manipulations by coalitions under asymmetric information the case of groves mechanisms abstract we study the formation in coalitions in vickrey clarke groves mechanisms in a model where we assume that asymmetry of information exists within coalitions the coalitions must therefore use an internal mechanism to give incentives to their members to reveal their information to each other we show that there exists no mechanism robust to all coalitions on the other hand there exist mechanisms robust to coalitions of two agents and any larger coalition that would form in these mechanisms would be subject to manipulation by subcoalitions we characterize these mechanisms and show in particular that they are never anonymous journal of economic literature classification numbers c71 d82

group incentive compatibility in a market with indivisible goods abstract in a market where each trader has one unit of an indivisible good there are procedures for exchanging goods which result in competitive allocations one of these procedures the top trading cycle has the property that it is in each trader s best interest to report his true preferences over the set of goods this note shows that no subset of traders can misrepresent their preferences and improve the allocation for all members of the subset additionally if there are no indifferences in the preferences then some traders in a subset that misrepresents preferences do worse

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

efficient resource allocation on the basis of priorities many institutions allocate resources by non market mechanisms based on priorities in this paper we introduce a model of resource allocation on the basis of priorities and address the following questions is it possible to allocate resources on the basis of any priority structure if yes when can we do this pareto efficiently without creating incentives for manipulation and consistently across different groups of agents and resource levels we adopt a basic indivisible objects model with a finite number of object types and a finite quota of goods of each type some interesting examples are the determination of access to education allocation of graduate houses offices or tasks agents are assumed to have strict preferences over object types and remaining unassigned an assignment is an allocation of the objects to the agents such that every agent receives at most one object a rule associates an assignment to each preference profile we formalize a priority structure to be a collection of strict priority rankings of individuals indexed by the object types where i a j would be read as i has higher priority for object a than j we assume that the priority structure is exogenously fixed and allow the preferences of the agents to vary a rule is said to violate a priority of i for a if there is a preference profile under which i envies j who is assigned a and publication information econometrica 70 6 november 2002 2489 2497 the copyright to this article is held by the econometric society http www econometricsociety org it may be downloaded printed and reproduced only for personal or classroom use absolutely no downloading or copying may be done for or on behalf of any for profit commercial firm or other commercial purpose without the explicit permission of the econometric society for this purpose contact julie p gordon executive director of the society at jpg northwestern edu i would like to thank faruk gul wolfgang pesendorfer the co editor the four anonymous referees and the participants of the micro theory lunch seminar in princeton university for their comments and suggestions

two models of bid taker cheating in vickrey auctions vickrey second price sealed bid auctions have attractive theoretical properties but standard first price sealed bidding is far more common explanations of the rarity of vickrey auctions rely on concern about revelation of private information and on fear of cheating the authors present two models of bid taker cheating a static game theoretic model and a reputation based model of repeated auctions in the first an honest bid taker will not choose a vickrey auction in the second a trusted bid taker who cheats when it pays eventually destroys his or her reputation and the trust on which the use of vickrey auctions depends copyright 1995 by university of chicago press

investigation into transmission options for cross border power trading in asean power grid this work is a feasibility study of high voltage ac hvac and high voltage dc hvdc transmission option for the association of southeast asian nations asean power grid apg interconnections an optimal power flow a minimum cost power generation model is developed in the matpower simulation platform to perform this analysis electricity generation and consumption data are taken from the latest power development plans of individual asean countries for the evaluation of optimal cross border power flow through the interconnections results show that apg can enhance power generation from countries with abundant renewable resources to meet the growing demand at load centers in the asean member nations an annual cost is used as the output matrix for this study the analysis results reveal that in some interconnections implementing hvdc link instead of currently planned hvac could be economically beneficial for the apg the findings in this paper would serve as valuable references for the apg planners

the discovery of opportunities extending the economic theory of the entrepreneur shane 2003 a general theory of entrepreneurship the individual opportunity nexus cheltenham edward elgar has shown convincingly that modern theories of entrepreneurship perform reasonably well in explaining the empirical results obtained in different areas of research upon the subject his book also shows that the cognitive aspects of entrepreneurship in general and opportunity recognition in particular are important areas that warrant further research this paper argues that the concept of opportunity is closely related to the concept of a project as an opportunity is essentially a project that would prove beneficial if it were exploited it is suggested that modelling individual search across potential projects and the screening of projects by the use of symptoms holds the key to the successful modelling of entrepreneurship in terms of opportunity

public good provision mechanisms and reciprocity this paper determines optimal public good provision mechanisms in an environment where agents are motivated by reciprocity in a two agent economy we show that the standard pivot mechanism is not strategy proof if at least one agent cares strongly enough about reciprocity truthful reporting maximises a player s own payoff and hence is viewed as selfish by his opponent who retaliates by understating demand for the public good incentive compatibility is restored if the mechanism is implemented sequentially when agents are asked to report their demands in turn a high report by the first mover he may result in him paying an unfairly large share of the provision cost should the second mover she understate her demand hence truthful reporting is not judged as selfish by the second mover who reciprocates by stating her true demand our results alert the institutional designer to the importance of game dynamics when agents are non selfish

stable and efficient resource allocation under weak priorities abstract we study the indivisible object allocation problem without monetary transfer in which each object is endowed with a weak priority ordering over agents it is well known that stability is generally not compatible with efficiency we characterize the priority structures for which a stable and efficient assignment always exists as well as the priority structures that admit a stable efficient and group strategy proof rule while house allocation problems and housing markets are two classic families of allocation problems that admit a stable efficient and group strategy proof rule any priority augmented allocation problem with more than three objects admits such a rule if and only if it is decomposable into a sequence of subproblems each of which has the structure of a house allocation problem or a housing market

strategy proof exchange we consider the allocation of goods in exchange economies with a finite number of agents who may have private information about their preferences in such a setting standard allocation rules such as walrasian equilibria or rational expectations equilibria are not compatible with individual incentives we characterize the set of allocation rules which are incentive compatible or in other words the set of strategy proof social choice functions social choice functions which are strategy proof are those which can be obtained from trading according to a finite number of pre specified proportions the number of proportions which can be accommodated is proportional to the number of agents such rules are necessarily inefficient even in the limit as the economy grows

the effects of nonstationarities on performance in call markets abstract this experiment investigates the responsiveness of laboratory call markets to repetitive systematic shocks in underlying demand or supply conditions results of nine call markets conducted under three treatment conditions are compared with nine previously reported double auctions the informationally sparse call auctions perform no worse than the double auctions allocative efficiency is similar across institutions and call markets appear to track underlying equilibrium price movements more accurately than double auctions

understanding corporate coherence theory and evidence abstract multiproduct firms are perceived to be coherent in their scope yet there is no strong theoretical foundations to explain coherence in modern industrial organization theory this paper shows that as u s manufacturing firms grow more diverse they maintain a constant level of coherence between neighboring activities this finding runs counter to the idea that firms with many activities are generally more incoherent a framework is then presented which appeals to the nature of enterprise learning path dependencies and the nature of the selection environment to explain the ubiquity of coherent diversifiers

the price quantity sealed bid offer auction with pro rata rationing experimental evidence this study examines a price quantity sealed bid offer auction with pro rata rationing in risky and riskless settings an asset with a known distribution of possible values is traded in the risky setting results include prices and quantities less consistent with the competitive equilibrium than with other nash equilibria frequent overrevelation of quantities a 0 73 correlation between inferred and induced risk coefficients lower forgone profits for the nonrationed side of the market and relatively low efficiencies the riskless setting in which asset values are known exhibits many of the same characteristics but to a lesser degree coauthors are ann martin david senkow and galen sevcik copyright 1993 by royal economic society

information effects in uniform price multi unit dutch auctions we design a multi unit descending price dutch auction mechanism that has applications for resource allocation and pricing problems we address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions bidders are either informed of the number of bidders in the auction or know that it is one of two possible sizes they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders we find that revealing group size decreases bids and therefore revenue if units remaining are not shown when group size is unknown the price also falls if the number of units remaining is revealed the most efficient and largest revenue outcome occurs when bidders are not provided information on either group size or units remaining these laboratory results conform to some directional predictions from our theory although overbidding is common

how trading institutions affect financial market performance some laboratory evidence i introduction trading institutions vary considerably across contemporary financial markets 1 but most can be classified into one of two basic types the continuous double auction da allows traders to submit public offers to buy or to sell and to accept other traders offers at any moment in time the double auction institution offers immediacy but non uniform transaction prices the other basic trading institution the clearinghouse ch gathers offers and clears them at a unified price at a pre specified time it sacrifices immediacy for uniform transaction prices 2 the two types of institutions have co existed and evolved for centuries but now are emerging in new electronic versions market participants and policy makers would like to know which institution or variant or combination is most efficient but theoretical and empirical work to date provides little guidance this paper reports on a series of laboratory asset markets experiments designed to compare variants of the double auction and clearinghouse trading institutions the markets are small usually with eight or nine traders but the traders are profit motivated and experienced with the trading institutions the traded asset has uncertain market value and traders receive useful but inconclusive private information they can only learn the asset s true value during the course of trade laboratory markets offer several advantages for empirical study of financial market institutions first private information is observable even controllable in the laboratory and therefore the investigator can directly measure market efficiency 3 second the complexity of the environment can be varied systematically in the laboratory and its effects on market performance can be separated from the effects of the market institution and other forces finally the market institution itself is controllable in the laboratory so it is possible to make valid causal inferences on how the market institution shapes market performance i begin with a survey of relevant literature and other preliminaries in the rest of this section section ii outlines the laboratory procedures the creation of trading environments of varying complexity the electronic implementation of the clearinghouse and double auction trading institutions the computation of theoretical benchmark prices and allocations and the measurement of market performance section iii collects the results following an illustrative account of a double auction trading period and a clearinghouse trading period i use descriptive statistics to summarize market performance in each of the thirty nine experiments the main conclusions are based on statistical comparisons of market performance across alternative market institutions the clearinghouse institution does surprisingly well it delivers greater market depth than the double auction discovers prices at least as efficiently and produces final allocations almost as efficient as the double auction the main institutional variants examined in this paper concern the amount of information made public regarding order placement orderflow the data suggest that public display of the orderflow enhances double auction efficiency but may impair clearinghouse efficiency a study of trading volume shows higher volume in the double auction in both institutions volume increases when important private news arrives and when the trading period is about to end the paper concludes with a brief summary and discussion of the results a companion paper friedman 1991 considers the effects of awarding various privileges to some but not all traders copeland and friedman 1987 1991 provide useful background information on laboratory procedures and computerized double auction markets instructions for the current experiments are available on request the need for empirical work a skeptic might argue that empirical work is unnecessary the mere fact that the double auction and clearinghouse institutions both persist in major financial markets implies that both are highly efficient because a more efficient institution would displace less efficient institutions

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

internet advertising and the generalized second price auction selling billions of dollars worth of keywords we investigate the generalized second price gsp auction a new mechanism used by search engines to sell online advertising although gsp looks similar to the vickrey clarke groves vcg mechanism its properties are very different unlike the vcg mechanism gsp generally does not have an equilibrium in dominant strategies and truth telling is not an equilibrium of gsp to analyze the properties of gsp we describe the generalized english auction that corresponds to gsp and show that it has a unique equilibrium this is an ex post equilibrium with the same payoffs to all players as the dominant strategy equilibrium of vcg

scale effects in multi unit auctions abstract we argue that auctions with multi unit demand can be used to experimentally conduct new and novel tests of auction theory the focus of the paper is on changes in bidding behavior as the auction is scaled up by adding more bidders and increasing both the demand per bidder and supply of the auctioned good we identify uniquely tractable environments and obtain clear cut theoretical comparative statics in these settings this leads to the construction of uniform price auctions of different scales where the prediction is that risk neutral bidders bids on the last unit they demand are independent of scale in our experiment bidders on average bid much more aggressively than predicted by theory there is also evidence of a scale effect with more aggressive bidding in the small scale treatment compared to the large scale treatment it is argued that these features are consistent with joy of winning and anticipated regret

preference anomalies preference elicitation and the discovered preference hypothesis there is wide ranging evidence much of it deriving from economics experiments of anomalies in behaviour that challenge standard preference theories this paper explores the implications of these anomalies for preference elicitation methods because methods that are used to inform public policy such as contingent valuation are based on standard preference theories their validity may be called into question by the anomaly data however on a new interpretation these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments we explore the evidence for this interpretation and what implications follow for preference elicitation methodology

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

on the diffusion of probabilistic investment appraisal and decision making procedures in the uk s upstream oil and gas industry a critical activity for companies involved in the upstream oil and gas industry is deciding whether or not to invest in developing hydrocarbon prospects decisions are characterised by combinations of uncertainty and incomplete information assembled by professionals with different but highly complementary areas of expertise this paper presents evidence of variation among companies in the industry in the extent to which formal appraisal and decision making procedures are adopted and where adopted in the manner of application an explanation is set out in which the importance of senior managers attitudes is tempered by limits to the adaptability of organisational routines of which appraisal and decision making processes are prominent

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

manipulation and single peakedness a general result this article considers environments in which individual preferences are single peaked with respect to an unspecified but unidimensional ordering of the alternative space we show that in these environments any institution that is coalitionally strategy proof must be dictatorial thus any nondictatorial institutional environment that does not explicitly utilize an a priori ordering over alternatives in order torendera collectivedecisionis necessarilyprone to the strategic misrepresentation of preferences by an individual or a group moreover we prove in this environment that for any nondictatorial institution the truthful revelation of preferences can never be a dominant strategy equilibrium accordingly an incentive to behave insincerely is inherent to the vast majority of real world lawmaking systems even when the policy space is unidimensional and the core is nonempty t hequestionofmanipulation themisrepresentation of one s true preferences in order to achieve a more favorable collective decision has alternately intrigued and frustrated social scientists for over two centuries 1 manipulation is clearly a potential problem for those interested in drawing inferences from individuals observed behaviors for example how does a legislator s roll call vote relate to his or her policy preferences how does an individual voter s vote choice reflect his or her preferences over the parties and or candidates moresubtly doesthecompositionofalegislativecommittee reflect the preferences of the members of the legislature does a juror s vote to convict a defendant truthfully reflect the juror s beliefs about the defendant s guilt or innocence is the president s choice of political appointees indicative of the policies that he or she would pursue in their positions in short manipulation is simultaneously

changing cognitive frames changing organizational forms an entrepreneurial theory of organizational development this paper discusses the notion of development in firm organizations on the basis of a comparison with ontogenetic phenomena in nature and offers a behavioral foundation that highlights in particular the impact of bounded rationality cognition and social learning on this basis the paper explores the role of entrepreneurship and its cognitive underpinnings particularly with regard to the nucleus multi person firm i e a newly started entrepreneurial business if the entrepreneurial venture is successful and grows the increasing business volume requires that the firm organization also be expanded its size then sooner or later reaches a stage where the cognitive underpinnings of the firm change qualitatively in a way that forces the firm into major restructuring at this point developmental paths can branch off in quite diverse directions some of which are briefly highlighted copyright 2000 by oxford university press

choosing your pond location choices and relative income do individuals care about their relative income while this is a long standing hypothesis revealed preference evidence remains elusive we provide a unique test by studying residential choices in

towards a theory of entrepreneurial teams abstract this article examines the role of entrepreneurial teams in processes of entrepreneurial discovery it addresses two main questions the first investigates the implications of economic theory for the possibility of team entrepreneurship because leading economic theories focus almost exclusively upon individual decision makers we propose a broader notion of entrepreneurship that includes enterprising teams as well as individuals we define entrepreneurship as a profit seeking problem solving process that takes place under conditions of structural uncertainty the second question examines the conditions that are conducive to joint entrepreneurial action and the formation of entrepreneurial teams we suggest that bounded structural uncertainty and perceived strong interdependence arising from common interest can jointly prime team entrepreneurship

decarbonization scenarios for the eu and mena power system considering spatial distribution and short term dynamics of renewable generation we use the multi scale power system model limes eu to explore coordinated long term expansion pathways for renewable energy re generation long distance transmission and storage capacities for the power sector of the europe and middle east north africa mena regions that lead to a low emission power system we show that ambitious emission reduction targets can be achieved at moderate costs by a nearly complete switch to re sources until 2050 if transmission and storage capacities are expanded adequately limiting transmission capacities to current levels leads to higher storage requirements higher curtailments and to an increase in temporal and spatial electricity price variations results show an escalation of electricity prices if emission reductions exceed a critical value adequate expansion of transmission and storage capacities shift this threshold from 70 to 90 emission reductions in 2050 relative to 2010

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

house allocation with transfers we consider the shapley scarf house allocation problem where monetary transfers are allowed we characterize the class of mechanisms that are strategy proof ex post individually rational ex post budget balanced and collusion proof in these mechanisms the price of each object is fixed in advance and the objects are reallocated according to the unique core assignment of the shapley scarf economy associated with the prices the special case in which all prices are zero is the core mechanism studied by shapley and scarf our mechanisms are compelling alternatives to the groves mechanisms which satisfy neither budget balance nor our condition of collusion proofness journal of economic literature classification numbers c71 c78 d71 d78 d89

personalized prices and uncertainty in monopsony abstract we analyze personalized pricing by a monopsonist facing a finite number of ex ante identical capacity constrained suppliers with privately known costs when the distribution of costs is sufficiently smooth and regular the buyer chooses to make the same offer to all suppliers leading to a posted price when demand is sufficiently concave convex this price is lower higher than the classical monopsony price in the limit as the seller capacities tend to zero we obtain the classical monopsony price therefore our model provides a decentralized micro foundation for monopsony

manipulation through bribes we consider allocation rules that choose outcomes and transfers based on agents reported valuations of the outcomes a bribing situation exists when one agent could pay another to misreport his valuations resulting in a net gain to both a bribe proof rule eliminates such opportunities we show that under a bribe proof rule each agent s payoff is a continuous function of other agents reported valuations furthermore on connected domains if the set of outcomes is finite or the domain is smoothly connected each agent s payoff is a constant function of other agents reports finally under a domain richness condition a bribe proof rule must be constant the results apply to a broad class of economies journal of economic literature classification numbers c70 d70

renewable energy and policy options in an integrated asean electricity market quantitative assessments and policy implications abstract energy market integration emi in the asean region is a promising solution to relieve the current immobilization of its renewable energy resources and would serve the fast increasing demand for electricity in the region emi could be further extended with coordinated policies in carbon pricing renewable energy portfolio standards rps and feed in tariffs fit in the asean countries using a linear dynamic programming model this study quantitatively assesses the impacts of emi and the above mentioned policies on the development of renewable energy in the power generation sector of the region and the carbon emissions reduction achievable with these policies according to our results emi is expected to significantly promote the adoption of renewable energy along with emi fit appears to be more cost effective than rps and is recommended for the asean region albeit political barriers for policy coordination among the countries might be a practical concern in addition an rps of 30 electricity from renewable sources by 2030 which is considered politically a low hanging fruit would achieve moderate improvements in carbon emissions reductions and renewable energy development while incurring negligible increases in the total cost of electricity

the importance of ordering in sequential auctions to date the largest part of literature on multi unit auctions has assumed that there arek homogeneous objects being auctioned where each bidder wishes to win exactly one or all ofk units these modeling assumptions have made the examination of ordering in sequential auctions inconsequential the aim of this paper is to introduce and highlight the critical influence that ordering can have on the efficiency of an auction we study a buyer who outsources via sequential 2nd price auctions two heterogeneous jobs and faces a diverse set of suppliers with capacity constraints

strategyproof assignment by hierarchical exchange we give a characterization of the set of group strategyproof pareto optimal and reallocation proof allocation rules for the assignment problem where individuals are assigned at most one indivisible object without any medium of exchange although there are no property rights in the model the rules satisfying the above criteria imitate a trading procedure with individual endowments in which individuals exchange objects from their hierarchically determined endowment sets in an iterative manner in particular these assignment rules generalize gale s top trading cycle procedure the classical rule for the model in which each individual owns an indivisible good

individual versus group strategy proofness when do they coincide a social choice function is group strategy proof on a domain if no group of agents can manipulate its final outcome to their own benefit by declaring false preferences on that domain there are a number of economically significant domains where interesting rules satisfying individual strategy proofness can be defined and for some of them all these rules turn out to also satisfy the stronger requirement of group strategy proofness we provide conditions on domains guaranteeing that for all rules defined on them individual and group strategy proofness become equivalent we also provide a partial answer regarding the necessity of our conditions

an efficient ascending bid auction for multiple objects when bidders exhibit multi unit demands standard auction methods generally yield inefficient outcomes this article proposes a new ascending bid auction for homogeneous goods such as treasury bills or telecommunications spectrum the auctioneer announces a price and bidders respond with quantities items are awarded at the current price whenever they are clinched and the price is incremented until the market clears with private values this dynamic auction yields the same outcome as the sealed bid vickrey auction but has advantages of simplicity and privacy preservation with interdependent values this auction may retain efficiency whereas the vickrey auction suffers from a generalized winner s curse

assigning refugees to landlords in sweden efficient stable maximum matchings in this paper we investigate the problem of finding housing for refugees once they have been granted asylum in particular we demonstrate that market design can play an important role in a partial solution to the problem more specifically we investigate a specific matching system and we propose an easy to implement mechanism that finds an efficient stable and maximum matching such a matching guarantees that housing is efficiently provided to a maximum number of refugees and that no refugee prefers another specific landlord to their current match when at the same time that specific landlord prefers that refugee to their own current match

group incentive compatibility for matching with contracts abstract hatfield and milgrom hatfield john william milgrom paul r 2005 matching with contracts amer econ rev 95 913 935 present a unified model of matching with contracts which includes the standard two sided matching and some package auction models as special cases they show that the doctor optimal stable mechanism is strategy proof for doctors if hospitals preferences satisfy substitutes and the law of aggregate demand we show that the doctor optimal stable mechanism is group strategy proof for doctors under these same conditions that is no group of doctors can make each of its members strictly better off by jointly misreporting their preferences we derive as a corollary of this result that no individually rational allocation is preferred by all the doctors to the doctor optimal stable allocation

infrastructure investments for power trade and transmission in asean 2 costs benefits long term contracts and prioritized developments abstract this study establishes a systemic approach in assessing the feasibility of power infrastructure investment for gms and apg in the asean 2 asean plus china and india region it aims to identify the financial and finance related institutional barriers of implementing such a regional power interconnection a whole system simulation model is built to assess the financial viability as well as commercial viability which imply bankability for financiers and profitability for investors respectively of new transmission projects under the optimized pattern of power trade it also determines the optimized planning of new transmission capacities according to our results the existing development plan of power transmission infrastructure in the region so called apg appears to stand as a financially and commercially viable plan however there is room for improvement in the planning in terms of timing routes and capacity of the cross border transmission lines and the gms related projects should be prioritized

obviously strategy proof mechanisms what makes some strategy proof mechanisms easier to understand than others to address this question i propose a new solution concept a mechanism is obviously strategy proof osp if it has an equilibrium in obviously dominant strategies this has a behavioral interpretation a strategy is obviously dominant if and only if a cognitively limited agent can recognize it as weakly dominant it also has a classical interpretation a choice rule is osp implementable if and only if it can be carried out by a social planner under a particular regime of partial commitment i fully characterize the set of osp mechanisms in a canonical setting with one dimensional types and transfers a laboratory experiment tests and corroborates the theory

bounded rationality and robust mechanism design an axiomatic approach abstract we propose an axiomatic approach to study the superior performance of mechanisms with obviously dominant strategies to those with only dominant strategies guided by the psychological inability to reason state by state we develop obvious preference as a weakening of subjective expected utility theory we show that a strategy is an obviously dominant if and only if any obvious preference prefer it to any deviating strategy at any reachable information set applying the concept of nash equilibrium to obvious preference we propose obvious nash equilibrium to identify a set of mechanisms that are more robust than mechanisms with only nash equilibria

leveling the playing field sincere and sophisticated players in the boston mechanism empirical and experimental evidence suggests different levels of sophistication among families in the boston public school student assignment plan we analyze the preference revelation game induced by the boston mechanism with sincere players who report their true preferences and sophisticated players who play a best response we characterize the set of nash equilibrium outcomes as the set of stable matchings of a modified economy where sincere students lose priority to sophisticated students any sophisticated student weakly prefers her assignment under the pareto dominant nash equilibrium of the boston mechanism to her assignment under the recently adopted student optimal stable mechanism jel d82 i21

the evolutionary firm and cournot s dilemma to transform this competence based approach into an evolutionary theory the con nection between the firm and veblen s concept of social knowledge is more fully devel oped once established the evolutionary theory of the firm is utilised to bypass marshall s reconciliation problem and solve cournot s dilemma

imagination and leadership the neglected dimension of an evolutionary theory of the firm abstract bounded rationality prevents humans from tracing all action plans that could in principle be imagined in the present paper individuals partly socially shaped cognitive frames explain which action plans do gain attention this provides the basis for a new entrepreneurial theory of the firm where business conceptions which underlie any entrepreneurial venture play a key role coordination and motivation of the firm members can be achieved and opportunism be held down if through cognitive leadership the entrepreneur succeeds in implementing and defending his own business conception as a tacit cognitive frame collectively shared within the firm

auction institutional design theory and behavior of simultaneous multiple unit generalizations of the dutch and english auctions historically english and dutch auctions have been used for the exchange of single objects such as works of art or single lots of a good such as produce fish or cut flowers where these institutions have been used for the exchange of multiple units such as the australian wool auction using english rules successive lots of the good are sometimes sold sequentially at auction in some but not all instances this is because the goods are not identical even though the various lots may be close substitutes see penny burns 1985 where the goods are accepted universally as being homogeneous as in the securities markets multiple units are often commonly auctioned simultaneously in the securities industry orders are batched for simultaneous execution in multiple unit auctions in what are referred to as call markets that is the security is called for auction at a particular point in time this type of market is used on the stock exchanges of austria belgium france germany and israel some of these are verbal and some are sealed bid auctions although the u s organized exchanges are predominantly continuous rather than call markets except that call markets are used each day to open trading in each listed security there is a growing number of exceptions such as the proliferation since 1984 of auction preferred stock goldman sachs and co october 1984 and money market preferred stock lehman brothers july 1984 we now have dutch auction rate transferable securities called darts stated rate auction preferred stock or straps and many more after the initial subscription offering of this type of security the market is called every 49 days to reset the preferred dividend rate using a multiple unit auction the exchange of shares and the dividend determination is based on the array of stated dividend rates at which existing holders and potential new holders are willing to sell and or buy corresponding quantities the dividend rate and exchange of shares every 49 days is executed using the uniform price or competitive sealed bid mechanism vernon l smith et al 1980 the discussion to follow will be confined to this sealed bid form of the call market call markets provide temporal consolidation of trade orders or other forms of expressing the desire to buy and sell by comparison with continuous trading call markets offer both advantages and disadvantages robert a schwartz 1988 pp 442 6 the cited advantages include low cost of operating the exchange information aggregation and presumed pricing efficiency price stability individual trades which are thought to have a small impact on price reduced price uncertainty and finally nondiscriminatory pricing however there are offsetting disadvantages 1 the market is inaccessible except at the time of call 2 no bid offer contract or price information is available until the results of the call are announced and 3 there is transaction uncertainty because a submitted bid offer may be too low high to execute inside the supply demand cross these conditions are only partially alleviated if there is a secondary market between calls these disadvantages may be significant in september 1988 the wall street journal published an article on the failure of a call market for the auction rate preferred stock economic science laboratory university of arizona tucson arizona this material is based upon work supported by the national science foundation under grant no ses 8320121

obvious ex post equilibrium abstract i propose a new solution concept obvious ex post oxp equilibrium this is a formal standard of cognitive simplicity for mechanisms in settings with interdependent values under some standard assumptions the ascending auction has an efficient oxp equilibrium i discuss a decision theoretic foundation for oxp mechanisms

group strategy proofness in private good economies many salient rules to allocate private goods are not only strategyproof but also group strategy proof in appropriate domains of definition hence diminishing the traditional conflict between incentives and efficiency that is so for solutions to matching division cost sharing house allocation and auctions in spite of the substantive disparity between these cases in a general framework encompassing all of them we prove that the equivalence between the two forms of strategy proofness is due to an underlying common structure that transcends the many differences between the contexts and the mechanisms for which it holds jel c78 d44 d63 d71 d82

matching with contracts we develop a model of matching with contracts which incorporates as special cases the college admissions problem the kelso crawford labor market matching model and ascending package auctions we introduce a new law of aggregate demand for the case of discrete heterogeneous workers and show that when workers are substitutes this law is satisfied by profit maximizing firms when workers are substitutes and the law is satisfied truthful reporting is a dominant strategy for workers in a worker offering auction matching algorithm we also parameterize a large class of preferences satisfying the two conditions

opportunity cost inattention and the bidder s curse abstract auction winners sometimes suffer a bidder s curse paying more for an item at auction than the fixed price charged for an identical item by other sellers this seemingly irrational behavior is puzzling because the information necessary to avoid overpaying would appear to be readily available to bidders yet they seem to ignore it to understand this behavior we consider the bidders decisions whether to acquire information about the fixed price before bidding in the presence of opportunity costs our theory introduces costly information acquisition into an auction model with a fixed price aftermarket selling an identical good when information about the fixed price is costly bidders sometimes remain rationally ignorant and overbid in the auction generating the bidder s curse to assess the empirical validity of our proposed explanation we study the model s predictions in an experiment where subjects have an opportunity cost of looking up a fixed price and bid in an auction we find that information acquisition decreases and overbidding increases with opportunity cost as predicted most observed lookup behavior is rationalizable and rational ignorance reliably generates the bidder s curse

creation and pursuit of entrepreneurial opportunities an evolutionary economics perspective considerable debate surrounds the concept of entrepreneurial opportunities this paper approaches the opportunity concept from an evolutionary market process perspective it argues that new opportunities for entrepreneurial activity frequently emerge as by products of market competition agents may deliberately or unwittingly create opportunities organizational development and the evolution of industries are additional sources of new entrepreneurial opportunities at the same time they enable agents to acquire the skills required to exploit these opportunities

frank knight on risk uncertainty and the firm a new interpretation we attempt to interpret frank knight by taking him on his own terms among our conclusions are the following 1 knight s distinction between risk and uncertainty is not solely a distinction between insurable and uninsurable risk 2 knight s explanation for the existence of firms does not reduce to a moral hazard theory except perhaps in the broadest and least interesting sense and 3 knight s treatment of the problem of the separation of ownership from control is not as obviously wrong as commentators have made it out to be

silent auctions in the field and in the laboratory we analyze data from hundreds of auctions from three field silent auction sessions we focus on the descriptive statistics and on a parametric model of jump bidding we then report data from six laboratory sessions of silent auctions as a controlled environment this allows us to evaluate the auctions in ways not available within the field the laboratory experiments capture essential features of the field sessions and thus comprise a credible laboratory testbed for further examination of institutional perturbations in the silent auction jel d44 h41

allocation of entrepreneurial attention abstract limited attention has been recognized by many economists as a scarce resource to be allocated among a given number of alternative uses however limited entrepreneurial attention is allocated between improving current operations and innovating new products which increases the number of current operations and perhaps the demands on the entrepreneur s attention the allocation of entrepreneurial attention thus endogenizes the number of uses to which attention can be allocated and the opportunity cost of attention this allocation has implications for the relationships between innovation firm size and monopoly profits between firm size and firm growth and the organization of the firm

comprehensive measurement of energy market integration in east asia an application of dynamic principal component analysis abstract the energy market integration emi in east asia has been carried out for over a decade despite the efforts exerted by countries in the region little has been known about the emi progress this paper innovatively applies the dynamic principal component analysis to measure the emi and its evolution in east asia between 1995 and 2011 the emi is measured by using information from all the five dimensions that have been identified in the literature 1 energy trade liberalisation 2 investment liberalisation 3 development of energy infrastructure and its associated institutional arrangements 4 domestic market openness and 5 energy pricing reform results show that although significant progress has been made for emi in east asia there are significant cross country disparities in different aspects moreover we show that further efforts towards emi in general should focus on liberalising national markets first then phasing out fossil fuel subsidies and finally liberalising investment regime since national market liberalisation is the least developed dimensions certain countries that lag behind in emi need to learn from either their past experiences or from other nations and focus their efforts on their relatively weak dimensions

a naturalistic approach to the theory of the firm the role of cooperation and cultural evolution one reason why firms exist this paper argues is because they are suitable organizations within which cooperative production systems based on human social predispositions can evolve in addition we show how an entrepreneur given these predispositions can shape human behavior within a firm to illustrate these processes we will present a model that depicts how the biased transmission of cultural contents via social learning processes within the firm influence employees behavior and the performance of the firm these biases can be traced back to evolved social predispositions humans lived in tribal scale social systems based on significant amounts of intra and even intergroup cooperation for tens if not a few hundred thousand years before the first complex societies arose firms rest upon the social psychology originally evolved for tribal life we also relate our conclusions to empirical evidence on the performance and size of different kinds of organizations modern organizations have functions rather different from ancient tribes leading to friction between our social predispositions and organization goals firms that manage to reduce this friction will tend to function better

knowledge and competitive advantage the coevolution of firms technology and national institutions this issue of jibs offers reviews of two books that analyse the dynamic interaction between the business environments and business strategies in very different ways the institutional underpinnings for business strategies are a major research topic for comparative management aiming to explain why in different contexts firms pursue different strategies and with different implications for performance j peter murman in knowledge and competitive advantage takes a historical perspective focusing on the co evolutionary processes between national innovation systems business strategies and performance this books thus adds to the industry level longitudinal research reviewed in jibs no 4 2003 tom murtha et al s managing new industry creation and david mckendrick et al s from silicon valley to singapore

transaction cost economics in real time this paper attempts to place the theq of the boundaries of thejirm within the context of the passage of time more precisely it resurrects and places in a modem frame some of the insights of the chsical and marshallian theories of organization the modem reinterpretation of those theories centers around the capabilities view of the jirm taken together with governance costs the capabilities ofjirm and market determine the boundaries of the jirm in the short run ovw time capabilities change as firms and markets learn which implies a kind of information or knowledge cost the cost of trandewing the firm s capability to the market w vice versa these dynamic governance costs are the costs of persuading negotiating and coordinating with and teaching others they arise in the face of change notably txchnological and organizational innovation in fit they are the costs of not having the capabilities you need when you need them dynamic transaction costs provide an explanation for vertical integration that is arguably more general than those dominant in the literature in the face of uncertainty and divwgent views ofthe future common ownership of multiple stages of production is a supwior institutional arrangement for coordinating systemic change asset specrfity is neither necessary nor suffient for this to be true dynamic governance costs may also affit internal organization it may sometimes be costly in 3 terms of persuasion negotiation and teaching to create within the firm capabilities readily available on the market indeed in cases in which systemic coordination is not 4 the issue the market may turn out to be the superior institution of coordination in e 2 genwal the capabilities view of the jirm suggests that we look atfim2 and market as alternative and sometimes overlapping institutions of learning 1 transaction costs in the long rzln and the short 9 x classical and neoclassical perspectives

the design testing and implementation of virginia s nox allowance auction we report on the design and testing of three auction mechanisms to maximize revenue and efficiency in the sale of two vintages of nitrous oxide emission allowances by the commonwealth of virginia in 2004 the three mechanisms considered were a combinatorial sealed bid csb auction a sequential english clock sec auction and a combinatorial english clock cec auction we find the sec and cec mechanisms to be superior the csb when demand is relatively elastic 2008 elsevier b v all rights reserved

robustly optimal auctions with unknown resale opportunities the standard revenue maximizing auction discriminates against a priori stronger bidders so as to reduce their information rents we show that such discrimination is no longer optimal when the auction s winner may resell to another bidder and the auctioneer has non bayesian uncertainty about such resale opportunities we identify a worst case resale scenario in which bidders values become publicly known after the auction and losing bidders compete bertrand style to buy the object from the winner with this form of resale misallocation no longer reduces the information rents of the high value bidder as he could still secure the same rents by buying the object in resale under regularity assumptions we show that revenue is maximized by a version of the vickrey auction with bidder specific reserve prices first proposed by ausubel and cramton 2004 the proof of optimality involves constructing lagrange multipliers on a double continuum of binding non local incentive constraints

cognitive ability and bidding behavior in second price auctions an experimental study behavioral biases are more pronounced for individuals with lower cognitive abilities this paper examines what connection if any there is between cognitive ability and bidding strategy in second price auctions despite truthful revelation being a weakly dominant strategy previous experiments have consistently observed overbidding which makes use of such auctions for inferring homegrown value problematic examining the effect of cognitive ability is important as it may help identify when one can reliably recover values from bids the results indicate that more cognitively able subjects behave in closer accordance with theory and that cognitive ability partially explains heterogeneity in bidding behavior

loss aversion and competition in vickrey auctions money ain t no good we present results from an experiment with a within subject design aimed at testing a unique prediction of expectations based reference dependent preferences and loss aversion in private value second price vickrey auctions if bidders have expectationsbased reference dependent preferences the total number of participants in an auction should affect bids in auctions for real objects but not in auctions with induced monetary values our findings are consistent with expectations based reference dependent preferences and loss aversion in real object auctions subjects bids are affected by the number of competitors and on average they decline with the intensity of competition in induced value auctions instead bids are unaffected by the intensity of competition we also successfully replicate an experiment from sprenger 2015 aimed at distinguishing expectations based loss aversion from models of disappointment aversion this provides additional evidence that our findings in the auction experiments are due to expectations based loss aversion

strategy proof and symmetric social choice functions for public good economies we study economies with one private good and one pure public good and consider the following axioms of social choice functions strategy proofness says that no agent can benefit by misrepresenting his preferences regardless of whether the other agents misrepresent or not and whatever his preferences are symmetry says that if two agents have the same preference they must be treated equally anonymity says that when the preferences of two agents are switched their consumption bundles are also switched individual rationality says that a social choice function never assigns an allocation which makes some agent worse off than he would be by consuming no public good and paying nothing in theorem 1 we characterize the class of strategy proof budget balancing and symmetric social choice functions assuming convexity of the cost function of the public good in theorem 2 we characterize the class of strategy proof budget balancing and anonymous social choice functions in theorem 3 we characterize the class of strategy proof budget balancing symmetric and individually rational social choice functions

auctions versus negotiations which is the more profitable way to sell a company an auction with no reserve price or an optimally structured negotiation with one less bidder we show under reasonable assumptions that the auction is always preferable when bidders signals are independent for affiliated signals the result holds under certain restrictions on the seller s choice of negotiating mechanism the result suggests that the value of negotiating skill is small relative to the value of additional competition the paper also shows how the analogies between monopoly theory and auction theory can help derive new results in auction theory jel d44 g34 there are close analogies between standard price theory and the theory of auctions in an absolute english auction in which the price rises continuously until only one bidder remains and the seller is required to accept the final bid the sale price equals the lowest competitive price at which supply equals demand in the theory of optimal auctions the seller is treated as a monopolist who can choose any

evolution economic competence and the market for corporate control abstract to assess the merits of the market for corporate control this paper examines two processes which standard analysis does not study the allocation of economic competence and the evolution of organizational structures economic competence is seen to be an unusual scarce resource embodied in the very ways in which individuals and organizations take economic decisions which guides the allocation of all scarce resources including itself its efficient allocation is shown to require an evolutionary trial and error process where the market for corporate control plays a crucial role

behavioral equilibrium in economies with adverse selection i propose a new solution concept behavioral equilibrium to study environments with players who are naive in the sense that they fail to account for the informational content of other players actions a behavioral equilibrium requires that i players have no incentives to deviate given their beliefs about the consequences of deviating ii these beliefs are consistent with the information obtained from the actual equilibrium play of all players and iii when processing this information naive players fail to account for the correlation between other players actions and their own payouncertainty i apply the framework to certain adverse selection settings and show that contrary to the received literature the adverse selection problem is exacerbated when naive players fail to account for selection more generally the main distinguishing feature of the framework is that in equilibrium beliefs about both fundamentals and strategies are jointly restricted consequently whether a bias may arise or not is determined endogenously in equilibrium jel c72 d82 a large literature presents evidence that psychological and cognitive biases aect people s be havior this evidence raises some questions what are the eects of these biases and can they persist at all in economic settings where people strategically interact with each other and have the opportunity to learn from their experience 1 in this paper i introduce a game theoretic equilibrium framework to study these questions in the context of a particular bias people s failure to take into account the informational content of other people s actions i apply the framework to a class of games that arises naturally in adverse selection settings and then show that the adverse selection

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

incentive compatibility in a market with indivisible goods abstract in a market in which each trader s initial endowment is one unit of an indivisible good there exists an incentive compatible procedure for reaching a competitive allocation this contrasts with some recent results for similar problems

ernst abbe s scientific management theoretical insights from a nineteenth century dynamic capabilities approach scientific management is the label frederick taylor attached to the system of shop floor management devised by him in this article we present our discovery of very different scientific management principles that roughly concurrently with taylorism were developed by german physicist turned manager ernst abbe and that are codified in the statutes of the carl zeiss foundation created by abbe they exhibit striking parallels to resource and capability based theories of the firm and indicate managerial challenges that warrant further theoretical elaboration abbe develops an account for managing a science based firm and securing its long term competitiveness giving detailed prescriptions with regard to the type and scope of a firm s activities its organizational set up and its labor relations we highlight some of the most characteristic features of abbe s thought discuss its effects on the development of the firms owned by the zeiss foundation and compare it to and draw out implications for present day management theory

collusion facilitating and collusion breaking power of simultaneous ascending and descending price auctions this article demonstrates that a robust tacit collusion evolves quickly in a collusion incubator environment but is destroyed by the simultaneous descending price auction theories of collusion producing behavior along with the detail of the states on which strategies are conditioned lead to a deeper understanding of how tacit collusion evolves and its necessary conditions these theories explain how the descending price auction destroys the collusion the experiments proceed by conducting simultaneous ascending price auctions in the collusion incubator then once the tacit collusion developed changing to the descending auction the change moved prices from collusive levels to near competitive levels