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

optimal democratic mechanisms for taxation and public good provision abstract we study the interdependence of optimal tax and expenditure policies an optimal policy requires that information on preferences is made available we first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system we then study democratic mechanisms with the property that tax payers vote over public goods under such a mechanism efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases

price taking equilibrium in economies with multiple memberships in clubs and unbounded club sizes abstract we model an economy with clubs or jurisdictions where individuals may belong to multiple clubs and where clubs sizes are arbitrary clubs may be restricted to consist of only one or two persons or as large as the entire economy or anything in between notions of price taking equilibrium and the core both with communication costs are introduced these notions take into account that there is a small communication cost of deviating from a given outcome we demonstrate that given communication costs for all sufficiently large economies the core is nonempty and the set of price taking equilibrium outcomes is equivalent to the core

a utilitarian approach to the provision and pricing of excludable public goods the paper studies utilitarian welfare maximization in a model with an excludable public good where individual preferences are private information if inequality aversion is large optimal allocations involve the use of admission fees and exclusion to redistribute resources from people who benefit a lot from the public good to people who benefit little if inequality aversion is close to zero optimal admission fees are zero these results are robust if earning abilities provide an additional source of heterogeneity and income taxation an additional policy instrument

anonymous lindahl pricing in a tiebout economy with crowding types the crowding types model of a local public goods economy makes a distinction between crowding effects and tastes of agents decentralization of the core is possible both with anonymous admission prices that depend only on publicly observable information and when technology is linear with lindahl per unit prices lindahl price systems are superior to admission prices since they can be specified with only a finite number of prices here we show that the core is equivalent to the set of non anonymous lindahl equilibria even with non linear technology the core is generally larger however than the set of anonymous lindahl equilibria

property rights and efficiency of voluntary bargaining under asymmetric information we show that in public good problems under asymmetric information the success of voluntary bargaining is closely related to the structure of property rights we characterize property rights structures and mediated bargaining procedures that either lead to an efficient voluntary resolution to public good problems or achieve the efficient outcome but slightly coerce the agents into participation in this respect we identify efficient property rights structures in this paper we show that in public good problems under asymmetric information the success of any voluntary bargaining procedure is closely related to the structure of property rights in the economy for clarity of exposition we focus our attention on the following example in a town inhabited by n residents a firm is considering whether to operate a factory that generates pollution as an inevitable by product a higher level of production generates a correspondingly higher level of pollution the firm s profits are increasing with the level of production and the welfare of the residents is decreasing with the level of pollution the firm s profitability and residents preferences are assumed to be private information the structure of property rights specifies the level of pollution that the firm is entitled to emit into the environment for every such economy we describe and prove the existence of efficient property rights structures we characterize property rights structures and voluntary mediated bargaining procedures that maximize the sum of residents utilities and the firm s profit and thus lead to an efficient resolution to the public good problem furthermore we show that these efficient property rights structures are robust to changes in the underlying environment this suggests that the combination of efficiency minded legislation that would set the initial structure of property rights appropriately and a mediator who would base his recommendations on an efficient decision mechanism could facilitate the achievement of the efficient outcome under some circumstances however we show that the mediated voluntary bargaining procedure has to be replaced by compulsory arbitration that coerces agents into agreement we provide results that show that when the efficient property rights structure is adopted the degree of coercion that is necessary to obtain the efficient outcome is small thus in contrast to rob 1989 and mailath and postlewaite 1 our results apply to any public good problem where the costs and benefits of providing the public good are monotonically increasing in the level of provision and where some additional restrictions to be specified later are imposed on the form of the utility and profit functions and on the information structure

robustly coalition proof incentive mechanisms for public good provision are voting mechanisms and vice versa we study the relation between mechanism design and voting in public good provision if incentive mechanisms must satisfy conditions of robust coalition proofness as well as robust incentive compatibility the participants contributions to public good provision can only depend on the level of the public good that is provided and that level can only depend on the population shares of people favouring one level over another for a public good that comes as a single indivisible unit the outcome depends on whether or not the share of votes in favour of provision exceeds a specified threshold with more provision levels for the public good more complicated mechanisms can be used but they still involve the counting of votes rather than any measurement of the participants willingness to pay the article thus provides a foundation for the use of voting mechanisms

a mechanism design approach to climate change agreements we take a mechanism design perspective to investigate how environmental agreements should account for multilateral externalities incentive compatibility and voluntary participation by sovereign countries the optimal mechanism involves a tradeoff between a free rider problem in the effort provision of participating countries and the necessity of inducing countries to ratify the agreement this mechanism can be approximated by a simple menu with attractive implementation and robustness properties limits on enforcement and commitment might nevertheless hinder the performance of this menu making the business as usual scenario more likely

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

tastes skills and local public goods abstract this paper analyzes optimal club configurations in an economy where different types of labor are complementary in the production of private goods extending the work of berglas journal of public economics 6 409 423 1976 the analysis shows that when labor types are nonessential in production a homogeneous club configuration may be optimal despite the presence of labor complementarity the assumption that inputs are essential precluded this outcome in berglas model it is shown that homogeneous clubs are optimal when complementarity is weak or when preferences are substantially different

competition between private and public schools vouchers and peer group effects a theoretical and computational model with tax financed tuition free public schools and competitive tuition financed private schools is developed students differ by ability and income achievement depends on own ability and on peers abilities equilibrium has a strict hierarchy of school qualities and two dimensional student sorting with stratification by ability and income in private schools high ability low income students receive tuition discounts while low ability high income students pay tuition premia tuition vouchers increase the relative size of the private sector and the extent of student sorting and benefit high ability students relative to low ability students

tiebout with politics capital tax competition and constitutional choices this paper examines how capital tax competition affects jurisdiction formation we describe a non cooperative locational model of public goods provision choices where the levels of taxation and the local public good varieties provided within jurisdictions are selected by majority voting and where equilibrium jurisdictions consist of consumers with similar tastes we show that interjurisdictional tax competition results in an enlargement of jurisdictional boundaries and even in the absence of intrajurisdictional transfers can raise welfare for all members of a jurisdiction

collective decisions and competitive markets in a general equilibrium model we allow for households with several typically heterogeneous members households that make efficient collective consumption decisions where different households may use different collective decision mechanisms yet households that operate within a competitive market environment the interaction of two allocation mechanisms collective decisions and competitive markets is investigated with a focus on the efficiency properties and decentralization possibilities of the dual allocation mechanism

public goods with congestion abstract i consider the problem of the efficient provision of a congested limited capacity public good in a setting with asymmetric information i show in particular that when the capacity of the good is limited in a wide class of economies it is possible to construct an incentive compatible mechanism that always produces the good at the efficient level balances the budget and satisfies voluntary participation constraints this result is in contrast with the corresponding impossibility result for pure public goods due to mailath and postlewaite rev econ stud 57 1990 351 359 and rob j econ theory 47 1989 307 333

second best taxation as a game second best theory usually lies in the realm of normative analysis it focuses attention on the best solutions which still can be obtained in problems where constraints of various natures forbid the attainment of first best pareto optimal situations its central concern is the characterization of such second best solutions and a large part of the literature concentrates on the optimal design of taxes or of policies of public firms taking a second best problem we try in this paper to shift the emphasis from normative to positive considerations the solution we are interested in is not optimal with respect to some a priori given social welfare function embodying justice objectives but it is supposed to reflect the power of the different agents in a negotiation process clearly the conceptual tools required for such an analysis are to be found in game theory and it is actually a game theoretical approach that we follow here the model we are looking at is presented in section ii it formalizes one of the simplest second best problems that can be imagined we have a twogood economy with one private good and one public good agents have different wealth in private good and the public good is financed through a wealth tax this latter fiscal system is clearly not flexible enough to adjust contributions with marginal willingnesses to pay so that we actually face a second best situation there is one decision variable in the society the tax rate which determines the public good production about which the agents have conflicting desires to this problem we associate a game which provides a precise framework for the analysis of the power of the agents the positive outcomes of the negotiation process are supposed to belong to the core of this game sections iii and iv concentrate on the analysis of the core the results strongly contrast with those obtained in the classical studies of the core of 67 0022 053 l 81 040067 25 02 00 o

an empirical analysis of process and product patenting a simultaneous equation framework the results of this study support the hypothesis that research activity is not a homogeneous activity and that important differences exist between the determinants of process patenting and product patenting further the effects on concentration and advertising of research depend on the type of research carried on by firms concentration and process patenting are positively related and concentration and product patenting are not there is some weak evidence linking advertising and product patenting further process patenting tends to generate greater industrial concentration

optimal provision of a public good with costly exclusion we examine the problem of providing a non rival and excludable public good to individuals with the same preferences and differing contributing capacities exclusion from the public good is costly in the sense that if two different quantities of the public good are consumed in the community then the sum of the costs of providing the two quantities must be borne by contrast costless exclusion only requires the cost of the largest quantity consumed of the public good to be financed we show that despite its important cost providing public goods in different quantities is often part of any optimal provision of public good when the public authority is imperfectly informed about the agents contributive capacities in the specific situation where individuals have an additively separable logarithmic utility function we provide a complete characterization of the optimal exclusion structure in the two type case we also show that the preference for such a costly exclusion is more likely when the heterogeneity in the population or income is large and when the aversion to utility inequality is important

public good provision with constitutional constraint this article studies the public good provision problem in which the principal faces a constitutional constraint in the sense that in order for a public good provision mechanism to be implemented it must first be approved by agents under a prespecified voting rule i find that as long as the voting rule is not the unanimity rule the principal can propose a mechanism such that first best efficiency of provision of the public good is achieved i also consider various constraints such as prohibition of discriminatory mechanisms and the existence of vote buying and discuss optimal voting rules in these situations

incomplete contracts and excludable public goods abstract we study whether a firm that produces and sells access to an excludable public good should face a self financing requirement or alternatively receive subsidies that help to cover the cost of public goods provision the main result is that the desirability of a self financing requirement is shaped by an equity efficiency trade off while first best efficiency is out of reach with such a requirement its imposition limits the firm s ability of rent extraction hence consumer surplus may be higher if the firm has no access to public funds

cooperative research in a newly industrialized country taiwan abstract partly triggered by the successful experience of the japanese vlsi program taiwan has launched several cooperative research projects aimed at enhancing industrial competitiveness these undertakings however have not performed as well as expected under such circumstances the taiwanese government is anxious to explore which factors affect the inter industry and inter firm variation in cooperative research activity and to evaluate the feasibility of such r d cooperative projects our analysis suggests that the more research active the industry is the greater is the proportion of those funds allocated to cooperative arrangements and foreign competition is the principal factor which influences a firm s decision to engage in cooperative research activity furthermore we conclude that taiwanese firms should look beyond their own r d as the major source of new technology and become involved in cooperative research the reasons for such a necessity are due to the accelerating pace of technological change scale barriers in high tech industries and taiwan s small and medium sized enterprise dominant status in the industrial structure however a compromise which allows research goals to fall in the middle ground between research oriented and product oriented measures is advisable to match taiwan s current environment in addition implementing a new cost sharing principle and an appropriate incentive scheme to improve research efficiency in government led cooperative programs are urgently needed

political institutions and sorting in a tiebout model we construct a computational model of tiebout competition and show that political institutions differ in their ability to sort citizens effectively in particular we find that certain types of institutions those that become more politically unstable as citizen heterogeneity increases perform relatively poorly given a single jurisdiction yet these same institutions perform relatively well when there are multiple jurisdictions we provide an explanation for this phenomenon which draws upon simulated annealing a discrete nonlinear search algorithm jel

competitive equilibrium and the core in club economies with anonymous crowding in club economies with anonymous crowding competitive equilibrium states of the economy are efficient and coincide with the core when there is only one private good anonymous admission prices permit consumers with different tastes to share facilities consumers might do so when their demands for facility size and crowding coincide in which case sharing is efficient thus similarity of demands is the relevant consideration for efficiently grouping consumers with different tastes

optimal selling strategies when to haggle when to hold firm a seller encountering risk neutral buyers one at a time should if commitments are feasible quote a single take it or leave it price to each this strategy is superior to any other for finite or infinite buyer populations whether there is learning or the distribution of buyer prices is known at the outset with one object for sale or many although haggling may offer advantages in terms of price discrimination these gains are more than offset by the losses it generates by encouraging buyers to refuse purchases at high prices

is public r d a complement or substitute for private r d a review of the econometric evidence is public r d spending complementary and thus additional to private r d spending or does it substitute for and tend to crowd out private r d conflicting answers are given to this question we survey the body of available econometric evidence accumulated over the past 35 years a framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross section data from various levels of aggregation laboratory firm industry country the findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment s that the investigators envisage is not adequately specified we conclude by offering suggestions for improving future empirical research on this issue

community composition and the provision of local public goods abstract there is considerable evidence suggesting that the composition of the community that is the characteristics of the residents themselves plays a central role in determining levels of important public outputs such as education and public safety this paper explores the normative implications of this evidence we show that optimal community composition involves a trade off between the gains from homogeneity in demands among residents and the gains from heterogeneity in the production of those goods the analysis establishes a role for equalizing intergovernmental grants on efficiency grounds such grants can provide the needed incentives for sustaining heterogeneous communities

optimal selling procedures with fixed costs abstract this paper studies the optimal selling procedures for a monopolist when consumers valuations are unknown and there are fixed costs the fixed costs introduce a positive externality among customers each customer benefits from the presence of others who help cover the fixed costs in this context it is optimal for the monopolist to make the probability of each individual being served contingent on the valuations of all the other consumers the monopolist therefore sets a minimum price and then lets each customer contribute as much as he wishes journal of economic literatureclassification numbers d44 d82 l31

innovation expenditures and the role of government in belgium abstract unlike suggestions from earlier research on the schumpeterian hypothesis it is argued and shown that sales and employment are not simply substitute size measures to test the r d behaviour of foreign and domestic companies operating in belgium further suggests that government sponsored r d has not substituted for privately funded r d foreign companies are found to behave differently and to do less r d the more they pay for externally supplied technology

stability in a network economy the role of institutions abstract we consider an economy in which agents are embedded in a network of potential value generating relationships agents are assumed to be able to participate in three types of economic interactions autarkic self provision bilateral interaction and multilateral collaboration through endogenously provided platforms we introduce two stability concepts and provide sufficient and necessary conditions on the network structure that guarantee existence in cases of the absence of externalities link based externalities and crowding externalities we show that institutional arrangements based on socioeconomic roles and leadership guarantee stability in particular the stability of more complex economic outcomes requires more strict and complex institutional rules to govern economic interactions we investigate strict social hierarchies tiered leadership structures and global market places

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

local public goods with mobility existence and optimality of a general equilibrium abstract the existence and optimality of a general equilibrium in a model with a finite number of locations among which the continuum of individuals each individual belonging to one of a finite number of types have to choose is investigated each community finances its own production of public goods by taxes the way in which the tax burden in shared among the different types in the different regions is left arbitrary the model allows for restrictions on the mobility of either residents and or workers congestion and externalities in both production and consumption commuting costs preferences of an individual may also depend on his location as well as on the distribution of all individuals across locations

the breakup of nations a political economy analysis this paper develops a model of the breakup or unification of nations in each nation the decision to separate is taken by majority voting a basic trade off between the efficiency gains of unification and the costs in terms of loss of control on political decisions is highlighted the model emphasizes political conflicts over redistribution policies the main results of the paper are i when income distributions vary across regions and the efficiency gains from unification are small separation occurs in equilibrium and ii when all factors of production are perfectly mobile all incentives for separation disappear i introduction following the demise of communism the entire map of europe from the atlantic coast to the urals is being redrawn and issues of separation unification and the redrawing of borders are yet again at the forefront of european concerns many of the issues raised by this process are primarily of a political cultural or linguistic nature however there are also economic considerations that bear on this problem the objective of this paper is to analyze some important economic and political determinants of the process of unification and separation of democratic nations the starting point of our analysis is to suppose that from an economic efficiency point of view separation of nations is never desirable a unified nation is always more efficient since free trade among regions is guaranteed duplication costs in defense and law enforcement are avoided and local public goods provision such as transportation and communication networks or common standards can be coordinated furthermore any benefits of decentralization that might be obtained in a world with several nations may also be achieved within a unified nation by replicating the administrative structure of the world with several

do local governments use their tax bases efficiently abstract this paper analyzes an economy with multiple governments and with mobility of individuals across jurisdictions where each government is constrained to raise revenue for public expenditures using distortionary taxes a government is said to be competitive if the total benefits and costs of its decisions including the excess burden are perceived to be internalized the competitive equilibrium allocations are not constrained efficient in general there exists another set of distortionary taxes and public expenditures such that when private sector behavior adjusts to maintain equilibrium all individuals in the economy are better off thus competitive decentralized decision making does not lead to an efficient use of the available tax instruments it is also shown that the source of the failure can be interpreted as a missing market and the form of the best decentralized remedy which involves pricing the tax base is derived

the knowledge production of r and d many studies investigate the relationship between r d expenditures as an input and patents as an intermediate product or output of a knowledge production function we suggest that the productivity of research in patent production functions has been underestimated in the literature as scholars typically use information about r d i e the sum of research expenditure and development expenditure due to data availability however in most industries only applied research will lead to patentable knowledge and development happens after the initial research phase that may have led to a patent instead of using data on r d we separate the knowledge creating process into r and d this data stems from r d surveys of belgian firms it turns out that only the r part of r d expenditure has a significant effect on patents and that development expenditure are insignificant thus previous literature relying on r d expenditure suffers from a measurement error such that the coefficient of r d is biased towards zero as r d includes a large fraction of irrelevant expenditure i e development expenditure with respect to patenting

convergence theorems on the core of a public goods economy sufficient conditions abstract it is shown if all consumers are either asymptotically satiated or strictly nonsatiated in public goods then the core converges to the lindahl allocations as the economy grow without bound asymptotic satiation implies that only a vanishing fraction of the private good is devoted to public goods production as the economy gets large strict nonsatiation on the other hand implies that essentially all of the private good is devoted to public goods production in the limit it is interesting that these two conditions are independently sufficient for core convergence despite their completely opposite implications for the asymptotic nature of the lindahl allocations journal of economic literature classification numbers h41 d51 c71

pivotal players and the characterization of influence a player s influence relative to a mechanism and opponents strategies is the maximum difference his action can make in the expected value of a collective outcome a player is pivotal if his influence exceeds a threshold we provide tight bounds on the number of pivotal players and on average influence these bounds are uniform over all mechanisms and action profiles and are achieved at mechanisms that take the form of a majority rule we illustrate our analysis with an example of provision of a public good where each individual compares the private cost of his contribution with its influence on the collective outcome journal of economic literature classification numbers d62 d89 h41

political centralization and government accountability boffa acknowledges financial support from the free university of bolzano ww82 piolatto from the spanish ministry of science and innovation eco 2012 37131 and the government of catalonia 2014 sgr 420 ponzetto from the spanish ministry of science and innovation jci 2010 08414 and eco 2011 25624 the spanish ministry of economy and competitiveness ryc 2013 13838 the government of catalonia 2009 sgr 1157 and 2014 sgr 830 the barcelona gse and the bbva foundation through its first grant for researchers innovators and cultural creators

a note on optimal income taxation public goods provision and robust mechanism design abstract this paper extends the model of optimal income taxation due to mirrlees mirrlees j 1971 an exploration in the theory of optimum income taxation review of economic studies 38 175 208 and includes private information on public goods preferences a mechanism design approach is used to establish the following result if policies are required to be robustly implementable in the sense of bergemann and morris bergemann d morris s 2005 robust mechanism design econometrica 73 1771 1813 then the optimality conditions in the extended model with uncertainty about tax and expenditure policies are the same as in the standard model of optimal income taxation the paper provides a foundation for a widely used assumption in public finance namely that individuals optimize their behavior subject to a predetermined and commonly known tax system

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

an analysis of the composition of r d spending research and development encompasses a myriad of activities generally research is the primary search for technical or scientific advancement and development is the translation of such advancement into product of process innovations the national science foundation has fostered an even finer breakdown basic research applied research and development in practice however r d is more heterogeneous than these labels imply the research fields associated with basic research include areas in both the physical and biological sciences applied research and development projects relate to product groups as diverse as all the activities in the industrial sector nevertheless most previous empirical studies of the microeconomic aspects of r d have treated r d spending as a single homogeneous activity consequently a generally acceptable set of variables has developed for explaining inter firm levels of r d spending but virtually nothing is known about the determinants of the inter firm composition of r d

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

equilibrium and inefficiency in a community model with peer group effects public service output depends on input expenditures on own personal characteristics and on the characteristics of the other residents in the community the peer group effect in a community model with public expenditures set by voting with migration between communities and with land price differentials capitalization it is shown that communities may become heterogeneous in composition and second best inefficient this equilibrium occurs when the peer group effect is neither too strong nor too weak the inefficiency arises because an externality is created by migration the land price differential does not play the part of the price of the better peer group but of a transfer payment

federal funding and the level of private expenditure on basic research economists have long been interested in questions concerning the role of government in stimulating private sector innovation in the late 1950s blank and stigler 2 asked in particular whether government funded industrial research and development r d activity was likely to stimulate or substitute for private sector expenditure on r d a number of studies have since addressed this issue and most conclude in favor of the existence of a positive relationship between federal r d expenditures and the level of private r d investment leyden and link 8 have provided a theoretical rationale for this observed complementarity they suggest that federallyfunded industrial r d activity may generate knowledge spillovers and other infratechnology that may raise the productivity of inputs into private r d r d is a heterogeneous activity and a question which has received relatively little attention in the literature is the extent to which the apparent complementarity between federal and private industrial r d spending holds for the different components of firms r d budgets cross section evidence on this issue produced by link 13 suggests that

strong tiebout equilibrium under restricted preferences domain abstract we investigate the existence and give a partial characterization of a strong tiebout equilibrium which consists of an endogenously formed partition of the individuals into disjoint jurisdictions with each jurisdiction producing and financing its own public goods and moreover there exists no group of individuals who can all benefit by establishing their own community in particular no single individual finds it desirable to migrate from his equilibrium jurisdiction the existence proof makes use of the notion of consecutive games which we introduce and show that for such games there always exists a partition with a nonempty core

a critique of tiebout s theory of local public expenditures the last section of this paper presents a rigorous version of tiebout s theory of local public goods it is shown that equilibria exist and are pareto optimal this rigorous theory follows closely the more rigorous part of tiebout s work this rigorous theory makes a number of very special assumptions which make local public goods essentially private the body of this paper presents a series of examples which show that if one tries to generalize the rigorous version of tiebout s theory in a number of interesting directions then equilibria may no longer exist or may not be pareto optimal the conclusion is that tiebout s idea does not lead to a satisfactory general theory of local public goods the goal of this paper is to point out that tiebout s notion of equilibrium with local governments does not have the nice properties of general competitive equilibrium except under very restrictive assumptions tiebout 39 suggested that there are competitive forces which tend to make local governments allocate resources in a pareto optimal fashion consumers choose to live in those towns with the mix of taxes and public goods they prefer local governments choose this mix so as to attract inhabitants this idea may seem intriguing for it suggests that the invisible hand solves an important part of samuelson s perplexing public goods problem 32 tiebout in fact makes an argument which is nearly rigorous i give a rigorous version of his argument at the end of the paper however in this rigorous version so many restrictive assumptions are made that public goods become essentially private in the body of the paper i give a series of examples with which i try to convince the reader that one is forced to adopt tiebout s restrictive assumptions the idea is that if one changes any of his assumptions then either equilibria may not exist or may not be pareto optimal my examples are presented in the context of a general class of tiebout models i consider several subclasses one of which is the special case considered by tiebout in each of the subclasses except that considered by tiebout i give a counterexample either to the existence of equilibrium or to its pareto optimality the subclasses are so chosen that the difficulties they reveal would be shared by any reasonable tiebout model which differed from his special case i believe that my examples controvert tiebout s suggestion 39 last paragraph that his theory compares favorably with competitive equilibrium theory most of the examples in this paper have already appeared in the literature i cite related work as i go along what is new here is that i assemble the examples in a unified argument

assessing the effect of public subsidies on firm r d investment a survey this survey examines the empirical literature on the relationship between public r d subsidies and private r d investment over the past five decades the survey reveals a considerable heterogeneity of empirical results that cannot be explained fully by methodological issues we aim to provide further explanations of the possible causes of that heterogeneity in particular we emphasise a set of issues that in our view are critical to understanding the potential effect of public r d subsidies on private r d spending special attention is paid to the dynamic aspects and composition of firm r d the constraints faced by the firm such as financial constraints and the amount and source of public subsidies none of these issues have been investigated in depth we formulate a set of research assumptions to guide future empirical research in this field

local government structure and urban residential location the large research literature on the tiebout model has developed with little attention paid to the urban economic structure in which local government functions this paper attempts to examine the theoretical consequences of local jurisdictions functioning within a conventional monocentric urban model it also discusses a mathematical formulation of a two jurisdiction linear city in which the local service level and local property tax rate might be used as strategic variables in a game theory sense it is concluded that for this to happen the local service level has to have more than one element which is intuitively appealing some references are developed to current british local government and possible changes

clubs and the market large finite economies abstract this paper builds a general equilibrium model of finite economies with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of other club members because club memberships are indivisible and choices of club memberships must be coordinated across the population the core of such an economy may be empty and equilibrium may not exist however for large finite club economies an approximate core is not empty and states in this approximate core can be approximately decentralized by prices for private goods and for club memberships the arguments use convexification tools familiar from the literature on private goods economies and a new tool of some independent interest that addresses the special problems created by the nature of club memberships journal of economic literature classification numbers d2 d5 h4

market structure and innovation a survey economics we all recite deals with allocation of limited resources towards satisfaction of unlimited wants resources are typically identified as land labor and capital plus a technology that determines their transformation into consumer goods disparity between the available goods and services and the desired gives rise to scarcity and the question of what how and for whom to produce the focus then shifts to description and evaluation of alternative resource allocation mechanisms for making the choices the pareto criterion by which an allocation of resources is deemed efficient if any reallocation improving the position of some individual worsens the position of others is a commonly employed gauge of a mechanism s performance in the absence of externalities increasing returns to scale and uncertainty a perfectly competitive market system yields a pareto optimal allocation of resources this underlies the view that individual self interest is compatible with society s interest the further conclusion that pareto optimality may not be achieved via the market system in the presence of monopoly elements provides an economic rationale for antitrust laws the objective of a resource allocation mechanism appears to be according to the analysis described above to make the best of available resources the alternative objective of relaxing constraints through expanding the resource base or developing new technology seems to be beyond its scope thus until rather recently technical advance had been regarded in the mainstream of economic theory as unmotivated by the quest for profits and substantially unaffected by resource allocation instead as j schmookler observed technology had been viewed as a parameter like the weather affecting the outcome of resource allocations but itself unaffected by them 84 1965 evidence that technological progress has significantly contributed to growth in productivity together with a substantial increase in research and development activity largely financed by government and carried out by industry see f machlup 51 1962 may have spurred reconsideration of this view once technical advance is regarded as an economic variable it is natural to in

pollution claim settlements under correlated information abstract agents have to decide whether a polluting plant will be operated or not agents disutility cost from pollution is privately known but correlated across agents incentive compatible mechanisms are characterized under the assumption that transfer payments are non negative the implementability constraint is similar to the independence case except that virtual utilities are diminished by a factor due to the correlation of agents types as correlation vanishes the implementability constraint approaches the implementability constraint of the independent types environment it is established that the free riding problem is relaxed as the number of agents increases with many agents ex post efficiency is achievable under ex ante budget balance journal of economic literature classification numbers d82 h41

why are governmental r d and private r d complements it is well known that government r d and private r d have a complementary relationship however no previous study has provided an explanation for why that complementary relationship exists this paper argues that infratechnology is the critical link between governmental and private r d and that the observed complementarity is the result of technical complementarity at the production level between funding infratechnology and knowledge sharing a theoritical framework based on this argument is developed and examined empirically for supporting evidence evidence of technical complementary is found as well as evidence that governmental r d stimulates the sharing of knowledge

clubs and the market this paper defines a general equilibrium model with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of the other members of their clubs the space of agents is a continuum but clubs are finite it is shown that i competitive equilibria exist and ii the core coincides with the set of equilibrium states the central subtlety is in modeling club memberships and expressing the notion that membership choices are consistent across the population

r d portfolio and market structure this article analyses how firms allocate their resources when they compete for multiple patents in heterogeneous research projects simultaneously a simple model shows that firms resource allocation is biased away from risky and basic research even when imitation is not possible and firms are fully rational therefore a market may lack major innovations despite large aggregate research expenditure and strong patent protection this article also shows that as a market becomes more competitive firms invest relatively less in basic research but more in risky research these results provide a novel explanation for an ambiguous empirical relationship between innovation and market concentration

efficient mechanisms for public goods with use exclusions constrained efficient provision of an excludable public good is studied in a model where preferences are private information the provision level is asymptotically deterministic making it possible to approximate the optimal mechanism with a mechanism that provides a fixed quantity of the good and charges fixed user fees for access in general the fixed fees involve third degree price discrimination but if names are uninformative about preferences the analysis provides a justification for average cost pricing copyright 2004 wiley blackwell

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

public goods participation constraints and democracy a possibility theorem abstract it is well known that ex post efficient mechanisms for the provision of indivisible public goods are not interim individually rational however the corresponding literature assumes that agents who veto a mechanism can enforce a situation in which the public good is never provided this paper instead considers majority voting with uniform cost sharing as the relevant status quo efficient mechanisms may then exist which also satisfy all agents interim participation constraints in this case ex post inefficient voting mechanisms can be replaced by efficient ones without reducing any individual s expected utility intuitively agents with a low willingness to pay have to contribute more under majority rule than under an efficient mechanism with a balanced budget although this possibility theorem is not universal in the sense of schweizer 2006 an asymptotic possibility is obtained for certain type distributions

bias in market r d portfolios abstract based on a simple contest model of product innovation we find that in accordance with conventional wisdom and contrary to much of the previous theoretical literature market competition implies an equilibrium level of risk which is too low from society s standpoint the intuition is that the divergence between private and social marginal benefits from rd and this probability is higher for lower risk projects

some new evidence on the determinants of large and small firm innovation empirical analyses presented by acs and audretsch suggest differences in the market structure determinants of innovation between large and small firms in u s manufacturing the evidence they offer is ambiguous by using data for a different country the netherlands a different measure of innovation and a different aggregation level we offer new evidence allowing a revaluation of the findings for the u s material moreover the influence of the market structure determinants does not appear to differ between a period of sluggish growth 1983 and one of relatively high growth 1989

public r d policies and cost behavior of the us manufacturing industries abstract this paper estimates and evaluates the contribution of r d tax incentives and publicly financed r d investment policies in promoting the growth of output and privately funded r d investment in us manufacturing industries publicly financed r d induced cost savings but crowds out privately financed r d investment while the incremental r d tax credit and immediate deductibility provision of r d expenditures have a significant impact on privately financed r d investment the optimal mix of both instruments is an important element for sustaining a balanced growth in output and productivity in the manufacturing sector

demand side vs supply side technology policies hidden treatment and new empirical evidence on the policy mix this paper provides new empirical evidence about the impact of various technological policies upon firms innovative behaviour we take into consideration the role of policies for innovative activities and we focus on their interaction while supply side policies such as r d subsidies and tax credits have been both extensively discussed in the literature and empirically investigated the analysis of innovative public procurement is a growing trend in the literature which still lacks robust empirical evidence in this paper we replicate the existing results on supply side policies surmise fresh empirical evidence on the outcome of innovative public procurement and address the issue of possible interaction among the various tools when controlling for the interaction with other policies supply side subsidies cease to be as effective as reported in previous studies and innovative public procurement seems to be more effective than other tools the preliminary evidence suggests that technology policies exert the highest impact when different policies interact

tiebout economies with differential genetic types and endogenously chosen crowding characteristics abstract we consider a tiebout economy with differential crowding and public projects in which agents are distinguished by their tastes and genetic endowments agents choose which crowding characteristic for example a skill they wish to express and this affects their value to other members of their jurisdiction club firm etc an agent s choice is influenced both by his genetic endowment which affects his cost of acquiring crowding characteristics and by his preferences over which crowding characteristic he expresses we show that if small groups are strictly effective the core is equivalent to the set of anonymous competitive equilibrium outcomes but that the core generally contains taste homogeneous jurisdictions journal of economic literature classification numbers h41 h72

a general characterization of interim efficient mechanisms for independent linear environments we consider the class of bayesian environments with independent types and utility functions which are both quasi linear in a private good and linear in a one dimensional private value type parameter we call these independent linear environments for these environments we fully characterize interim efficient allocation rules which satisfy interim incentive compatibility and interim individual rationality constraints we also prove that they correspond to decision rules based on virtual surplus maximization together with the appropriate incentive taxes we illustrate these techniques with applications to auction design and public good provision

equivalence of the core and competitive equilibrium in a tiebout economy with crowding types abstract we propose a new model of a local public goods economy with differentiated crowding the new feature is that taste and crowding characteristics of agents are distinguished from one another we prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of tiebout equilibrium outcomes equilibrium prices are defined to depend solely on crowding characteristics this implies that only publicly observable information and not private information such as preferences is needed to induce agents to sort themselves into efficient jurisdictions thus our model allows us to satisfy bewley s 6 anonymity requirement on taxes in his well known criticism of the tiebout hypothesis

r d determinants accounting for the differences between research and development the determinants of r d are an important topic of innovation studies the classical schumpeterian hypotheses about the influence of size and market power have been complemented with the role played by industry determinants such as demand pull technological opportunity and appropriability in determining r d investments however r d has always been considered as a whole even though research and development activities differ in many aspects we take advantage of a new panel database of innovative spanish firms pitec to distinguish between research and development efforts of firms we analyze the differentiated role played by traditional r d determinants in driving research and development results show that demand pull and appropriability have a higher effect on development while technological opportunity is more influential for research differences are statistically significant important in magnitude and robust to the use of different indicators for demand pull technological opportunity and appropriability and to several robustness checks

r versus d estimating the differentiated effect of research and development on innovation results r d is considered to be the main source of innovation we argue that r d is too broad a measure including activities differing in purposes culture people management and other features however empirical studies have not analyzed them separately mainly due to the lack of data using firm level data the aim of this paper is to estimate the differentiated effect of research and development on different innovation outputs results show that both research and development activities are important however we find that development activities are more important for product innovation while the effect of research activities is higher on process innovation moreover we analyze differences by technological intensity of the sector when analyzing product and process innovations we find evidence supporting the existence of higher payoffs to development and especially to research in low tech sectors when compared with high tech ones

public good provision with many participants for a nonexcludable public good with benefit and cost functions independent of the number of participants this paper studies second best allocations under bayesian interim incentive compatibility and interim individual rationality as the number of participants becomes large second best provision levels converge in distribution to first best levels if the latter are bounded second best provision levels become large in absolute terms but small relative to first best levels if benefit and cost functions are isoelastic in contrast for an excludable public good the ratio of second best to first best levels is bounded away from zero

occupational choice incentives and wealth distribution abstract we consider a model of occupational choice in large economies where individuals differ in their wealth endowment individuals can remain self employed or engage in productive matches with another individual i e form firms matches are subject to a moral hazard problem with limited liability the division of the gains from such matches is determined by competitive forces when the incentive problem is asymmetric matches are typically wealth heterogeneous with richer individuals choosing the occupation for which incentives are more important the utilities attained within a match depend on the wealth distribution and changes in the latter give rise to trickle down effects