the role of reference prices in experimental auctions abstract we examine the role of reference prices field prices in willingness to pay studies involving experimental auctions using a 2nd price vickrey auction we find that provision of reference prices increases bid values

behavioral contract theory abstract this review provides a critical survey of psychology and economics behavioral economics research in contract theory first i introduce the theories of individual decision making most

screening ethics when honest agents care about fairness we analyze a principal s ability to discriminate between honest and dishonest agents who have private information about the circumstances of the exchange honest agents reveal circumstances truthfully as long as the mechanism is suciently fair the probability that an equilibrium allocation is chosen by an agent who is lying should not be too large without intolerance for lying the agent is given proper incentives if dishonest and zero rent if honest with even a small intolerance for lying the optimal mechanism is discontinuously altered it may still involve ethics screening whereby some allocation chosen by a dishonest agent is never chosen by an honest agent it happens either when the dishonest is overstating circumstances or when the principal is forced to allow for some suboptimal announcements due to an excessive intolerance for lying with limited intolerance for lying ethics screening allows for doing better than in the standard setup where the agent is dishonest with certainty even if honesty is unlikely however if intolerance for lying is too strong the principal cannot improve upon the standard setup

optimal auction with resale this paper investigates the design of seller optimal auctions when winning bidders can attempt to resell the good in that case the optimal allocation characterized by myerson 1981 cannot be achieved without resale i find a sufficient and necessary condition for sincere bidding given the possibility of resale in two bidder cases i prove that the myerson allocation can be achieved under standard conditions supplemented with two assumptions with three or more bidders achieving the myerson allocation is more difficult i prove that it can be implemented in special cases in those cases the myerson allocation is generated through a sequence of resale auctions each optimally chosen by a reseller

competition in political and economic markets do anomalies play an important role in explaining economic and political choices are political decisions more prone to anomalies irrationality and inefficiency than economic decisions in their integration of results derived from experimental psychology and applied political economy frey and eichenberger 1990 argue that social scientists ought to answer these questions in the affirmative after examining a large body of choice data frey and eichenberger conclude that individuals deviate from the axioms of rational choice in their view the resultant anomalies in individual behavior are unaffected by the aggregation which occurs in the economic marketplace they conclude that political decision making systems correct no larger a proportion of these anomalies than are corrected by the economic market in many institutional settings outlined in their paper decision making systems can be expected to magnify individuals deviations from rational behavior system wide irrational behavior will then produce less frequent trading and a less efficient allocation of resources in this note we examine two components of frey and eichenberger s argument first we reconsider their evidence for irrational behavior in light of a larger body of experimental data which includes choices made in market settings second we argue that competition in political markets will tend to eliminate aggregate anomalies just as it does in economic markets experimental economists often generate data which distinguish between choices individuals indicate in unstructured environments and transactions individuals consummate in markets initial statements regarding choices are often inconsistent with subsequent trading behavior these data indicate that the economist s maximization paradigm based on tenets of rational choice is

regulation and the theory of legislative choice the interstate commerce act of 1887 this article concerns the economic incidence of the interstate commerce act of 1887 ica our focus is the short haul pricing constraint a provision of the ica that prohibited railroads from charging higher rates to isolated primarily agrarian shippers than it charged to intercity shippers of similar commodities utilizing the event study methodology we find that the impending passage of the ica generated a distribution of abnormal returns to railroads and shipping firms that is consistent with the theoretical implications of our analysis of the short haul pricing constraint shpc however early interpretations of the shpc by the interstate commerce commission reduced some of the abnormal returns to railroads in a manner that is inconsistent with the hypothesis that the short haul pricing constraint was an important mechanism of early railroad regulation the analysis does support a multiple interest interpretation of the interstate commerce act and has implications for the positive theory of regulation

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

renewable energy integration in zonal markets in this paper we investigate the impact of zonal network management in the operation of power systems with significant levels of renewable energy integration our study is inspired by the current state of the european energy market and we focus on a case study of the central western european cwe system first we present a hierarchy of models that account for unit commitment the separation of energy and reserves and the simplified representation of transmission constraints in a zonal market in order to examine the impact of these factors on efficiency in a regime of large scale renewable energy integration second we simulate operations of the cwe system under the zonal market design using a detailed instance that consists of 656 thermal generators 679 nodes and 1073 lines with multiarea renewable energy production and 15 minute time resolution zonal market operations are compared against deterministic and stochastic unit commitment using high performance computing in order to tackle the scale of the resulting models we find that market design can have an influence on cost efficiency which far exceeds the benefits of stochastic unit commitment relative to deterministic unit commitment we conduct a detailed analysis of the numerical results in order to explain the relative performance of the different models

the effect of explicit reference points on consumer choice and online bidding behavior sellers often explicitly suggest to buyers that they compare one option to other reference options building on the notion that loss aversion is more pronounced when comparisons are explicit rather than implicit we propose that the mere fact that consumers are explicitly told to make particular comparisons induces more risk averse cautious choice and bidding behavior this proposition was supported in a field experiment involving real online auctions in which comparisons among listings either were done spontaneously by bidders or were encouraged using an explicit instruction to compare the focal auction with adjacent listings results showed that explicit reference points 1 diminished the influence of adjacent auction prices on the focal auction s price 2 led participants to submit fewer lower and later bids 3 increased the incidence of sniping 4 decreased bidding frenzy and 5 decreased the tendency to bid on multiple items simultaneously the impact of explicit comparisons on risk averse behavior was further tested in a very different context using a laboratory choice experiment in that study explicit instructions to compare option sets increased the tendency to choose the compromise low risk and all average alternatives we discuss the theoretical and practical implications of this research

market clearing with stochastic security part ii case studies this paper analyzes the market clearing formulation with stochastic security developed in its companion paper through two case studies solved using mixed integer linear programming techniques the generation and reserve schedules as well as the nodal prices of energy and security are assessed under various conditions such as a line flow limits b when nonspinning reserve is excluded from the formulation c demand side valuation of energy not served d generator ramping limits and e the set of pre selected contingencies

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

a positive theory of environmental quality regulation this paper demonstrates that environmental quality regulation may enhance producer wealth while simultaneously reducing an externality problem by restricting access to common property regulation not only corrects a resource misallocation but it creates a scarcity rent as well in the recent history of environmental quality the common access problem has been addressed by federal and state agencies through a standards based approach rather than through the enforcement of tradable property rights as a consequence rents from the right to use these assets have accrued to producers the data are convincing that there is a strong interplay between producers consumers and the victims of pollution each party has some influence on the outcome and one sided analysis neglects many important aspects of regulation environmental quality regulation is complicated but many of the observed perplexities are consistent with a rent seeking self interest theory of government 46 references 1 figure 7 tables

capacity utilization and new source bias evidence from the us electric power industry abstract while prior research has shown that new source bias has increased construction costs and delayed the building of new electric power plants this research explores the empirical question of whether increased operating costs caused by new source bias are larger than the cost savings of newer technology if new sources do have higher operating costs an incentive exists to utilize order plants more intensively statistical evidence of these differing utilization rates is found

multi dimensional reference dependent preferences in sealed bid auctions how most laboratory experiments differ from the field abstract we study bidding behavior in first and second price sealed bid auctions with loss averse agents our model predicts overbidding in first price induced value auctions consistent with evidence from most laboratory experiments substantially different bidding behavior could result in commodity auctions where money and auction item are consumed along different dimensions of the consumption space differences also result in second price auctions our study thereby indicates that transferring qualitative behavioral findings from induced value laboratory experiments to the field may be problematic if subjects are loss averse

price information and bidding behavior in repeated second price auctions examining panel data on bidding behavior in over forty second price auction markets with repeated trials we observe that i posted prices influence the behavior of the median naive bidder ii posted prices do not affect the behavior of the median experienced bidder or the bidder for familiar goods and iii anticipated strategic behavior wanes after two trials the results suggest that while affiliation might exist in auctions for new goods the repeated trial design with nonprice information removes the correlation of values and provides the experience that bidders need to understand the market mechanism

auctions versus posted price selling two popular selling methods posted price selling and auctions are compared here in an independent private values model without auctioning costs auctioning is always optimal when auctioning is costly auctions are still preferable if the marginal revenue curve is sufficiently steep the global steepness of the marginal revenue curve is found to coincide with the dispersion around the mean for a number of standard distributions finally the prices of the monopoly seller and of the social optimum are compared copyright 1993 by american economic association

the bidder s curse traditional explanations for the popularity of auctions are efficiency and revenue maximization we argue that another reason is the potential for overbidding i e buyers bidding above their willingness to pay outside the auction the auction mechanism ensures that even if only few buyers overbid they affect prices and allocations we employ a novel approach to identify overbidding in the field comparing auction prices to simultaneous fixed prices for identical items on the same ebay webpage we argue that fixed prices provide an upper bound for auction bids in a detailed data set of board game auctions we find that the final price exceeds the simultaneous fixed price in 42 percent of the auctions the result is not explained by differences in item quality shipping costs or seller reputation prior auction experience does not eliminate overbidding the finding replicates in a second broad data set of a cross section of auctions 48 percent overbidding the substantial fraction of overbid auctions is induced by a small number of bidders only 17 percent ever bid above the fixed price using a simple model of second price auctions with alternative fixed prices we show that transaction costs of switching between auctions and fixed prices cannot explain the results given that even the expected auction price is higher than the fixed price consistent with limited attention the closer the fixed price is listed relative to an auction the less likely are overbids this effect is strongest for bidders first bids when they are likely to examine the auction and fixed price listings more closely

how pollution taxes may increase pollution and reduce net revenues this paper develops a positive theory of pollution taxation by a federal authority when pollution abatement subsidies are used by local governments environmental and industry lobby groups influence governments with campaign contributions first pollution may increase in the pollution tax because the abatement subsidy increases decreases with the tax and pollution increases decreases in the abatement subsidy this occurs because the lobbying incentives change at a pollution tax reform second pollution taxes may reduce net revenues because subsidy expenditures rise third pollution may increase simultaneously as net revenues fall finally the welfare effect of a pollution tax may be negative

rational irrationality some economics of self management abstract the paper first reviews some of the main challenges posed to our received economic paradigm by a variety of behaviors documented by psychologists and discusses possible responses to this challenge it then describes a specific attempt at unifying a number of themes in social psychology using a parsimonious modeling of human behavior

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

environmental protection in the federalist system the political economy of npdes inspections i introduction federal regulatory programs from occupational safety to protection of the environment are implemented jointly by national and state agencies more broadly almost all regulatory programs involve some delegation to branch offices meat inspections or regional districts tax collection given the pervasiveness of regulatory federalism surprisingly little research has been done on the political consequences of delegating national policy to local actors in particular the small but growing literature on the politics of regulation has almost completely ignored the role of federalism in implementing regulatory policy 1 perhaps the most widely accepted model of bureaucratic decision making peltzman s 1976 model of support maximization implies that delegation can have a profound impact on the implementation of regulatory policy peltzman s model posits that regulators maximize support while minimizing opposition in the context of environmental protection a rational regulator would calculate the marginal support from pollution abatement generated by inspecting a given plant and equate that to the marginal opposition arising from job loss generated by that action pashigian 1985 points out that in environmental legislation local and national interests are unlikely to be identical because industry the primary target of pollution control measures has an uneven geographic distribution thus a local regulator performing peltzman s calculation is quite likely to reach a very different decision than a national regulator this paper examines the extent to which local regulators are able to respond to local interests when enforcement of a national policy has been delegated to them there are three possibilities one is that delegation of enforcement to local government represents a complete abdication of control by the federal government at the other extreme is the possibility the federal government can delegate with no loss of control because of its ability to enforce its goals through the use of threats loss of authority over the program and incentives additional grant money the third possibility is that both local and national interests can influence a delegated program the federal government will lose some control when it delegates but the loss will not be total the clean water act of 1972 is one of the largest federal regulatory programs ever delegated to the states under the act the federal government took over the previously state level responsibility for regulating water pollution 2 under the clean water act industrial polluters are issued permits which specify types and amounts of pollutants allowed in effluent discharged during a given time period these limits are set by state or regional authorities but must conform to minimum national standards permit writers may consider the desires of the local community if those desires demand more stringent standards than the federal minimums but may not respond to community demands for lower standards local communities with considerable employment in the industry for example might want a lower standard than the federal mandate although a politically minded regulator does not have the ability to actually grant a permit with a lower standard a second source of discretion is available in the form of selective enforcement while permits are difficult enough to issue they are meaningless without some method of verifying compliance 3 the state or regional environmental protection agency epa conducts regular on site inspection of polluters although the epa requests that delegated states inspect polluters at least once a year it is not required in practice states have considerable discretion on how and when to inspect polluters this should not come as a surprise there are 7 500 npdes facilities in the country variation in state performance could be due to location alone this study using data from the epa s permit compliance database which tracks compliance with the clean water act analyses plant level inspection violation and effluent discharge data

the effect of environmental regulation on optimal plant size and factor shares the method for measuring the effects of environmental regulation on the size distribution of industrial plants and the distribution of factor shares described in this paper focuses on the 20 industries with highest per unit pollution abatement costs and the 20 with the lowest costs the study finds that compliance with environmental laws has not only reduced the number of plants in the affected industries but has placed a greater burden on small rather than on large plants besides redistributing within industry market shares environmental regulation has increased the use of capital relative to labor although the disproportionate burden placed on small plants in the high abatement cost industries may have been unintended it is likely that large firms will be less vocal opponents of environmental regulation than are small firms 22 references 12 tables

auctions with a buy price the case of reference dependent preferences abstract in an auction with a buy price the seller provides bidders with an option to end the auction early by accepting a transaction at a posted price this paper develops a model of an auction with a buy price in which bidders use the auction s reserve price and buy price to formulate a reference price the model both explains why a revenue maximizing seller would want to augment her auction with a buy price and demonstrates that the seller sets a higher reserve price when she can affect the bidders reference price through the auction s reserve price and buy price than when she can affect the bidders reference price through the auction s reserve price only the comparative statics properties of bidding behavior are in sharp contrast to equilibrium behavior in other models where the existence and size of the auction s buy price have no effect on bidding behavior

posted prices and bid affiliation evidence from experimental auctions in most experimental auctions researchers ask participants to bid on the same item in multiple po tentially binding rounds posting the price submitted by the top bidder or bidders after each of those rounds if bids submitted in later rounds are affiliated with posted prices from earlier rounds this practice could result in biased value estimates in this article we discuss the results of an experiment designed explicitly to test whether posted prices affect bidding behavior we find that for familiar items high posted prices lead to increased bids in subsequent rounds our results have implications for researchers conducting experimental auctions article advances the literature in several im portant ways first we report the design and results of the only study designed specifically to control for the effects of posted prices on bids in subsequent rounds we do this with the aid of confederate bidders who were instructed to bid within a certain narrow range thus we have multiple treatments that vary only by the presence or absence of confederate bidders al lowing for what we believe to be the cleanest possible test of the effect of posted prices on bidding behavior in later rounds while list and shogren 1999 model bids in round t as a function of the posted price in round t 1 through our use of confederate bidders to con trol posted prices we are able to test whether exposure to high posted prices has an effect that accumulates over the course of multiple rounds leading to a gradual increase in mean bids second our methods of analysis are more complete than previous work examining bid af filiation we not only compare summary statis tics from early and late rounds but we also use panel data analysis to understand how in dividual participants bids are affected by the presence of confederate bidders focusing on individuals rather than summary statistics al lows us to understand how individual specific characteristics influence affiliation and it also allows us to better understand the role of out liers

carbon geography the political economy of congressional support for legislation intended to mitigate greenhouse gas production over the last 5 years the u s congress has voted on several pieces of legislation intended to sharply reduce the nation s greenhouse gas emissions given that climate change is a world public bad standard economic logic would predict that the united states would free ride and wait for other nations to reduce their emissions within the congress there are clear patterns to who votes in favor of mitigating greenhouse gas emissions this paper presents a political economy analysis of the determinants of pro green votes on such legislation conservatives consistently vote against such legislation controlling for a representative s ideology representatives from richer districts and districts with a lower per capita carbon dioxide footprint are more likely to vote in favor of climate change mitigation legislation representatives from districts where industrial emissions represent a larger share of greenhouse gas emissions are more likely to vote no jel q54 q58 r50

demand for environmental goods evidence from voting patterns on california initiatives this article studies voting behavior on 16 environmental ballot propositions in california in order to characterize the demand for environmental goods the environment is found to be a normal good for people with mean incomes but some environmental goods are inferior for those with high incomes at least when supplied collectively an important price of environmental goods is reduced income in the construction farming forestry and manufacturing industries income and price can explain most of the variation in voting there is little need to introduce preference variables such as political ideology

can rents run uphill a note on the theory of regulation no one familiar with the history of regulation would be surprised that inefficient firms can benefit at the expense of the efficient yet this outcome has not been analyzed within the standard rent seeking models this paper has derived conditions under which less efficient firms can profitably secure regulation that imposes costs on their more efficient rivals the possibility that less efficient firms can form a profitable coalition does not mean that they will actually do so we have analyzed only the polar situations in which inefficient firms form a coalition to put efficient firms out of business and efficient firms try to block the regulation by offering counter bids the actual formation of coalitions will depend on political entrepreneurship mcchesney 1987 the opportunity costs of various producers fort and hallagan 1987 and the particular cost functions of forming a coalition functions that may well differ among various firms i have placed these influences in the ceteris paribus pound in order to analyze the demand and supply conditions that are conducive to successful rent seeking by less efficient firms the theoretical demonstration that less efficient firms can outbid their more efficient counterparts for legislation and still earn profits helps explain a common regulatory outcome

taxes torts and the toxics release inventory congressional voting on instruments to control pollution i introduction governments can choose from a wide variety of policy instruments to control pollution including tax and subsidy schemes marketable permits information provision programs liability systems with well defined property rights and command and control selection of emission standards or technologies economists throughout the 1980s devoted significant effort to modeling the relative merits of these instruments the question of why politicians would prefer one manner of controlling pollution over another also attracted attention starting with buchanan and tullock s 1975 positive theory of externality control in which polluters find direct regulatory controls on emissions more profitable than pollution taxes theories of instrument selection have been developed in which politicians choose policies based on the relative costs and benefits to shareholders workers and environmentalists are affected by the constraints imposed by political institutions and are driven to select the most efficient policy instrument to achieve a given level of redistribution 1 to date however there have been few empirical tests of what drives instrument selection in environmental policy there is a large empirical literature devoted to explaining the level of support for environmental programs in congress most articles focus on the degree to which a legislator s stand on a given environmental bill can be explained by narrow district interests generally the material interests of constituents or by ideology either constituents or the member s own policy preferences studies of voting on environmental legislation by ackerman and hassler 1981 crandall 1983 pashigian 1985 and yandle 1989 offer evidence that legislators actions are in part explained by the district or state level impacts of proposed legislation on their constituents kalt and zupan 1984 find that after controlling for constituents material self interest in proposed strip mining legislation the ideology of constituents and the personal ideologies of their representatives influence voting on this aspect of environmental preservation as grier 1993 demonstrates debate over the general role of the legislator s specific ideology in voting continues in studying votes in the house and senate on the proposed size of the superfund during debate over the program s renewal hird 1993 concludes that congressional voting on superfund is found to represent legislator s environmental and liberal ideologies as much as if not more than narrowly defined self interest he links the importance of ideology to voting on superfund in part to the bill s symbolic environmental appeal in environmental legislation the final impact of a bill on industry and the environment often depends on issues resolved through technical amendments downs s theory of rational ignorance and arnold s theory of the degree to which constituents will link congressional actions with real world outcomes predict that members of congress may be less constrained by general constituent interests on amendment votes since these votes are less likely to be covered in the media than are final legislative votes as denzau and munger 1986 and grier and munger 1991 note groups with specific interests such as affected industries may find it less costly to persuade a member of congress to vote their way on a measure if the representative s constituents are supportive of or indifferent to the measure in the case of technical amendments affected parties may be more influential than on highly visible votes because the lack of media coverage translates into a lower probability that the vote will become a major campaign issue in future elections this implies that voting on the instruments to control pollution will be driven in part by the specific district level costs and benefits of these measures while voting on the final passage of a bill will be more driven by general constituent interests

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

field experiments on the effects of reserve prices in auctions more magic on the internet i present experimental evidence on the effects of minimum bids in first price sealed bid auctions the auction experiments manipulated the minimum bids in a preexisting market on the internet for collectible trading cards from the game magic the gathering i examine a number of outcomes including the number of participating bidders the probability of sale the levels of individual bids and the auctioneer s revenues the benchmark theoretical model is one with symmetric risk neutral bidders with independent private values the results verify a number of the predictions concerning equilibrium bidding many bidders behave strategically anticipating the effects of the reserve price on others bids

buy out prices in auctions seller competition and multi unit demands online auction sites often enable sellers to add a buy out price in one shot auctions this has been motivated by appeal to impatience or risk aversion we offer additional justification in a dynamic model by showing that an early seller has an incentive to use a buy out price if a similar product is offered later by another seller and bidders desire multiple objects revenue in the first auction increases but revenue in the second auction decreases as does the sum of revenues the buy out price causes the auction sequence to become inefficient because the first item may be awarded to a bidder who should have received none

the missing pollution haven effect this paper examines the effect of recent increases inhazardous waste disposal taxes on employment growth inindustries that generate hazardous waste mostexisting literature has found that interjurisdictionaldifferences in environmental stringency havenegligible measurable economic consequences commonexplanations for this lack of effect include claimsthat 1 measures of environmental stringency arepoorly quantified 2 compliance costs are modest 3 variation in compliance costs among jurisdictionsis small and 4 cross section data are insufficientto explore the consequences of increasingly stringentstandards this paper addresses these four concernsby quantifying hazardous waste disposal taxes demonstrating that they are large and varied acrossjurisdictions in the united states and showing thatthey have had a significant effect on hazardous wasteshipping among states the paper then uses a panel ofstate and county level data to show that despite thesefindings state hazardous waste disposal taxes do notimpose large employment losses on industries thatgenerate waste

a roll call analysis of the endangered species act amendments public choice economics view legislative process as a transaction in the political market interest groups demand regulation in their favor and lobby lawmakers the lawmakers analyze an assortment of factors and supply legislation to the winning group thereby maximizing their rent from the political market this article examines endangered species act esa amendments from a public choice perspective congressional voting on the esa amendments are assessed using a model based on political incentive and ideology the results show that the lawmakers voting behavior is correlated with their party affiliation ideology and several characteristics of their home state such as number of endangered species proportion of urban population contribution of the natural resources and construction sectors in gross state product and geographical location copyright 2001 oxford university press

religion and the demand for membership in environmental citizen groups i test the hypothesis that religious affiliation is an empirical measure of tastes and beliefs that affect the demand for membership in environmental citizen groups the number of adherents to judeo christian denominations per household has a significant negative effect on state membership rates for nine groups advocating a preservationist approach to environmental policy particularly in states with many catholics baptists and mormons religious affiliation has a marginally significant positive effect on membership rates for two sportsmen groups advocating private stewardship these results suggest that religious affiliation should also be a significant determinant of constituent preferences for environmental policies

regulation and firm size fda impacts on innovation this article estimates the highly differential impacts of fda regulations on pharmaceutical firms of various sizes where size is measured as scale of r d expenditures estimation is performed using the method of maximum quasi likelihoods using productivity trends of the united kingdom as a control to isolate fda regulatory effects in the united states it is shown that smaller u s pharmaceutical firms suffered devastating reductions in research productivity because of fda regulations in contrast the largest u s pharmaceutical firms apparently benefited from regulation as sales gains due to reduced competition more than offset their quite moderate declines in research productivity

secret reserve prices in a bidding model with a re sale option this paper presents an auction model in which the seller may choose not to sell in spite of receiving a bid above the announced reserve price such behavior is seen frequently in auctions yet would be suboptimal within most existing models here the seller uses resale to signal information about the object s value that could not be easily communicated via a reserve price announcement the model predicts that bids for reauctioned objects increase relative to initial bids and that on average prices of both reauctioned items and those sold at initial auction rise as delay in reauctioning increases copyright 1997 by american economic association

stochastic optimization of sub hourly economic dispatch with wind energy we present a stochastic programming framework for a multiple timescale economic dispatch problem to address integration of renewable energy resources into power systems this framework allows certain slow response energy resources to be controlled at an hourly timescale while fast response resources including renewable resources and related network decisions can be controlled at a sub hourly timescale to this end we study two models motivated by actual scheduling practices of system operators using an external simulator as driver for sub hourly wind generation we optimize these economic dispatch models using stochastic decomposition a sample based approach for stochastic programming computational experiments conducted on the ieee rts96 system and the illinois system reveal that optimization with sub hourly dispatch not only results in lower expected operational costs but also predicts these costs with far greater accuracy than with models allowing only hourly dispatch our results also demonstrate that when compared with standard approaches using the extensive formulation of stochastic programming the sequential sampling approach of stochastic decomposition provides better predictions with much less computational time

environmental regulation whose self interests are being protected special interest can explain why environmental policy limits economic activity in areas where air quality is above minumum standards locational competition among region helped create a policy that raised factor mobility cost from slower to faster growing regions analysis of votes shows greater support for this policy was received from northern urban constituencies and the greatest opposition came from the south and the west pollution abatement costs per unit of output are higher in areas with higher not lower air quality

environmental policy in majoritarian systems abstract this paper sheds new light on the determination of environmental tax policies in majoritarian federal electoral systems such as the u s and derives implications for the environmental federalism debate on whether the national or local government should have authority over environmental taxes in the absence of majority bias the socially preferred policy would be federal district level taxation which accounts both for cross boundary pollution and differences in industry concentration across districts in majoritarian systems however where the legislature consists of geographically distinct electoral districts the majority party at the national or state level favors home districts depending on the location of polluting industries and the associated damages the majority party may therefore impose sub optimally high or low pollution taxes due to a majority bias majority bias can influence the social welfare ranking of alternative environmental tax policies in some cases majority bias may make decentralized or federal uniform taxation the preferred solution

buy price english auction abstract consider an english auction for a single object in which there is an option for a bidder to guarantee a purchase at a seller specified buy price b at any time we show that there exist v and v v such that a bidder purchases at the buy price immediately if his valuation v is no less than v or v v v and at least one other bidder is participating in the auction if b v v he purchases at the buy price once the current bid reaches a strategically chosen threshold price a properly set buy price increases expected social welfare and the expected utility of each agent when either buyers or seller are risk averse

auctions with anticipated emotions overbidding underbidding and optimal reserve prices the experimental literature has documented that there is overbidding in second price auctions regardless of the valuations of bidders in contrast in first price auctions there tends to be overbidding for large valuations but underbidding for small valuations we show that the experimental evidence can be rationalized by a simple extension of the standard auction model where bidders anticipate constant positive or negative emotions caused by the mere fact of winning or losing even if the emotional dis utilities are very small the revenue maximizing reserve price r might be significantly different from the standard model moreover r decreases with the number of bidders

secret reserve prices in first price auctions this article offers a theoretical explanation for the use of secret reserve prices in auctions i study first price auctions with and without secret reserve price in an independent private values environment with risk neutral buyers and a seller who cares at least minimally about risk the seller can fix the auction rules either before or after she learns her reservation value fixing the rules early and keeping the right to set a secret reserve price can be strictly optimal moreover i describe the relation of using a secret reserve price to phantom bidding and non commitment to sell

price formation in a sequential selling mechanism abstract this paper studies a dynamic trade institution where an auction is combined with a buy it now option this option presents a take it or leave it price offered by the seller to a potential buyer before the auction if the buyer rejects this buyout price the object is auctioned off in equilibrium sales should take place only in the auction an experimental test reveals that average buyout prices and profits are well captured by the theoretical prediction however a substantial amount of sales takes place before the auction this is caused by offering too low or accepting too high buyout prices we discuss alternative explanations such as risk preferences and wrong formation of beliefs that might account for agents behavior

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

economic valuation of reserves in power systems with high penetration of wind power this paper proposes a methodology to determine the required level of spinning and nonspinning reserves in a power system with a high penetration of wind power the computation of the required reserve levels and their costs is achieved through a stochastic programming market clearing model spanning a daily time horizon this model considers the network constraints and takes into account the cost of both the load shedding and the wind spillage the methodology proposed is illustrated using an example and a realistic case study some conclusions are finally drawn

auction and the informed seller problem a seller possessing private information about the quality of a good attempts to sell it through a second price auction with announced reserve price the choice of a reserve price transmits information to the buyers we characterize the equilibria with monotone beliefs of the resulting signalling game and show that they lead to a reduced probability of selling the good compared to the symmetric information situation we compare the unique separating equilibrium of this signalling game to the equilibrium of a screening game in which an uninformed monopoly broker chooses the trading mechanism we show that the ex ante expected probability of trade may be larger with a monopoly broker as well as the ex ante total expected surplus

the political economy of trade liberalization and environmental policy a pressure group model where environmental and industry lobby groups offer political support in return for favorable pollution tax policies is used to explain and predict the equilibrium pollution tax in sectors protected by tariffs the political economy effects of trade liberalization are investigated the pollution tax is shown to decrease if the lobbying effort by the environmental lobby decreases more rapidly than by the industry lobby ceteris paribus the level of political conflict falls with trade liberalization pollution may increase because of a reduction of the pollution tax and tax revenues may fall simultaneously as pollution increases the global trading system is currently undergoing another round of multilateral trade liberalization and regional economic integration is occurring in several parts of the world the trade environment link has become an important part of trade liberalization talks it is commonplace for industry representatives to argue that less stringent environmental regulations give less developed countries ldcs a comparative advantage in pollution intensive goods and that industries with high abatement costs will migrate to ldcs environmentalists argue that international differences in environmental laws and regulations may be reduced to their lowest common denominator through political pressure this is not a fear of trade liberalization itself but of the effects of lower trade barriers on the political determination of environmental regulation

endogenous price expectations as reference points in auctions the paper models auctions with bidders who have reference dependent payos the reference point is endogenised as the expected price of the good in the auction the model predicts that in equilibrium bidders both overbid and underbid in comparison to the standard bidding function without reference dependent utility the model predicts that more bidders overbid than underbid and that bidders bid more aggressively as the number of bidders or the reserve price increases finally it is shown perhaps surprisingly that revenue equivalence continues to hold between rst and second price

empirical evidence on the impact of reserve prices in english auctions we study the impact of reserve prices on the revenue of english auctions using a unique hand collected database of virtual football players from the online football management game hattrick as theoretically predicted setting a reserve price entails a trade off between the cost of setting it too high and having the good go unsold and the benefit associated with a higher revenue should the reserve price successfully extract surplus from the highest bidder overall we find the net benefit of setting a higher reserve price to be negative regardless of the value of the reserve price this is a novel result insofar as previous literature has generally found an insignificant or positive effect of the reserve price on unconditional auction revenue

market power and cartel formation theory and an empirical test abstract antitrust enforcement makes it difficult to test theories of cartel formation because most attempts to form cartels are blocked or kept secret however federal laws allow u s produce growers to operate marketing cartels through devices called marketing orders these cartels use quantity controls and quality standards to raise prices of fresh produce some growers have adopted marketing orders and others have not this paper develops and tests a positive theory of the adoption of marketing orders the theory suggests that growers in a region are more likely to adopt a marketing order if the demand for fresh produce is inelastic the growers market share in the fresh market is large there are barriers to entry and expansion the fraction of the output the growers ship to the fresh market is not too large or too small growers are homogeneous and large cooperatives exist probit analyses support these hypotheses

effects of seller supplied prices on buyers product evaluations reference prices in an internet auction context a field experiment investigated the impact of two external reference points under the seller s control on the final price of an auction when an item s seller specified a high external reference price a reserve price the final bid was greater than when the seller specified a low external reference price a minimum bid when the seller provided both high and low reference prices the reserve influenced the final bid more the low reference price led to a lower outcome compared to when the seller did not communicate any reference price the number of bidders influenced outcomes in the absence of seller supplied reference prices

explaining state bans on corporate farming state laws banning corporate farming present a puzzle for a rent seeking explanation of political outcomes since family farmer proponents may receive no direct benefit from these bans an explanation developed here is that these farmers benefit indirectly forestalling corporate entry preserves the farm political coalition structured around those cooperatives patronized by family farmers and so indirectly preserves federal subsidies and supply restrictions that the incidence of state bans is positively related to the importance of federal farm programs the importance of cooperatives and the homogeneity of farmers within a state is consistent with this indirect rent seeking explanation

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

optimal reserve prices in sealed bid auctions with reference effects abstract the reference effect and loss aversion are incorporated into the buyer s utility in the symmetric independent private value models of sealed bid auctions the buyer s equilibrium bidding strategy and the seller s optimal reserve price are derived for the first price and second price sealed bid auctions in both auction mechanisms the seller s optimal reserve price and expected revenue are increasing in the reference point we compare the seller s expected revenues as well as the optimal reserve prices in the two auctions the results show that the seller will set a higher optimal reserve price but obtain lower optimal expected revenue in the second price auction compared to the first price auction further we extend the model to the gain seeking case and endogenize the reference point as the ex ante expected price of the item in equilibrium in contrast to the loss averse case the seller will set a lower optimal reserve price but obtain higher optimal expected revenue in the second price auction compared to the first price auction if the buyers are gain seeking with an endogenous reference point similar results are obtained in terms of revenue comparison between the two auctions

reserve price effects in auctions estimates from multiple regression discontinuity designs i introduction online auctions are an important trading mechanism in modern economies ebay alone has 81 million active users worldwide and auctions a billion objects annually ebay 2009 as data from auction settings has become accessible especially from online auction environments there has been a surge in empirical analysis testing whether the behavior of buyers and sellers is consistent with auction theory bajari and hortacsu 2004 we contribute to this empirical literature by presenting evidence from 260 000 online auctions of second hand cars that took place between january 2003 and november 2008 we identify the impact of a common feature of online and offline auctions public reserve prices on a rich set of auction outcomes 1 to establish causality we present evidence from multiple regression discontinuity rd research designs an empirical method that has not been used in the earlier literature to test the predictions of auction theory guided by theory we first identify the impact of reserve prices on various standard margins of bidder s behavior such as their entry into auctions bidding behavior within the auction and ultimately the winning bid we then combine these estimates to shed light on whether the reserve prices set by the auctioneer indeed maximize her ex ante expected revenue at a final stage we exploit our rich data to provide new insights that have not previously been documented in the empirical auctions literature such as the impact of reserve prices on i bidder s search behavior and ii the composition and characteristics of bidders this new evidence helps shed light on how to best characterize this environment in terms of whether bidders endogenously enter auctions and whether they hold symmetric valuations or not our analysis has broad relevance in three regards first car sales through auctions form an important share of the market the value of cars sold via auction in the united states was 89 billion in 2007 and used car dealers filled over 30 of their inventory via auctions roberts 2013 second the auction mechanism used in our setting an open ascending second price auction that allows proxy bidding is widely suggested to be the most prevalent online auction format bajari and hortacsu 2004 third the specific auction design feature we study reserve prices is commonly observed in online and offline formats the first set of outcomes we study are motivated by the theoretical auction literature these relate to the impact of reserve prices on winning bids the number of entrants that is the number of bidders that place at least one bid and the probability the object is sold 2 theory suggests reserve price impacts on these margins depend on three factors i whether bidders have private or common valuations of the auctioned object ii whether bidder entry is exogenous or endogenous and iii whether the reserve price signals the auctioneer s private information on the true value of the auctioned object in exogenous entry models predictions about the impact of reserve prices on these outcomes are robust with regard to whether bidders have private affiliated or common values for the object milgrom and weber 1982 myerson 1981 riley and samuelson 1981 and to whether the reserve price conveys a signal of the object s value to buyers cai riley and ye 2007 as is intuitive in this class of exogenous entry models a higher reserve price discourages entry of marginal bidders decreases the likelihood the object is sold and increases winning payments conditional on sale theoretical predictions on reserve price impacts are less clear cut in endogenous entry models levin and smith 1994 tan and yilankaya 2006 analogous to exogenous entry models a higher reserve price discourages entry of both potential and actual bidders and decreases the probability of sale however a higher reserve price might decrease winning payments through its adverse impact on entry

reserve prices in auctions as reference points we consider second price and first price auctions in the symmetric independentprivate values framework we modify the standard model by theassumption that the bidders have reference based utility where the reserveprice minimum bid plays the role of the reference point in contrast to theusual result the seller s optimal reserve price is increasing in the number ofbidders even if an individual bidder perceives only a very small utility losswhen he has to pay more than the reserve price the impact on the optimalreserve price can be strong when there are many bidders

politics of environmental law political ideology elitism or urban rural interests this paper examines a number of demographic aspects in congressional districts and states that played important roles in a series of congressional votes on environmental issues in 2000 these characteristics include urbanization or population density education income race and employment our findings are mixed while we find some evidence at least in senate votes that population density is a positive predictor of pro environment votes we also find that things commensurate with the environmental kuznets curve such as income education and lifestyle also play an important role in environmental voting

parties politics and regulation evidence from clean air act enforcement does local federal regulation respond to the preferences of local congressional representatives for example do republican congressmen reduce local enforcement of clean air laws in their districts we use facility level panel data on clean air act inspections over 1989 2005 to study the causal effect of a congressman s party affiliation on local enforcement random assignment of electoral outcomes is obtained with a regression discontinuity design we find that new republican vs democratic representatives significantly depress inspection rates for local polluting facilities in the first year after their election jel d73 q52 q53

reserve price signaling abstract in a general auction model in which bidders signals are affiliated we characterize the unique separating equilibrium in which the seller can use reserve prices to credibly signal her private information when the buyers signals are independent the optimal reserve price is shown to be increasing in the number of bidders under certain conditions we also demonstrate that the probability that the item is sold at the reserve price can increase as the number of bidders increases which indicates a more central role for reserve prices than perceived in the standard auction models

bidding off the wall why reserve prices may be kept secret abstract this note shows by means of an example that in a common value auction a seller with a random reservation value can increase her ex ante expected profits by following a policy of conducting an auction in which her reserve price is kept secret compared to an auction in which the reserve price is announced by keeping the reserve price secret the seller is able to encourage greater participation from the bidders and can therefore increase the linkage of the price paid to the value of the purchased object journal of economic literature classification numbers d82 d44

buy prices in online auctions irrationality on the internet abstract buy prices are puzzling it makes sense for a seller at auction to set a minimum bidding level i e a reserve price surely but a maximum we explore the use of maximum bidding levels buy prices in online auctions and provide a rational explanation for this seemingly irrational auction mechanism we show that augmenting an english auction with a buy price can improve the seller s profits by partially insuring and therefore increasing the expected payment from some risk averse bidders perhaps more surprising is that the english auction augmented with a buy price can also be superior even to the first price sealed bid and dutch auctions when bidders are risk averse

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices