efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

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

misclassified treatment status and treatment effects an application to returns to education in the united kingdom abstract we study the impact of misreported treatment status on the estimation of causal treatment effects focusing on applications where no additional information or repeated measurements are available we first characterize the bias introduced by misclassification on the average treatment effect on the treated att under a conditional independence assumption in both a binary and a multiple treatment setting we find that the bias of matching type estimators computed from misclassified data cannot in general be signed we subsequently provide easily implementable methods to bound the att of interest semiparametrically in particular allowing for very general forms of impact heterogeneity and of the no treatment outcome equations as well as for some dependence of the misreporting probabilities on individual characteristics the empirical problem that motivates our paper is the estimation of the wage returns to a number of educational qualifications in the united kingdom allowing for misreporting in a

ex ante incentive efficient trading mechanisms without the private valuation restriction abstract the private valuation assumption found in most trading mechanism design papers rules out markets whose valuation structure generates externalities between traders this paper characterizes the set of ex ante incentive efficient trading mechanisms for a large class of markets that do admit such externalities and for bilateral trade markets establishes the impossibility of a first best solution across a class of trading problems employing uniform priors and linear valuation structures this paper also compares levels of market efficiency for varying numbers of traders

the higher returns to formal education for entrepreneurs versus employees how valuable is formal education for entrepreneurs income relative to employees and if the income returns to formal education are different for entrepreneurs vis a vis employees what might be a plausible explanation to explore these questions we analyze a large representative us panel we show that entrepreneurs have higher returns to formal education than employees we refer to this as the entrepreneurship returns puzzle we run post hoc analyses to explore a number of potential explanations of this puzzle indirectly our analysis indicates that the higher returns to formal education for entrepreneurs might be due to the fewer organizational constraints they face leading to more personal control over how to use their human capital compared to employees

optimal taxation and strategic budget deficit under political regime switching i develop a dynamic political economy theory of optimal taxation and budget distortions in a model with partisan politics under asymmetric information politics affects the distribution of utilities in the economy political regime switching introduces fluctuations of this distribution these fluctuations justify strategic budget distortions by governments currently holding office and willing to favour their redistributive concerns against future majority under quite general assumptions on preferences these distortions take the form of budget deficits resp surpluses with leftist rightist governments endogenizing the probabilities of getting elected may reverse this result this paper presents a dynamic political economy theory of taxation policy showing how partisan governments create strategic budget distortions under quite general assumptions on preferences for redistribution these distortions take the form of budget surpluses resp deficits when rightist resp leftist governments hold office being uncertain on whether it will remain in office in the future the current government chooses a level of deficit which will favour its redistributive concerns against those of future majorities it does so by constraining the redistributive policy of its successor through the budget constraint that the latter inherits a leftist resp rightist government is more resp less enclined to redistribute income by running some deficit today the leftist government ensures that society gets poorer tomorrow a future rightist government will redistribute more as society gets poorer the implemented tax policy will thus be close to what a leftist government would have chosen itself on the contrary by running a surplus today a rightest government relaxes the burden of taxation imposed by tomorrow s leftist government on high income agents this leftist government will be less eager to redistribute and will adopt the rightist party s behaviour under political regime switching strategic distortions of the state budget constraint become important tools for current governments willing to favour their own redistributive concerns against those of future majorities as a result of this dynamic game between partisan governments playing at different points in time with the state budget constraint future policies blend together the preferences for redistribution of current and past governments the commitment value of budget deficits has already been stressed by persson and

strategic liquidity supply and security design we study how securities and issuance mechanisms can be designed to mitigate the adverse impact of market imperfections on liquidity in our model asset owners seek to obtain liquidity by selling claims contingent on privately observed future cash flows liquidity suppliers can be competitive or strategic in the optimal trading mechanism associated to an arbitrary given security issuers with low cash flows sell their entire holdings of the security while issuers with high cash flows are typically excluded from trade by designing the security optimally issuers can avoid exclusion altogether we show that the optimal security is debt because of its low informational sensitivity debt mitigates the adverse selection problem furthermore by pooling all issuers with high cash flows debt also reduces the ability of a monopolistic liquidity supplier to exclude them from trade in order to better extract rents from issuers with lower cash flows

pollution claim settlements under private information abstract the classical problem of resolving a nuisance dispute between a pollution generating firm and nearby residents is modelled here as a mechanism design problem we assume that the designer of the mechanism is the firm that it is uncertain about the actual losses suffered by residents and that the initial assignment of property rights is one where each resident is entitled to prevail we derive a profitmaximizing scheme under the individual rationality and incentive compatibility constraints and examine its properties it is shown that the outcomes it yields are sometimes inefficient moreover when many residents are affected by pollution and the degree of uncertainty with respect to the losses they suffer is large these inefficiencies become rampant

the principal agent relationship with an informed principal the case of private values we analyze the principal agent relationship when the principal has private information as a three stage noncooperative game contract proposal acceptance refusal and contract execution we assume that the information does not directly affect the agent s payoff private values equilibrium exists and is generically locally unique moreover it is pareto optimal for the different types of principal the principal generically does strictly better than when the agent knows her information equilibrium allocations are the walrasian equilibria of an economy where the traders are different types of principal and exchange the slack on the agent s individual rationality and incentive compatibility constraints

solving the global warming problem beyond markets simple mechanisms may help his paper discusses the feasibility and performances of simple mechanisms to implement international environmental agreements in the multilateral externalities context of global warming asymmetric information and voluntary participation by sovereign and heterogeneous countries are key constraints on the design of those agreements mechanisms must prevent two sorts of free riding problems free riding in effort provision and free riding in participation as markets might fail to solve simultaneously those two problems we construct instead a simple menu of options that trades off the provision of incentives for participating countries and the provision of incentives to participate with such a mechanism all countries voluntarily contribute to a fund although at different intensities but only the most efficient ones effectively reduce their pollution below its business as usual level

optimal domestic regulation under asymmetric information and international trade a simple general equilibrium approach we investigate the design of domestic incentive regulations in a small economy opened to trade and its implications for international specialization and for trade openness to remain welfare improving more specifically we append to an otherwise standard 2 2 heckscher ohlin model of a small open economy a continuum of intermediate sectors producing nontradable goods used in tradable sectors those goods are produced by privately informed regulated firms asymmetric information induces distortions with general equilibrium impacts the small economy becomes relatively richer in the informationally sensitive factor so that asymmetric information might reverse trade patterns free trade is pareto dominated by autarky when it exacerbates agency distortions

on the failure of core convergence in economies with asymmetric information in interim economies with asymmetric information we show that the coarse core of wilson 1978 does not converge to price equilibrium allocations as the economy is replicated this failure of core convergence is a basic consequence of asymmetric information and extends to any reasonable notion of either interim core or price equilibrium

do education and income really explain inequalities in health applying a twin design we apply a twin design to examine the relationship between health and education andincome the estimated associations between health and education and income controlling forunobserved endowments

incentive mechanisms for international public goods under uncertainty of production costs abstract we investigate incentive mechanisms for the optimal supply of and demand for international public goods under cost uncertainty we find the incentive mechanism exists iff the nation wise income as well as the global income would be greater than the critical values determined by cost uncertainty

an institutional assessment of three local government level tourism destinations at different stages of the transformation process transformation theory attempts to understand the long run process of structural shifts that occur in an industry and economy as a result of institutional change while transformation theory is being advanced and tools have emerged to measure institutions these innovations are yet to be applied to consider institutional change across the development spectrum this is critical for developing institutional theory to underpin the tourism transformation process consequently this paper aims to 1 assess the institutions of the tourism industry in three regions at different stages of transformation and 2 compare tourism to other industries within the regions the results indicate that as the tourism industry matures it becomes smarter more adaptable and takes its own trajectory by departing from the institutional norms of non tourism organizations in the region the tourism management implications are that learning research capabilities adaptability and collaborative marketing plans should be fostered in the early stages of transformation

an incomplete contract perspective on public good provision abstract this paper surveys what can be learned from recent advances in the incomplete contract literature to understand how public goods are or should be provided the paper starts with a section on the full information case that presents and discusses the classical samuelson condition on the optimal provision of public goods the rest of the paper presents results under asymmetric information it is constituted of two main parts in the first one the social planner has complete contracting ability we discuss the basic setting and assumptions of this comprehensive contracting approach and study the trade offs it generates the second part of the paper is devoted to the study of contracting incompleteness such incompleteness can emerge from various sources which we present and discuss we then study the case of a politically chosen decision maker and the consequences of its inability to commit for more than one period and of the ability for individuals to form groups finally we address the problem of the choice between public and private forms of public good provision the concluding section summarizes the main policy lessons

the design of transnational public good mechanisms for developing countries we analyze the design of incentive mechanisms for the provision of transnational public goods under asymmetric information transnational public goods are infrastructures that no single country can afford to build for itself we show that the external constraints imposed by this mechanism may affect consumption pricing and the true redistributive concerns of local governments we characterize the corresponding distortions we also discuss the impact of the preferences for redistribution of the international agency in charge of designing the mechanism and the role of its ability to enforce that mechanism

all stage strong correlated equilibrium abstract a strong correlated equilibrium is a strategy profile that is immune to joint deviations different notions of strong correlated equilibria were defined in the literature one major difference among those definitions is the stage in which coalitions can plan a joint deviation before ex ante or after ex post the deviating players receive their part of the correlated profile in this paper we show that an ex ante strong correlated equilibrium is immune to deviations at all stages thus the set of ex ante strong correlated equilibria of moreno wooders games econ behav 17 1996 80 113 is included in all other sets of strong correlated equilibria

rates of return to degrees across british regions o leary n c and sloane p j rates of return to degrees across british regions regional studies earlier papers have found considerable heterogeneity in the returns to degrees in relation to subjects of study degree classification and higher education institution this paper examines heterogeneity of returns across british regions using the labour force survey it finds substantial regional variations in the financial rewards available to graduates with much higher returns in london and the south east than elsewhere adjusting for regional differences in the cost of living narrows such differences considerably decompositional analysis suggests that coefficient effects dominate composition effects consistent with agglomeration and productivity spillover effects being important o leary n c et sloane p j le taux de rendement des diplomes universitaires a travers les regions de la grande bretagne regional studies des articles anterieures ont trouve que le rendement des diplomes universitaires pa

incentive schemes as a signaling device abstract this paper considers a model of moral hazard where the principal has private information for instance in an organizational setting the firm may be better informed about the profitability of a sales area for which it seeks to employ a new sales representative we show how this information asymmetry may lead to a game of signaling which can mute incentives

estimating returns to education using twins in urban china abstract this paper empirically estimates the return to education using twins data that the authors collected from urban china our ordinary least squares estimate shows that one year of schooling increases an individual s earnings by 8 4 if we use a within twin fixed effects model the return is reduced to 2 7 but rises to 3 8 after the correction of measurement error these results suggest that a large portion of the estimated returns to education is due to omitted ability or the family effect we further investigate why the true return is low and the omitted ability bias high and find evidence showing that it may be a consequence of china s education system which is highly selective and exam oriented more specifically we find that high school education may mainly serve as a mechanism to select college students but as a human capital investment per se it has low returns in terms of earnings in contrast both vocational school education and college education have a large return that is comparable to that found in the united states

collusion delegation and supervision with soft information this paper derives an equivalence principle between organizational forms of supervisory and productive activities we consider an organization with an agent privately informed on his productivity and a risk averse supervisor getting signals on the agent s type in a centralized organization the principal can communicate and contract with both the supervisor and the agent however these two agents can collude against the principal in a decentralized organization the principal only communicates and contracts with the supervisor who in turn sub contracts with the agent we show that the two organizations achieve the same outcome we discuss this equivalence and provide various comparative statics results to assess the e ciency of supervisory structures

interim third party selection in bargaining abstract third party intervention can reduce the risk of conflict in situations where the bargaining failure is due to asymmetric information in this paper i consider the selection of a third party in a two person bargaining problem where each disputant has private information about its relative strength or weakness for a class of problems i find that the disputants choose the third party that is best for the strong type but worst for the weak type due to the incentive of each disputant to avoid seeming weak to their adversary the selected third party s intervention entails a higher ex ante chance of conflict than intervention by any other alternative this paper shows how the process of interim third party selection can have important consequences for the outcome of a third party intervention in bargaining

the cultural revolution and returns to schooling in china estimates based on twins abstract this paper investigates the returns to schooling in china for the cultural revolution cr cohort and the non cr cohort using a new set of chinese twins data applying the fixed effects model on twins data which helps to control for the genetic and family background effects this paper examines whether the cr cohort has smaller economic returns to schooling than the non cr cohort the empirical results in this paper indicate that the cultural revolution has not played a significantly adverse role in the returns to schooling

optimal robust bilateral trade risk neutrality a risk neutral seller and buyer with private information bargain over an indivisible item we prove that optimal robust bilateral trade mechanisms are payoff equivalent to non wasteful randomized posted prices

efficiency enhancing signalling in the samaritan s dilemma suppose an altruistic person a is willing to transfer resources to a second person b if b comes upon hard times if b anticipates that a will act in this manner b will save too little from both agents point of view this is the samaritan s dilemma this paper shows that the undersaving result is mitigated if we relax the standard assumption of complete information because if a is uncertain about how big b s need for support is b will have an incentive to signal that he is in great need by saving more than he otherwise would have done

ex ante efficient ex post individually rational trade abstract consider a bilateral trade model with two sided incomplete information for a general set of independent beliefs an ex post individually rational mechanism generating the same level of ex ante expected gains from trade as an ex ante efficient interim individually rational mechanism is constructed thus imposing the stronger notion of ex post individual rationality on this mechanism design problem generates no loss of efficiency

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

income schooling and ability evidence from a new sample of identical twins we develop a model of optimal schooling investments and estimate it using new data on approximately 700 identical twins we estimate an average return to schooling of 9 percent for identical twins but estimated returns appear to be slightly higher for less able individuals simple cross section estimates are marginally upward biased these empirical results imply that abler individuals attain more schooling because they face lower marginal costs of schooling not because of higher marginal benefits

analysing wage differentials when workers maximize the return to human capital investment abstractthe analysis of the determinants of differences in wages across workers has traditionally relied on the estimation of average earnings functions in this article we propose a new theoretical model where it is the workers who decide the amount they wish to invest in human capital taking into account the costs of acquiring those skills for the purpose of maximizing earnings in this model both human capital and marginal productivity are likely to be influenced by the individual s unobserved characteristics such as ability or motivation potentially giving rise to endogeneity problems in this context the empirical implementation of our theoretical model allows us under certain assumptions to obtain consistent estimates even under the assumption of endogeneity we present an empirical application to the education sector using data from the spanish structure of earnings survey 2010 our results show that females and workers in the private education sector face more difficulties in achieving t

returns to education evidence from u k twins we use a new sample of uk female identical twins to estimate private economic returns to education we report findings in three areas first we use identical twins to control for family effects and genetic ability bias and the education reported by the other twin to control for schooling measurement error our estimates suggest a return to schooling for uk females of about 7 7 second we investigate within twin pair ability differences by examining within twin pair and between family correlations of education with observable correlates of ability including birthweight ability tests and reading scores our findings suggest lower ability bias in within twin pair regressions than pooled regressions third using data on twins smoking we show smoking reflects family background and using it as an instrument exacerbates ability bias this abstract was borrowed from another version of this item

the equivalence of lending equilibria and signalling based insurance under asymmetric information i present a model in which a continuum of individuals have stochastic idiosyncratic income shocks complete insurance is physically feasible but unattainable due to an information asymmetry income shocks are observable only by the individuals receiving them any insurance institution must therefore rely on self reporting of income innovations two ways of achieving incentive compatible self reporting are presented the first is a debt market with an explicit lending restriction the second is an insurance contract that linearly filters a signal transmitted by individuals the two are then demonstrated to be identical equilibrium consumption fluctuates in a random walk which is inefficient given the physical potential for complete insurance but is efficient given the information constraints the results are complementary to those of green 1987 but permit more general stochastic processes of income to be analyzed serial correlation of income reduces the efficiency of the insurance

heterogeneous preferences and equilibrium trading volume abstract the representative agent lucas model stresses aggregate risk and hence does not allow us to study the impact of agents heterogeneity on the dynamics of equilibrium trading volume in this paper we investigate under what conditions non informational heterogeneity i e differences in preferences and endowments leads to nontrivial trading volume in equilibrium we present a non informational no trade theorem that provides necessary and sufficient conditions for zero equilibrium trading volume in a continuous time lucas market model with heterogeneous agents multiple goods and multiple securities we explain in detail how no trade equilibria are related to autarky equilibria portfolio autarky equilibria and peculiar financial market equilibria which play an important role in the literature on international risk sharing

efficient contracting with reliance and a damage measure this article reexamines the problem of breach of contract studied by shavell 1980 1984 and rogerson 1984 by considering explicitly the incentive problems that arise from asymmetric information and transaction specific investment we derive the optimal contract which consists of variable price and damage payment schedules each of which is set before any private information is observed we show that the optimal contract attains full classical efficiency

the craft of labormetrics using a wide array of examples from the literature and from original estimates the author examines the pitfalls that make good empirical research in labor economics at least as much craft as statistical technique among the subjects discussed are the appropriateness and cleanliness of data problems of extreme observations the validity of attempts to produce exogeneity using instrumental variables natural experiments and structural models and the treatment of selectivity and unobservable individual effects the author stresses the importance of testing empirical results to ensure that they make sense and of presenting them clearly and economically

limits to community participation in the tourism development process in developing countries abstract this study deals with a normative concept of participatory development approach which originates in the developed world in particular it analyses and explains the limitations to the participatory tourism development approach in the context of developing countries it was found that there are operational structural and cultural limits to community participation in the tdp in many developing countries although they do not equally exist in every tourist destination moreover while these limits tend to exhibit higher intensity and greater persistence in the developing world than in the developed world they appear to be a reflection of prevailing socio political economic and cultural structure in many developing countries on the other hand it was also found that although these limitations may vary over time according to types scale and levels of tourism development the market served and cultural attributes of local communities forms and scale of tourism developed are beyond the control of local communities it concludes that formulating and implementing the participatory tourism development approach requires a total change in socio political legal administrative and economic structure of many developing countries for which hard political choices and logical decisions based on cumbersome social economic and environmental trade offs are sine qua non alongside deliberate help collaboration and co operation of major international donor agencies ngos international tour operators and multinational companies

strategy proof stochastic assignment abstract i study strategy proof assignment mechanisms where the agents reveal their preference rankings over the available objects a stochastic mechanism returns lotteries over deterministic assignments and mechanisms are compared according to first order stochastic dominance i show that non wasteful strategy proof mechanisms are not dominated by strategy proof mechanisms however non wastefulness is highly restrictive when the mechanism involves randomization in fact the random priority mechanism i e the random serial dictatorship and a recently adopted school choice mechanism deferred acceptance with random tie breaking are wasteful i find that both these mechanisms are dominated by strategy proof mechanisms in general strategy proof improvement cannot be due to merely reshuffling objects and therefore must involve assigning more objects

reputational comparative advantage and multinational enterprise 1 introduction when cultivating a new export market or attempting to expand its share of an existing market an exporter is likely to find that it has been preceded by its reputation minus a readily identifiable brand name quality reputation may solely reflect the country of origin for example when consumers are presented with a large amount of complex product information they may use the country of origin as a heuristic in forming product impressions without considering other product attributes 1 in this article i show that this heuristic decision making process can affect a firm s quality decision and can therefore become self fulfilling hence any bias that consumers have may be well founded however it is only correct because firms respond rationally to it colombia s garment industry provides an interesting example of a self fulfilling unfavorable quality reputation in international trade as described by morawetz 1981 a single colombian garment firm took a contract for 50 000 men s suits that was beyond its capability the poor quality result so tarnished the american importer s name that other high quality importers become wary of colombian sewn garments with the payoff to high quality production reduced colombian garment firms then concentrated on low quality markets and the newly found unfavorable reputation was justified in the model constructed here consumers see only a noisy signal of the product s quality at the time of purchase therefore their posterior beliefs are based on this noisy signal and the country of origin reputations as will be made clear higher quality firms benefit more from an increase in their country s reputation so that a better reputation generates an increase in the percentage of high quality firms in this way the reputation becomes self fulfilling and ex ante identical countries can be correctly perceived as differing in their percentage of high quality producers i next introduce an economy with two sectors one sector produces more complex goods where high quality is not easily verified and is more essential to the product s performance these may be technology intensive products or they may consist of the design and marketing of the goods produced in the other sector in particular high quality production costs and the consumer s value for high quality goods is greater in this sector i show that this sector becomes more profitable as the country of origin reputation increases hence if one country s equilibrium reputation is low and the other country s equilibrium reputation is high then the pattern of specialization and international trade can be determined solely by reputational comparative advantage 2 finally i show that reputational comparative advantage can overshadow a small technological comparative disadvantage in determining the pattern of international trade given this pattern of trade and specialization based on reputational comparative advantage a high reputation firm may expend resources to establish a multinational enterprise mne in the low reputation country for example many mne products require the differing specializations of both the high and low reputation countries although differing in motivation this result accords well with more traditional models of vertical mne 3 however this impetus for mne as well as its more traditional counterparts does not explain why the mne would choose foreign direct investment fdi over a less costly licensing arrangement 4 the quality uncertainty in this model along with the difference in equilibrium reputations allows us to address this question in particular appropriable reputational rents are generated by fdi when the high reputation parent firm procures and internalizes production with a low reputation host firm this fdi breaks the low reputation equilibrium of the host firm and generates reputational rents

what do twins studies reveal about the economic returns to education a comparison of australian and us findings conventional estimates of rates of return to education are constrained because they are unable to isolate the returns to schooling from the contribution of individual ability and the influence of family background potentially studies using a sample of twins may overcome these problems monozygotic twins are genetically identical and if they have been reared together share the same family background differences in income between identical twins can therefore be associated with differences in the amount of education they have undertaken in order to estimate the independent influence of education comparisons of such estimates with estimates made from a sample of dizygotic twins who are genetically similar but not identical and who are also reared together may permit evaluation of the biases associated with ability and family background in conventional estimates of the return to education in an important paper jere behrman et al 1977 analyzed data from a sample of male world war ii veteran twins and found that of the overall rate of return to schooling of 8 percent 2 7 percentage points could be attributed to schooling per se 3 2 percentage points could be attributed to genetic factors and 2 1 percentage points could be attributed to shared family environment in a recent paper however orley ashenfelter and alan krueger 1994 have estimated the economic returns to education using data on a new sample of twins which permitted them to adjust their estimate for omitted ability variables and measurement error on this basis they find that family and genetic effects make virtually no contribution to the returns to schooling measurement error however biases the estimated return to schooling downward the findings of ashenfelter and krueger 1994 are very different from previous work in this field and there is now some confusion as to what analysis of twins data really reveals about the economic returns to schooling ashenfelter and krueger s results are based on analysis of data for a sample of 298 individuals 149 pairs of identical twins who attended a twins festival in 1991 they remark at the end of their paper only additional data collection is likely to lead to better estimates of the returns to schooling p 1171

asymmetric information bargaining problems with many agents a yes or no decision must be made about some issue all agents must agree the coase theorem asserts that the efficient outcome will always result suppose the value positive or negative that an individual attaches to an affirmative decision is privately known to that individual it is proved under very mild conditions that with independent types as the number of agents increases the probability of an affirmative efficient decision goes to zero an example in which it is common knowledge that an affirmative decision is efficient and yet the probability of such a decision goes to zero is given

asymmetric information information externalities and efficiency the case of oil exploration in this article we examine the efect of private information and information externalities on the ex post eficiency of investment in oil exploration we show that too much drilling tends to occur ifjirms believe that the area is likely to contain a sizeable pool of oil and too little drilling occurs if the opposite is true bargaining with well defined property rights to the information externality can eliminate underinvestment but overinvestment remains a problem because firms have an incentive not to disclose their private information

dominant strategy implementation of bayesian incentive compatible allocation rules abstract a large literature on incentive mechanisms represents incentive constraints by the requirement that truthful reporting be a bayesian equilibrium this paper identifies mechanism design problems for which there is no loss in replacing bayesian incentive compatibility by the stronger requirement of dominant strategies we identify contexts where it is possible to change the transfer payments of an optimal bayesian mechanism so as to create dominant strategies and yet leave every participant s expected utility unchanged we also address the issue of multiple equilibria and unique implementation contexts where these results apply include auctions bilateral bargaining procurement contracting and intrafirm resource allocation

stability with one sided incomplete information two notions of stability ex ante stability and bayesian stability are investigated in a matching model with non transferrable utility interdependent preferences and one sided incomplete information ex ante stable matching outcomes are unblocked for every belief on the blocking partner s type while bayesian stable matching outcomes are unblocked with respect to prior beliefs ex ante stability is a minimal requirement bayesian stability is a more selective desideratum with sound efficiency properties

politics and sustainable tourism development can they co exist voices from north cyprus abstract this paper investigates ways in which political obstacles inhibit the formulation and implementation of sustainable tourism development in small island developing states through the example of north cyprus the methodology draws on in depth interviews and participant observation of significant actors in the tourism sector the research findings suggest that understanding the intricate political system and power structure in a society is the key to understanding sustainable tourism policy development planning and implementation in the case of north cyprus policy development was found to be a product of political influence referred to as ego driven politics in the text specifically the use of public resources as an instrument for political power retention and that the politicisation of the public sector is the underlying cause of the weakened progress in sustainable tourism development it is therefore essential to have a clear understanding of political issues key political actors interests and how to mitigate personal interests to facilitate and maintain sustainable tourism development in such small states

education employment and earnings of secondary school and university leavers in tanzania evidence from a tracer study this study uses a tracer survey of secondary school completers in tanzania to analyse the impact of educational qualifications on labour market earnings we show that the rates of return to the highest educational qualifications for wage employees are not negligible and at the margin provide an investment incentive however we find little evidence of human capital effects in the earnings determination process for the self employment sector introducing controls for father s educational background and a set of school fixed effects designed to proxy for school quality and potential labour market network effects reduces the estimated rates of return to educational qualifications a comparison of our results with the available evidence from other countries in the region suggest that despite an extremely small secondary and university education system the private rates of return to education in the tanzanian wage employment sector are comparatively low

auction design and favoritism abstract the theory of auctions has ignored the fact that often auction designers not the principal design auctions in a multi attribute auction the auction designer may bias his subjective evaluation of quality or distort the relative weights of the various attributes to favor a specific bidder an ancient concern in the procurement of weapons in the auctioning of government contracts and in the purchase of electricity by regulated power companies the paper analyzes the steps to be taken to reduce the possibility of favoritism it is first shown that in the absence of favoritism quality differentials among firms are more likely to be ignored if the auction designer has imperfect information about the firm s costs second if the auction designer may collude with only one bidder the other bidders should be chosen if they are at least as efficient as the former bidder and no hard information about quality differentials is released by the auction designer that would justify fair discrimination in favor of the former bidder last if the auction designer can collude with any bidder the optimal auction tends to a symmetric auction in which quality differentials are ignored the possibility of favoritism reduces the auction designer s discretion and makes the selection process focus on non manipulable monetary dimensions of bids

estimates of the returns to schooling from sibling data fathers sons and brothers data on brothers and on fathers and sons from the national longitudinal survey are used to consider the impact of omitted variables and measurement errors on the economic returns to schooling the analysis suggests that the upward bias in estimated returns due to omitted variables is likely offset by an equal downward bias resulting from measurement errors in reported schooling controlling for both of these potential sources of bias yields results comparable to conventional regression estimates of the economic return to schooling

decentralized trading with private information the paper studies how asset prices are determined in a decentralized market with asymmetric information about asset values we consider an economy in which a large number of agents trade two assets in bilateral meetings a fraction of the agents has private information about the asset values we show that over time uninformed agents can elicit information from their trading partners by making small offers this form of experimentation allows the uninformed agents to acquire information as long as there are potential gains from trade in the economy as a consequence the economy converges to a pareto efficient allocation

virtual utility and the core for games with incomplete information abstract the core is extended to games with incomplete information the feasible set is characterized by incentive compatible mechanisms blocking is organized at the interim stage by an incentive compatible mediation plan membership of the blocking coalition itself may be determined randomly by the blocking mediator nonemptiness of an interim fine core is proven for games with a balanced structure independent types and sidepayments an offer of severance payments may be needed to inhibit blocking core allocations are characterized in terms of virtual utility scales that generalize the weighted utility scales of the inner core mechanisms that achieve core allocations are coalitionally durable

nash equilibrium and welfare optimality if is a set of social alternatives a social choice rule scr assigns a subset of a to each potential profile of individuals preferences over a where the subset is interpreted as the set of welfare optima a game form or mechanism implements the social choice rule if for any potential profile of preferences 1 any welfare optimum can arise as a nash equilibrium of the game form implying in particular that a nash equilibrium exists and 2 all nash equilibria are welfare optimal the main result of this paper establishes that any scr that satisfies two properties monotonicity and no veto power can be implemented by a game form if there are three or more individuals the proof is constructive