we implement our method on data from u s forest service timber auctions

will opec lose from the kyoto protocol a range of energy economy models forecast losses to members of the organisation of petroleum exporting countries opec should the kyoto protocol come into force these forecasts are a powerful influence in the united nations framework convention on climate change negotiations they are used by opec to advance the agenda on the impacts of response measures covertly arguing for compensation for lost oil revenues arising from implementation of the protocol this paper discusses this issue and explores the key assumptions of these models and their uncertainties assumptions about carbon leakage future availability of oil reserves substitution innovation and capital turnover are considered the paper suggests that losses will not affect opec countries equally and that these losses are not likely to be as substantial as the models forecast a range of policy measures are proposed to lessen any impact the protocol may have on opec

dynamics of energy technologies and global change technological choices largely determine the long term characteristics of industrial society including impacts on the natural environment however the treatment of technology in existing models that are used to project economic and environmental futures remains highly stylized based on work over two decades at iiasa we present a useful typology for technology analysis and discuss methods that can be used to analyze the impact of technological changes on the global environment especially global warming our focus is energy technologies the main source of many atmospheric environmental problems we show that much improved treatment of technology is possible with a combination of historical analysis and new modeling techniques in the historical record we identify characteristic l such network e ects yield high barriers to entry even for superior competitors these simple observations allow three improvements to modeling of technological change and its consequences for global environmental change one is that the replacement of long lived infrastructures over time has also replaced the fuels that power the economy to yield progressively more energy per unit of carbon pollution from coal to oil to gas such replacement has d they also include endogenous generation of s we show that doing so can yield projections with lessened environmental impacts without necessarily incurring negative e ect on the economy arriving on that path by the year 2100 depends on intervening actions such as incentives to promote greater diversity in technology and lower barriers to entry for new infrastructures that could accelerate historical trends of decarbonization 1999 elsevier science ltd all rights reserved

last place aversion evidence and redistributive implications we present evidence from laboratory experiments showing that individuals are last place averse participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution in modified dictator games participants randomly placed in second to last place are the most likely to give money to the person one rank above them instead of the person one rank below last place aversion suggests that low income individuals might oppose redistribution because it could differentially help the group just beneath them using survey data we show that individuals making just above the minimum wage are the most likely to oppose its increase similarly in the general social survey those above poverty but below median income support redistribution significantly less than their background characteristics would predict jel codes h23 d31 c91