on the optimality of treasury bill auctions in this paper we examine a stylized version of treasury bill auctions we show that if bidders are uncertain about the total amount being sold as in actual tbill auctions there is a unique pure strategy nash equilibrium in this equilibrium the seller s revenue is maximized

efficient egalitarian equivalence and the core of an economy with public projects abstract we prove the existence of efficient egalitarian equivalent allocations in an economy with a finite number of private goods and one abstract public project that can be executed by certain coalitions of economic agents efficient egalitarian equivalent allocations however may not be in the core

structural changes in volatility and stock market development evidence for spain abstract in this paper we review the factors that lead to changes in stock market volatility and use alternative methodologies of endogenous breakpoint detection in order to analyze whether the volatility of the spanish stock market has changed significantly over the period 1941 2001 this period corresponds to years of profound development of both the financial and the productive sides of the economy in this country the analysis of the spanish stock market suggests that volatility has behaved in a different manner over the period 1941 2001 after three decades of low volatility a structural break in volatility is detected in 1972 coinciding with the opening of the spanish economy from 1972 to 2001 the years of more intense financial development the stock market presents a higher level of volatility and lower persistence this effect is partly attributable to the increased growth of trading volume brought about by the economic development process

determinants of u s direct investment in the e e c revisited abstract this paper expands upon an earlier work in this review concerning the specification of a model to identify the determinants of u s direct foreign investment dfi in the e e c compared to earlier studies a longer data series is used an improved tariff discrimination proxy is employed and predicted sales are estimated and used as the output variable in the empirical work a variable to capture the effect of the u s capital control programs is also included the findings reaffirm the importance of market size especially in the plant and equipment equations as being an important determinant of dfi strong support was also found for the growth hypothesis consistent statistical support was found for the tariff discrimination hypothesis in addition the findings imply that a variable to capture the effects of fluctuating exchange rates should be included in future studies

wicksell lindahl and the theory of public goods wicksell s and lindahl s ideas on public goods and decisions are reviewed in light of later developments in the theoretical economics literature i begin by discussing their normative ideals in particular the notion of justness and the sources of the difficulties in reaching them wicksell s and lindahl s ideal states as well as the obstacles that they perceive are compared to more recent views on free riding and on the behavior of elected representatives their views on political bargaining are then related to later concepts in particular to the core of the economy

oil prices and the stock prices of alternative energy companies energy security issues coupled with increased concern over the natural environment are driving factors behind oil price movements while it is widely accepted that rising oil prices are good for the financial performance of alternative energy companies there has been relatively little statistical work done to measure just how sensitive the financial performance of alternative energy companies are to changes in oil prices in this paper a four variable vector autoregression model is developed and estimated in order to investigate the empirical relationship between alternative energy stock prices technology stock prices oil prices and interest rates our results show technology stock prices and oil prices each individually granger cause the stock prices of alternative energy companies simulation results show that a shock to technology stock prices has a larger impact on alternative energy stock prices than does a shock to oil prices these results should be of use to investors managers and policy makers

technological innovation and real investment booms and busts abstract we investigate why new high risk technologies can attract excessive and often unprofitable investment we develop an equilibrium model in which rational risk averse agents overinvest in a risky technology possibly to the point that its expected return is negative overinvestment results from relative wealth concerns which arise endogenously from the imperfect tradability of future endowments competition over future consumption leads to an indirect utility for wealth with keeping up with the joneses properties that can induce herding because overinvestment increases with the risk of the technology our model can explain why new risky technological innovations may promote investment bubbles

the equivalence of core and cost share equilibria in an economy with a public good abstract the central result of this paper is a refinement of an equivalence theorem in mas collell quart j econ 94 1980 625 641 for the core of a finite economy with a public good it is shown that an allocation belongs to the core if and only if it is a cost share equilibrium i e is supported by a monotonic cost share system we also characterize the set of core allocations which can be supported by a linear cost share system it turns out that the set of linear cost share equilibria which are in one to one correspondence with the lindahl foley equilibria is determined by uniform upper and lower bounds on the relative marginal rate of substitution for the public good

equilibrium in a finite local public goods economy abstract this paper examines the existence of a noncooperative equilibrium in a finite local public goods economy where consumers have quasi linear preferences jurisdictions consist of consumers who chose the same public project and finance the cost of production of public goods through either a proportional income tax or a poll tax we show that under a proportional income tax scheme a nash equilibria may fail to exist under a poll tax scheme an equilibrium always exists but in general nash equilibria violate a very weak efficiency condition we conclude by commenting on the stabilizing effect of zoning policies journal of economic literatureclassification number c71

oligopoly and cost sharing in economies with public goods we study economies that involve both small and large traders as well as the choice of a public project within this framework we establish two sufficient conditions under which the set of competitive allocations coincides with the core our first core equivalence result holds under the assumption that there is a countably infinite set of large traders similar to each other the second result independent of the number of large traders requires the existence of a coalition of small traders with the same characteristics of the large traders finally we show how the generalized aubin approach to cooperation may dispense with both conditions

technological change and the stock market tobin s average q has usually been well above 1 but fell below 1 during 1974 1984 our model explains this pattern and reconciles it with unchanging aggregate investment the stock market value in the numerator of q reflects ownership of physical capital and knowledge but the denominator measures just physical capital therefore q is usually above 1 periodic arrivals of important new technologies such as the microprocessor in the 1970 s suddenly render old knowledge and capital obsolete causing the stock market to drop national accounts measures of physical capital miss this rapid obsolescence then q appears to drop below 1 jel e44 o3 o41

on equilibrium prices in continuous time abstract state prices are the fundamental building block for dynamic asset pricing models we provide here a general continuous time setup that allows to derive non trivial structural properties for state prices from economic fundamentals to this end we combine general equilibrium theory and theorie generale of stochastic processes to characterize state prices that lead to continuous price systems on the consumption set we also show that equilibria with such state prices exist

collusion in uniform price auctions experimental evidence and implications for treasury auctions in uniform price auctions of shares there exist collusive equilibria in which bidders capture the entire surplus from the auction as well as competitive equilibria in which the auctioneer captures the entire surplus from the auction we provide experimental evidence that in uniform price auctions non binding pre play communication facilitates convergence to collusive equilibrium outcomes on the other hand regardless of the opportunities for communication in discriminatory auction experiments subject strategies conform closely with the unique equilibrium in undominated strategies in which bidders gains are equal to the smallest tick size in the bidding schedule this evidence suggests that uniform price auctions of treasury securities may result in lower revenues than the currently employed discriminatory procedure

linear and non linear price decentralization compendious and thorough solutions to the existence of a linear price equilibrium problem the second welfare theorem and the limit theorem on the core are provided for exchange economies whose consumption sets are the positive cone of arbitrary ordered frechet spaces dispensing entirely with the assumption that the vector ordering of the commodity space is a lattice the motivation comes from economic applications showing the need to bring within the scope of equilibrium theory vector orderings that are not lattices which arise in the typical model of portfolio trading with missing options the assumptions are on the primitives of the model they are bounds on the marginals of non linear prices and for proper economies they are both sufficient and necessary

cost share equilibria a lindahlian approach abstract we offer a new formalization of lindahl s equilibrium notion for public goods which yields an endogenous theory of profit distribution in line with the benefit approach to taxation increasing returns in the production of public goods are not a priori excluded our equilibrium notion coincides with kaneko s ratio equilibrium for economies with only one public good by reinterpreting the commodity space the equilibrium concept can be applied to economies with purely private goods or with externalities in the pure private good case our concept singles out allocations that are efficient and where individual net payments agree with average cost

economies with public projects efficiency and decentralization the article deals with the two fundamental theorems of welfare economics for production economies with a finite set of agents infinitely many private goods and a set of public projects the problem of efficiency and decentralization is addressed under the following very general assumptions a the commodity price duality is endowed with a consistent locally convex topology b the set of public projects is without any mathematical structure moreover any agent is characterized by a nonordered preference relation depending on consumption goods and public projects approximate and exact welfare theorems are discussed throughout the article

determinants of foreign direct investment in taiwan an alternative approach with time series data abstract regression analysis using level variables is a popular technique for identifying the demand side determinants of foreign direct investment while the technique is justifiable in analyses with cross country data it is not with time series data from a single country the lack of a logical relationship between the dependent and explanatory variables in an analysis using time series data usually leads to spurious and misleading results with an alternative specification fdi data of taiwan were utilized to highlight this problem contrary to conventional wisdom fdi in taiwan was found to be probably supply side determined

the provision of collective goods through a social division of labour abstract we develop a general equilibrium framework in which a wide range of collective economic configurations are provided through specialised professionals as part of an endogenously emerging social division of labour we extend the theory of value to this setting bringing together a model of an economy with collective goods with the model of a private goods market economy with an endogenously emerging social division of labour natural applications are the presence of non tradables in production the effects of education on productive abilities and the market system itself as an implementation of the price mechanism for an appropriately generalised notion of valuation equilibrium we prove the two fundamental theorems of welfare economics under very general conditions notably allowing for incomplete non monotonic and non transitive preferences we also incorporate adam smith s principle of increasing returns to specialisation and establish that there emerge well structured social divisions of labour in equilibrium

the pure theory of public goods efficiency decentralization and the core the authors extend the findings of mas colell on valuation equilibria and the relationship of cost share equilibria with the core they allow for any finite number of private goods and a set of public projects without any structure the authors show the two welfare theorems for valuation equilibrium the inclusion of the set of cost share equilibria in the core and the nonequivalence of these two sets for an economy with a finite number of agents copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

censored regression estimation under unobserved heterogeneity a stochastic parameter approach this article presents a methodology for addressing the problem of unobserved heterogeneity in the context of regression models based on censored samples the effectiveness feasibility and usefulness of the proposed approach is illustrated by means of an empirical application as well as a simulation experiment the article demonstrates that censored regressions that control for the presence of unobserved heterogeneity perform substantially better in comparison to their counterparts in which the problem of unobserved heterogeneity is ignored

reversal of fortunes democratic institutions and foreign direct investment inflows to developing countries does increased democracy promote or jeopardize foreign direct investment fdi inflows to less developed countries we argue that democratic institutions have conflicting effects on fdi inflows on the one hand democratic institutions hinder fdi inflows by limiting the oligopolistic or monopolistic behaviors of multinational enterprises facilitating indigenous businesses pursuit of protection from foreign capital and constraining host governments ability to offer generous financial and fiscal incentives to foreign investors on the other hand democratic institutions promote fdi inflows because they tend to ensure more credible property rights protection reducing risks and transaction costs for foreign investors hence the net effect of democracy on fdi inflows is contingent on the relative strength of these two competing forces our argument reconciles conflicting theoretical expectations in the existing literature empirical analyses of fifty three developing countries from 1982 to 1995 substantiate our claims we find that both property rights protection and democracy related property rights protection encourage fdi inflows after controlling for their positive effect through property rights protection democratic institutions reduce fdi inflows these results are robust against alternative model specifications statistical estimators and variable measurements

fiscal incentives and direct foreign investment in less developed countries this study found no support for the belief by the governments of most less developed countries ldcs that the provision of fiscal incentives is necessary to attract direct foreign investment and that the greater the generosity of these incentive programmes the greater would be the level of such investment what mattered were the presence of natural resources and a proven record of economic performance the provision of incentives could not compensate for the absence of either of these two factors the study is a cross sectional one of 27 ldcs for the period 1965 73

the information technology revolution and the stock market evidence since 1968 the ratio of stock market capitalization to gdp has varied by a factor of 5 in 1972 the ratio stood at above unity but by 1974 it had fallen to 0 45 where it stayed for the next decade it then began a steady climb and today it stands above 2 we argue that the it revolution was behind this and moreover that the capitalization gdp ratio is likely to decline and then rise after any major technological shift the three assumptions that deliver the result are

decentralization in replicated club economies with multiple private goods abstract we show that exhaustion of blocking opportunities is a sufficient condition such that every allocation in the core of a replicated club economy can be decentralized as a competitive equilibrium and that a related condition efficient scale is necessary and under an assumption on endowments sufficient such that competitive equilibrium exists and the core is nonempty these results do not require the euclidean structure and monotonicity assumed in lindahl equilibrium do not require convexity of preferences or costs and do not require the strong assumption that private goods are essential journal of economic literature classification numbers d46 d50 d61 h40

edgeworth equilibria in production economies abstract an edgeworth equilibrium is an allocation that belongs to the core of every n fold replica of the economy in this work we study the properties of edgeworth equilibria for economies with production and infinite dimensional commodity spaces under some relatively mild conditions we establish among other things that 1 edgeworth equilibria exist 2 every edgeworth equilibrium is a quasi equilibrium and 3 an allocation is an edgeworth equilibrium if and only if it can be decentralized by a price system

dynamics of biofuel stock prices a bayesian approach we use bayesian markov chain monte carlo methods to investigate the linkage between the volatility of ethanol security prices and the uncertainty surrounding the profitability of ethanol production and the price variations of non ethanol energy securities the joint evolution of return and volatility is modeled as a stochastic process that incorporates jumps in both return and volatility while a strong and significant correlation is found between the volatility of ethanol securities and profit uncertainty from june 2005 to july 2008 the dynamic pattern of ethanol stock volatility is strikingly similar to that of the s p 500 energy sector index in the more recent period our evidence lends support to the findings in the literature on rational learning from uncertainty in determining the equity price and volatility during the adoption and development of a technological innovation

auctions and bidding a primer maybe the contractor was right to think bid jobs are different but it is more likely that he suffered from too simple a view of what is involved in preparing a competitive bid our analysis will show that even an experienced estimator working in familiar terrain can lose money if he doesn t understand the subtleties of competitive bidding the phenomenon experienced by the painting contractor known as the winner s curse is just one of the surprising and puzzling conclusions that have been turned up by modern research into auctions another is the theoretical proposition supported also by some experimental evidence that for example a sealed bid treasury bill auction in which each buyer pays a price equal to the highest rejected bid would yield more revenue to the treasury than the current procedure in which the winning bidder pays the seemingly higher amount equal to his own bid there are also subtle results that demonstrate the equivalence of such apparently different institutions as the standard sealed bid auction in which the auctioneer seller sells the goods to the highest bidder for a price equal to his bid and the dutch auction in which the auctioneer seller begins by asking a high price and gradually lowers the price until

a theory of value with non linear prices equilibrium analysis beyond vector lattices this paper presents a new theory of value with a personalized pricing system that naturally induces a family of non linear prices this affords a coordinate free theory of value in which the analysis is without any lattice theoretic considerations when commodity bundles are perfectly decomposable the generalized prices become linear and the analysis specializes to the walrasian model this happens for instance whenever the commodity space is a vector lattice and consumption sets coincide with the positive cone our approach affords theorems on the existence of equilibrium and provides a value based characterization of pareto optimality and edgeworth equilibrium where the walrasian linear price based characterization fails the analysis has applications in the finite as well as the infinite dimensional setting journal of economic literature classification numbers c62 c71 d46 d51 d61

price discriminating monetary policy a nonuniform pricing approach abstract this paper establishes that a version of the bryant and wallace 1984 price discrimination analysis of monetary policy can be viewed as a special case of the spence 1977 nonuniform pricing model to this end a general equilibrium model is constructed with heterogeneous agents and a government that faces an informational restriction the government must finance an exogenously determined stationary deficit by issuing bonds or currency with quantity dependent prices in addition to generalizing the bryant and wallace model the analysis accomplishes the following i the informational restriction helps justify the ruling out of lumpsum taxation a crucial assumption of the bryant and wallace model and ii the analysis provides insight into nonuniform pricing in a simple general equilibrium model with heterogeneous agents

does innovation cause stock market runups evidence from the great crash this article examines the stock market s changing valuation of corporate patentable assets between 1910 and 1939 it shows that the value of knowl edge capital increased significantly during the 1920s compared to the 1910s as investors responded to the quality of technological inventions innovation was an important driver of the late 1920s stock market runup and the great crash did not reflect a significant revaluation of knowledge capital relative to physical capital although substantial quantities of influential patents were accumulated during the post crash recovery high technology firms did not earn significant excess returns over low technology firms for most of the 1930s

to trade or not to trade economies with a variable number of tradeables we present a general equilibrium model that encompasses the endogenous selection and shadow pricing of a set of tradeable commodities with home based and social production activities in the model a market system is a set of costly social institutions which embody the trade and production technologies available in the economy our equilibrium concept describes the pricing of market institutions thus pricing the tradeability of a commodity we obtain the existence and the decentralization of pareto efficient allocations we discuss an example regarding the transition of a guild based economy into a market based economy

simulated likelihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets abstract we present an econometric method for estimating the parameters of a diffusion model from discretely sampled data the estimator is transparent adaptive and inherits the asymptotic properties of the generally unattainable maximum likelihood estimator we use this method to estimate a new continuous time model of the joint dynamics of interest rates in two countries and the exchange rate between the two currencies the model allows financial markets to be incomplete and specifies the degree of incompleteness as a stochastic process our empirical results offer several new insights into the dynamics of exchange rates

determinants of us direct foreign investment in the caribbean this study evaluates two groups of variables economic and structural locational associated with us short and long run direct foreign investment dfi in the caribbean over the 1983 1994 period separate generalized least square models for the caribbean and latin america were estimated to determine whether differences existed between the two regions as to the variables associated with the levels of dfi this helped provide insights as to the strategies that should be maintained or introduced to give the caribbean a competitive edge in attracting the limited amounts of us dfi likely to be available for investment in the western hemisphere