non farm income household welfare and sustainable land management in a less favoured area in the ethiopian highlands a bio economic model has been calibrated to the socio economic and biophysical characteristics of a less favoured area in the ethiopian highlands land degradation population growth stagnant technology and drought necessitates development of non farm employment opportunities in the area the model has been used to assess the impact of improved access to non farm income on household welfare agricultural production conservation investments and land degradation in the form of soil erosion the model simulations indicate that access to low wage off farm income is restricted by lack of employment opportunities since households otherwise would have engaged in more off farm wage employment than observed the simulations show that better unconstrained access to low wage non farm income has a substantial positive effect on household income total agricultural production crop and livestock production and farm inputs used are reduced when access to non farm employment is improved and thus increases the need to import food to the area access to non farm income reduces farm households incentives to invest in conservation and this leads to more overall soil erosion and more rapid land degradation even though intensity of production is reduced special policies are therefore needed to ensure land conservation and to sustain local food production

land degradation drought and food security in a less favoured area in the ethiopian highlands a bio economic model with market imperfections abstract this paper presents a bio economic model of andit tid a severely degraded crop livestock farming system with high population density and good market access in the highlands of ethiopia land degradation population growth stagnant technology and drought threaten food security in the area drought or weather risk appears to have increased in recent years the bio economic model is used to analyse the combined effects of land degradation population growth market imperfections and increased risk of drought on household production welfare and food security we find that the indirect effects of drought on household welfare through the impact on crop and livestock prices are larger than the direct production effects of drought provision and adoption of credit for fertiliser although risky in itself may lead to increased grain production and improved household welfare and food security provision of credit may have a negative effect on conservation incentives but this effect may be mitigated by linking a conservation requirement to the provision of credit for fertiliser

the role of transaction costs for financial volatility evidence from the paris bourse this paper analyzes the causal linkage between transaction costs and financial volatility under two methodological improvements over the existing literature first we use panel data in which exogenous transaction cost differences in the french stock market are induced by price level dependent minimum price variation rules tick size rules unlike in previous studies based on one time regulatory tick size changes like the u s decimalization we can separately identify and control for marketwide volatility changes second we avoid the pitfalls of biased volatility measurement across regimes by using the range as a tick size robust volatility metric panel regressions controlling for marketwide volatility effects show at high levels of statistical significance that the hourly range volatility of individual stocks increases by more than 30 for a 20 exogenous increase in transaction costs due to tick size variations in the french trading system in the light of this evidence higher transaction costs in general and security transaction taxes in particular should be considered as volatility increasing jel f3 g1 g14

an economic model of soil conservation by introducing soil depth and soil loss into a simple model of agricultural production this paper seeks to determine when the private path of erosion differs from the socially optimal path considering the depletion of soil only and abstracting from the environmental disruption caused by erosion the paper argues that under most institutional arrangements the social and private rates of erosion are the same the paper concludes that public policy should be directed toward reducing erosion only when it leads to significant pollution externalities

walrasian tâtonnement auctions on the tokyo grain exchange the tokyo grain exchange tge s itayose mechanism provides the opportunity to analyze functioning walrasian t tonnement auctions wta in 15 677 auctions conducted over 1997 1998 for corn and redbean futures contracts price formation is unexpectedly similar to that observed in continuous double auctions provisional prices and pledges are informative in contrast to behavior observed in experiments few pledges are deceptive because the traders participate repeatedly and because the auctioneer has flexibility when changing the provisional price and ending the auction both the risk of the auction ending and the more equitable dispersion of information increase depth and the speed at which information is embodied in price

marshallian vs walrasian stability in an experimental market the experiments discussed below are an attempt to examine concepts of stability as found in economic textbooks two concepts of stability which stem from two different concepts of market adjustment seem to have dominated thinking whilst these two concepts are typically called walras stability and marshall stability some controversy exists over the extent to which these two models represent their respective thinking no doubt the current formal statements of the theories reflect an evolution of the ideas through the work of many theorists the terminology is retained for convenience regardless of their origins these two concepts lead to competing hypotheses about the conditions under which market instability will be observed so the subject is a natural one for experimental investigation furthermore since this is the first experimental examination of the stability of equilibria the strategy is to inquire about stability in the context of these two classical models and to avoid the temptation to attempt to extend them or integrate them with more modern theory the old models have not been checked they seem to be an appropriate place to start

credit constraints in general equilibrium experimental results our work attempts to investigate the influence of credit tightness orexpansion on activity and relative prices in a multimarket set up we report on somedouble auction two market experiments where subjects had to satisfy an inequalityinvolving the use of credit the experiments display two regimes characterizedby high and low credit availability the critical value of credit at the commonboundary of the two regimes has a compelling interpretation as the maximal credituse at the arrow debreu equilibrium of the abstract economy naturally associatedto our experimental environment our main results are that changes in theavailability of credit a have minor and unsystematic effects on quantitiesand relative prices in the high credit regime b have substantial effects bothon quantities and relative prices in the low credit regime

iteration tâtonnement computation and economic dynamics an attempt is made in this paper to extract a mathematical methodology underpinned by numerical meaning from a study of richard goodwin s classic contributions from 1943 to 1967 and beyond the key conceptual notions used are t tonnement computation approximations the geometry of dynamics simulations and iteration

links between rural poverty and the environment in developing countries asset categories and investment poverty abstract this paper presents a framework for analyzing the links between poverty and the environment in rural areas of developing countries it introduces the concept of investment poverty and relates it to other measures of poverty in analysis of these links the notion of poverty is examined in the context of categories of assets and categories of environment change with particular focus on farm household income generation and investment strategies as determinants of the links the strength and direction of the poverty environment links are shown to differ even invert depending on the composition of the assets held by the rural poor and the types of environmental problems they face policy strategies need to focus on conditioning variables that affect market development community wealth infrastructure household asset distribution and the affordability and appropriateness of natural resource conservation technologies

extreme walrasian dynamics the gale example in the lab we study the classic gale 1963 economy using laboratory markets tatonnement theory predicts prices will diverge from an equitable interior equilibrium towards infinity or zero depending only on initial prices the inequitable equilibria determined by these dynamics give all gains from exchange to one side of the market our results show surprisingly strong support for these predictions in most sessions one side of the market eventually outgains the other by more than twenty times leaving the disadvantaged side to trade for mere pennies we also find preliminary evidence that these dynamics are sticky resisting exogenous interventions designed to reverse their trajectories

screening peers softly inferring the quality of small borrowers this paper examines the performance of new online lending markets that rely on nonexpert individuals to screen their peers creditworthiness we find that these peer lenders predict an individual s likelihood of defaulting on a loan with 45 greater accuracy than the borrower s exact credit score unobserved by the lenders who only see a credit category moreover peer lenders achieve 87 of the predictive power of an econometrician who observes all standard financial information about borrowers screening through soft or nonstandard information is relatively more important when evaluating lower quality borrowers our results highlight how aggregating over the views of peers and leveraging nonstandard information can enhance lending efficiency this paper was accepted by amit seru finance

liquidity commonality in order driven trading evidence from the athens stock exchange abstractwe examine the presence of liquidity commonality in the order driven athens stock exchange ase unlike the majority of liquidity commonality studies that focus on the bid ask spread our analysis extends deeper in the limit order book providing insight on the price impact of both small and large trades we utilize a 6 month ftse athex 20 intraday data set to estimate the liquidity factor model of chordia et al 2000 to this end we conduct single equation analysis as well as panel data analysis with the use of two way clustered errors correcting for simultaneous firm and time correlations moreover we apply standard principal component analysis on stock liquidities to extract the marketwide liquidity component we find that liquidity commonality is low at the bid ask spread whereas it increases deeper in the book consequently large traders face liquidity risks associated with both individual stock and marketwide illiquidity moreover our empirical evidence hints that liquidity commonal

testing participation constraints in contract design for sustainable soil conservation in ethiopia abstract this paper focuses on contract design to improve the incentive structure of current coordination mechanisms related to sustainable land use management in the ethiopian highlands the main objective is to assess whether and if so under which terms and conditions rural households are willing to enter into contractual agreements to invest in soil conservation measures on their land participation constraints are tested under different soil erosion and institutional economic conditions in a choice experiment targeting 750 rural households we show that contracts provided by local government peasant associations offering additional credit land use security and extension services could be an effective means to increase the share of farmers implementing soil conservation measures however trust in contract terms and conditions appears to play an important role farmers living in the most erosion prone areas are most likely to participate while farmers taking soil conservation measures already are less likely to enter into a contractual agreement with the local government farmers not taking soil conservation measures will only do so if the contract price is lower than or equal to the income losses suffered from soil erosion

do traders strategically time their pledges during real world walrasian auctions abstract experimental research suggests the walrasian t tonnement auction encourages traders to under reveal preferences even encouraging initial pledges contrary to true desires because pledges are not binding we analyze the timing and characteristics of individual pledges and trades during 9604 auctions for redbeans conducted by the tokyo grain exchange we find no evidence of contrarian pledging and little evidence of under revelation as many traders over reveal as under reveal most traders pledge seriously from the beginning despite the considerable heterogeneity in pledging behavior across individual traders these differences appear to have no relationship with traders profits nor do they appear to affect the achievement of equilibrium

new market socialism a case for rejuvenation or inspired alchemy the aim of this paper is to examine the relative merits and drawbacks of two recent models of market socialism proposed by bardhan and roemer this is done first by putting these models into the perspective of the history of economic thought thus after presenting the basic elements of the early lange model as well as the austrian and new information economics critiques the necessary comparisons and contrasts are made to see what new light these new models bring into this debate in addition the internal consistency and coherence of these models is checked in terms of their own proclaimed goals last a more radical methodological critique is provided copyright 2003 oxford university press

government programs and adoption of conservation tillage practices on nonirrigated wheat farms a whole farm simulation analysis is used to investigate producer preferences for adoption of separate tillage practices minimum till combination till or no till under provisions of both the 1981 and 1985 farm bills an analysis of preference for participation or nonparticipation in government programs under both farm bills is also considered for risk averse producers a combination tillage practice with program participation is found to dominate as measured by stochastic dominance the other strategies considered under both the 1981 and 1985 provisions

resource degradation and adoption of land conservation technologies in the ethiopian highlands a case study in andit tid north shewa abstract this paper reports results from a study of resource degradation and conservation behavior of peasant households in a degraded part of the ethiopian highlands peasant households choice of conservation technologies is modeled as a two stage process recognition of the erosion problem and adoption and level of use of control practices an ordinal logit model is used to explain parcel level perception of the threat of the erosion problem and the extent of use of conservation practices results show the importance of perception of the threat of soil erosion household land and farm characteristics perception of technology specific attributes and land quality differentials in shaping conservation decisions of peasants furthermore where poverty is widespread and appropriate support policies are lacking results indicate that population pressure per se is unable to encourage sustainable land use the challenge of breaking the poverty environment trap and initiating sustainable intensification thus require policy incentives and technologies that confer short term benefits to the poor while conserving the resource base

price discovery and learning during the preopening period in the paris bourse before the opening of the paris bourse traders place orders and indicative prices are set this offers a laboratory to study empirically the t tonnement process through which markets discover equilibrium prices since preopening orders can be revised or canceled before the opening indicative prices could be noise we test this against the hypothesis that preopening prices reflect learning early in the preopening the noise hypothesis is not rejected as the opening gets closer the informational content and efficiency of prices increase and the learning hypothesis is not rejected we also propose a gmm based estimate of the speed of learning

minimum price variations discrete bid ask spreads and quotation sizes exchange minimum price variation regulations create discrete bid ask spreads if the minimum quotable spread exceeds the spread that otherwise would be quoted spreads will be wide and the number of shares offered at the bid and ask may be large a cross sectional discrete spread model is estimated by using intraday stock quotation spread frequencies the results are used to project 1 16 spread usage frequencies given a 1 16 tick projected changes in quotation sizes and in trade volumes are obtained from regression models for stocks priced under 10 the models predict spreads would decrease 38 percent quotation sizes would decrease 16 percent and daily volume would increase 34 percent article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

trading mechanisms and stock returns an empirical investigation this paper examines the effects of the mechanism by which securities are traded on their price behavior we compare the behavior of open to open and close to close returns on nyse stocks given the differences in execution methods applied in the opening and closing transactions opening returns are found to exhibit greater dispersion greater deviations from normality and a more negative and significant autocorrelation pattern than closing returns we study the effects of the bid ask spread and the price adjustment process on the estimated return variances and covariances and discuss the associated biases we conclude that the trading mechanism has a significant effect on stock price behavior

overnight information and stochastic volatility a study of european and us stock exchanges abstract this paper provides a comprehensive evaluation of the predictive ability of information accumulated during nontrading hours for a set of european and us stock indexes we introduce a stochastic volatility model which conditions on lagged overnight information distinguishes between the nontrading periods of weeknights weekends holidays and long weekends and allows for an asymmetric leverage effect on the impact of overnight news we implement bayesian methods for estimation and ranking of the empirical models and find two key results i there is substantial predictive ability in financial information accumulated during nontrading hours and ii the performance of stochastic volatility models improves considerably by separating the asymmetric impact of positive and negative news made available over weeknights weekends holidays and long weekends

consumption risk farm characteristics and soil conservation adoption among low income farmers in the philippines abstract this paper investigates patterns of soil conservation adoption among low income farmers in the philippines a model is presented that focuses attention on the role of assets and consumption risk in influencing soil conservation adoption decisions results from a reduced form probit model of adoption are reported these econometric findings indicate that patterns of soil conservation adoption reflect relative risk considerations in addition to farm and household characteristics farm size tenure security labor availability and land quality all exhibit a positive association with soil conservation adoption in contrast controlling on these and other household characteristics the probability of adoption falls as consumption risk rises these results underscore a need for greater sensitivity among policymakers to the role of consumption risk in influencing soil conservation decisions in low income settings

a simple account of the behavior of long term interest rates recent empirical research on the term structure of interest rates has shown that the long term interest rate is well described by a distributed lag on short term interest rates but does not conform to the expectations theory of the term structure it has been suggested that the long rate overreacts to the short rate this paper presents aunified taxonomy of risk premia or deviations from the expectations theory this enables the hypothesis of overreaction to be formally stated it is shown that if anything the long rate has underreacted to the short rate however the independent movement of the long rate is primarily responsible for the failure of the expectations theory

marshall and walras disequilibrium trades and the dynamics of equilibration in the continuous double auction market prices and quantities converge to the theoretical competitive equilibria in continuous double auction markets the double auction is not a tatonnement mechanism disequilibrium trades take place the absence of any influence of disequilibrium trades which have the capacity to change the theoretical equilibrium appears to be due to a property found in the marshallian model of single market adjustments the marshallian model incorporates a principle of self organizing coordination that mysteriously determines the sequence in which specific pairs of agents trade in an environment in which market identities and agent preferences are not public disequilibrium trades along the marshallian path of trades do not change the theoretical equilibrium the substance of this paper is to demonstrate that the marshallian principle captures a natural tendency of the adjustment in single continuous double auction markets and to suggest how it takes place the marshallian model of quantity adjustment and the walrasian model of market price adjustment can be seen as companion theories that explain the allocation and price processes of a market the marshallian model explains the evolution of the allocation who will meet and trade and the walrasian excess demand explains the evolution of prices when they do

walrasian and marshallian stability abstract it is well known that there is no direct relation between stability of the walrasian t tonnement process and stability of the marshallian quantity adjustment process it is shown that if short run walrasian t tonnement with a given number of firms is distinguished there is under the assumption of no joint production local stability of the short run walrasian adjustment process if and only if there is local stability of the long run marshallian adjustment process with exit and entry of firms according to profit levels

social influence and collective action effects on farm level soil conservation effort in rural kenya abstract this paper analyzes the effects of social influence and participation in collective action initiatives on soil conservation effort among smallholder farmers in lake naivasha basin kenya we apply binary and ordered probit models in a two stage regression procedure to cross sectional data collected through a household survey among randomly selected smallholder farmers smallholder farming systems in the research area are associated with practices that render farmlands susceptible to soil erosion causing negative impacts on land and the environment therefore strategies that encourage soil conservation are likely to also offer solutions for dealing with agri environmental challenges and poverty alleviation results indicate that social capital facilitates participation in collective action initiatives which then influence individual soil conservation efforts neighborhood social influences subjective norms gender education level farm size access to credit and livestock ownership also emerge as key determinants of soil conservation effort policy implications drawn by this study encourage strategies to increase participation and effectiveness in collective action initiatives as a boost to soil conservation implementation of soil conservation practices could also be encouraged through awareness increasing instruments facilitating access to agricultural micro credit and paying attention to gender related challenges on knowledge access and rights over land and other natural resources

a dynamic model of expectations equilibrium abstract this paper describes a dynamic information adjustment process which achieves rational expectations equilibria for stochastic exchange environments an informational temporary equilibrium is an exchange equilibrium in which agents expectations are conditioned on their initial information and market data generated in previous informational temporary equilibria an equilibrium is a temporary equilibrium which reveals no further information this process leads to an equilibrium even when the data observed by agents is insufficient to permit the existence of an expectations equilibrium

global instability in experimental general equilibrium the scarf example scarf 1960 proposed a market environment and a model of dynamic adjustment in which the standard tatonnement price adjustment process orbits around rather than converges to the competitive equilibrium hirota 1981 characterized the price paths by the configuration of endowments we explore the predictions of scarf s model in a nontatonnement experimental double auction we find that the average transaction prices in each period do follow the path predicted by the scarf and hirota models when the model predicts prices will converge to the competitive equilibrium our data converge when the model predicts prices will orbit our data orbit the equilibrium and in the direction predicted by the model moreover we observe a weak tendency for prices within a period to follow the path predicted by the model

time discounting and the overexploitation of coral reefs the incentive to overexploit a fishery resource is thought to exist if the resource owner s discount rate is sufficiently higher than the biological productivity of the targeted fish stock coral reef fisheries are extensively overexploited worldwide but the discount rates of reef fishers are largely unknown and there is little information about how discount rates relate to the exploitation status of fisheries we address these two research gaps for 48 small scale reef fisheries around the world we use a life history based method to derive fishery level intrinsic growth rates and then apply fisheries economics theory to investigate the compatibility of 2 different discount rates official and private with the exploitation status of reef fisheries we find that official discount rates that are normally used for policy making appear to be too low to fully reflect the short term outlook of reef fishers instead our inferred annual average private discount rate of 107 for fishers may better reflect the general overexploited state of reef fisheries our results indicate that in order to improve the chances of success fisheries policies which affect local fishers may need to be evaluated using private discount rates rather than the currently used official discount rates

price dynamics in general equilibrium experiments general equilibrium ge theory faces several related challenges classical theories of out of equilibrium adjustment are intuitive but implausibly centralized further standard restrictions on individual preferences place little structure on aggregate excess demand functions amongst other issues this fact implies that economies can be unstable under classical dynamics and thus instability appears to be an unavoidable feature of ge theory this paper recounts laboratory studies of ge environments which reveal that classical theories of dynamics do in fact organize market activity surprisingly well these experiments suggest that the walrasian auctioneer for example appears to be a constructive abstraction and that instability should be accommodated within theory rather than circumscribed laboratory applications of ge theory focused on issues beyond stability and dynamics are also briefly surveyed

cheap talk can matter in bargaining this paper describes an intuitive way in which cheap talk can matter in a twostage bargaining game in which talk may be followed by serious negotiation the intuition that all buyers would claim to have low reservation prices is incorrect in our model instead if good faith participation is endogenously determined then the parties can use talk to trade off bargaining position against the probability of continued negotiation our cheap talk equilibrium features bargaining behavior that could not be equilibrium behavior in the absence of talk

land tenure and investment incentives evidence from west africa abstract the existing literature on the relationship between property rights in land and agricultural investment in africa has given results that are often confusing and contradictory i make two clarifying contributions to this literature first i pull together existing studies and investigate whether the results they find have been affected by research methods or local contexts studies with small sample sizes those that use binary investment measures and those that control for household fixed effects are less likely to find a statistically significant link between land tenure and investment self reported tenure security has been a poor predictor of investment outcomes second i test for a relationship between land tenure and agricultural investment in nine data sets from west africa while the link between tenure and investment is significant for fallow and tree planting it is less robust for labor use and other inputs such as manure or chemical fertilizer

liquidity externalities and adverse selection evidence from trading after hours this paper examines liquidity externalities by analyzing trading costs after hours there is less than 1 20 as many trades per unit time after hours as during the trading day the reduced trading activity results in substantially higher trading costs quoted and effective spreads are three to four times larger than during the trading day the higher spreads reflect greater adverse selection and order persistence but not higher dealer profits because liquidity provision remains competitive after hours the greater adverse selection and higher trading costs provide a direct measure of the magnitude of the liquidity externalities generated during the trading day understanding network effects and liquidity externalities is one of the most important outstanding issues in market design madhavan 2000 and market regulation macey and o hara 1999 liquidity externalities arise from bringing traders together in space and time to reduce search and trading costs bringing traders together creates liquidity externalities because the additional traders arriving in the marketplace reduce trading costs for all investors to date attention has focused almost exclusively on spatial network effects by examining the trading of securities in different markets at the same time lee 1993 hasbrouck 1995 and others in contrast this paper studies the effects of temporal consolidation of trades by analyzing trading during and outside of exchange trading hours a well known liquidity externality arises from asymmetric information rational informed traders break up their orders across markets and over time this provides incentives for liquidity traders to consolidate their trades geographically garbade and silber 1979 mendelson 1982 1987 pagano 1989a 1989b and intertemporally admati and pfleiderer 1988 and foster and viswanathan 1990 it has been difficult to document the importance of these liquidity externalities however unless there are barriers that restrict the flow of orders from one trading venue to another in equilibrium contemporaneous

informed speculation with imperfect competition competitive rational expectations models have the unsatisfactory property dubbed the schizophrenia problem by hellwig that each trader takes the equilibrium price as given despite the fact that he influences that price an examination of information aggregation in a non competitive rational expectations model using a nash equilibrium in demand functions shows that the schizophrenia problem is avoided by having each trader take into account the effect his demand has on the equilibrium price given a distribution of private information across traders prices reveal less information than in the competition equilibrium and prices no longer become fully informative in the limit as noise trading vanishes or as traders become risk neutral with small traders the model may become one of monopolistic competition not perfect competition in contrast to the competitive model a reasonable model of endogenous acquisition of costly private information is obtained even when traders are risk neutral

the impact of water conservation and intensification technologies empirical evidence for rice farmers in ghana this study employs the propensity score matching model to examine the impact of the adoption of water conservation and intensification technologies on farm output and income among small scale lowland rice farmers in the northern region of ghana the matching was conducted based on the mahalanobis distance combined with the propensity score balancing tests by checking the mean standardized absolute bias in the matched sample were conducted as well as a sensitivity analysis was conducted to check for hidden bias due to unobservable selection the empirical results show a positive and significant impact of the adoption of bunds technology on input demand as well as a positive but insignificant impact on output supply and net returns adopters of the dibbling technology were found to have higher output supply whereas no statistically significant difference was found between the incomes of adopters and nonadopters of dibbling seed method the results however reveal a positive and significant effect on output and net returns when the dibbling method is combined with intensified weeding the estimates were found to be relatively insensitive to hidden bias

an experimental investigation of the patterns of international trade this study is the first attempt to create and study a laboratory economy with some of the prominent features of an international economic system the concept of multiple countries in which each country has its own technology preferences and resource endowments is introduced and operationalized the questions posed in the study are related to the law of comparative advantage factor price equalization terms of trade efficiency in production and exchange as guided by multiple and interacting markets and the effects of tariffs on international transactions the study builds on previous work in the experimental study of general equilibrium phenomena

trading volume and asset liquidity since the depth and liquidity of a market depend on the entry decisions of all potential participants each trader assesses them according to conjectures about entry by others if trade is equally costly across markets this externality leads to the concentration of trade on one market if not it can produce multiple conjectural equilibria some where trade concentrates on one market and others where large traders resort to a separate market or to search for a trading partner while fragmentation is welfare reducing in the two market case no such ranking is possible if it involves off exchange search

stochastic dominance analysis of soil and water conservation in subsistence crop production in the eastern ethiopian highlands the case of the hunde lafto area the aim of this paper is to analyze whether investment in soil and water conservation results in a higher yield and income and or mitigate variability in yield and income to subsistence farm households in the hunde lafto area net returns from crop production with and without soil and water conservation swc are compared based on stochastic dominance sd criteria a non parametric first order sd and normalized second order are used for data analysis analysis is based on the soil conservation research program scrp database for the hunde lafto research unit the results of the analysis suggest that adopting a conservation strategy results in higher grain yield and net return than in not adopting the normalized second order sd analysis results do not support the hypothesis that conservation strategy is unambiguously better than a noconservation strategy in reducing variability in yield and net return to farmers however conservation strategy has shown second order dominance at lower levels of yield and income that often correspond to unfavorable rainfall conditions this makes it a preferred strategy to cope with the most prevalent risk factor of moisture shortage therefore appropriate policies to help and encourage farmers to adopt swc structures will contribute to improving the welfare of subsistence farm households in the study area and in other similar settings in the country designing and implementing swc techniques that may result in unambiguous second order sd dominance will further improve the desirability and adoption of conservation measures

walras s models of the barter of stocks of commodities abstract the models are described in regard to their features that determine and express the pricing and exchange processes namely their physical characteristics participants institutions procedures rules and behavioral patterns it is shown that walras s arbitrage model is defective and walrasian arbitrage is not an equilibriating mechanism in the models that the other barter models are complete functioning systems that the numeraire does not simplify pricing in the models that the characteristics of the pricing process in the models do not involve a central or particular market authority and that they do not use or logically depend on the assumption of large numbers of traders

a stochastic dominance comparison of reduced tillage systems in corn and soybean production under risk returns per acre of reduced tillage systems including conventional chisel till plant and no till are examined under general assumptions concerning risk these returns are calculated using com and soybean experimental plot yields stochastic dominance rankings indicate an advantage second degree of conventional and chisel over no till when soil loss costs are not assigned annual per acre soil loss costs of 5 15 shift rankings towards the reduced tillage systems a 10 per acre cost results from corn yield losses of 0 06 per year 170 bushel per acre yield base over fifty years with a 5 real discount rate

the switch from continuous to call auction trading in response to a large intraday price movement some european exchanges e g euronext frankfurt and madrid make use of a mechanism to moderate price volatility that was proposed by madhavan 1992 as preferable to a trading halt in times of market stress it consists of a temporary switch from continuous to call auction trading in an individual security whenever its price moves beyond predetermined limits this article studies whether this mechanism sharpens the information content of prices dampens volatility and normalizes trading volume and intensity taking intraday data for the madrid order driven continuous market i find post switch improvements in the information content of prices and reductions in volatility especially for thinly traded stocks trading volume and intensity peaked around auctions but soon returned to preevent levels

rational expectations and the aggregation of diverse information in laboratory security markets the idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization hurwicz 1972 and rational expectations lucas 1972 we report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations in two of the three series one in which participants trade a complete set of arrow debreu securities and a second in which all participants have identical preferences double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium

order flow and liquidity around nyse trading halts we study order f low and liquidity around nyse trading halts we find that market and limit order submissions and cancellations increase significantly during trading halts that a large proportion of the limit order book at the reopen is composed of orders submitted during the halt and that the market clearing price at the reopen is a good predictor of future prices depth near the quotes is unusually low around trading halts though specialists and0or f loor traders appear to provide additional liquidity at these times finally specialists appear to spread the quote prior to imbalance halts to convey information to market participants the costs and benef its associated with new york stock exchange trading halts are the subject of continuous debate the stated purpose of trading halts is to allow investors a chance to react to new information and to facilitate the orderly emergence of a new equilibrium price see e g nyse 1999 however little is known about the extent or nature of investor reactions to trading halts furthermore it is unclear whether these reactions support or confound attempts to reach a new equilibrium price to address these issues we use nonpublic nyse data on all superdot electronic orders to analyze the effects of trading halts on order f low spreads and the limit order book we also examine the relationships between the limit order book and the reopening price and between liquidity and post halt volatility information on order f low is an important missing element in the ongoing debate about the usefulness of trading halts one argument against trading halts is that they impede price formation because trading aggregates information that is distributed across market participants however submissions and cancellations of orders during a halt may provide an alternative source of information that combined with published indications of possible reopening prices may assist with price formation an argument in favor of trading halts is that when traders are given an opportunity to cancel orders

learning from trading the incorporation of diverse information into asset prices is empirically examined in an actual securities market with multiple rounds of trade using prices of israeli index and nominal bonds of equal maturity we calculate implied expectations of inflation that has already occurred butfor which the official statistic has not yet been announced learning is defined as the convergence of these expectations to the actual level of infzation in the period after the end of the month but before the announcement of the official statistic wefind that the variance of the injiation expectation errors decreases with trading days in this period the decline in the variance suggests that investors learn by repeatedly observing prices about the distribution of other investors information we also find a positive relation between the dispersion of relative price changes and the size of the inflation expectation errors on thefirst round of trade the correlation diminishes as

manipulation in the vix at the settlement time of the vix volatility index volume spikes on sp editorial decision june 19 2017 by editor robin greenwood

policy instruments for sustainable land management the case of highland smallholders in ethiopia degradation of land continues to pose a threat to future food production potential in many developing economies various approaches mainly based on command and control policies have been tried with limited success in the past to encourage adoption of erosion control practices by farm households high transactions costs and negative distributional impacts on the welfare of the poor limit the usefulness of standards and taxes for soil and water conservation one innovative approach is the use of interlinked contracts which create positive incentives for land conservation this study analyses the social efficiency of such policies for erosion control in the ethiopian highlands using a non separable farm household model incentive contracts linked with conservation seem to be promising approaches for sustainable resource use in poor rural economies this may suggest that conservation programs should give greater consideration to better fine tuning and mix of policies that help achieve both economic and environmental objectives

price formation in double auction markets abstract this paper reports 14 laboratory experiments that examine existing theories of the price formation process in the continuous double auction the experiments feature random values and costs and therefore a new price formation observation each period we find that efficiency is high and rises with experience in this environment we also find that trades with greater exchange surplus tend to occur earlier in the period that increased trader experience reduces an anomalous intertemporal arbitrage opportunity observed previously and that only when traders are very experienced does exchange surplus accrue disproportionately to the side of the market with a smaller number of traders

how can african agriculture adapt to climate change a counterfactual analysis from ethiopia we analyze the impact of different adaptation strategies on crop net revenues in the nile basin of ethiopia we estimate a multinomial endogenous switching regression model of climate change adaptation and crop net revenues and implement a counterfactual analysis households data are combined with spatial climate data we find that adaptation to climate change based upon a portfolio of strategies significantly increases farm net revenues changing crop varieties has a positive and significant impact on net revenues when coupled with water conservation strategies or soil conservation strategies but not when implemented in isolation jel q54 q56

the speed of information revelation in a financial market mechanism abstract the paper studies the rate at which dispersed private information about the value v of a risky financial asset is incorporated into prices in an information adjustment mechanism the mechanism in the presence of competitive market makers aggregates the information of risk averse agents at a rate of n 1 2 where n is the number of rounds of the adjustment process without market makers convergence of prices to v is much slower in any case the asymptotic precision of prices is negatively related to the degree of risk aversion and the amount of noise in the system journal of economic literature classification numbers d83 g14

the roles of land tenure reforms and land markets in the context of population growth and land use intensification in africa this article reviews the past and potential future roles of land tenure reforms and land markets in sub saharan africa ssa as responses to population growth in the process of land use intensification and livelihood transformation the farm size distribution and the existence of an inverse relationship ir between farm size and land productivity in ssa and the implications of this relationship for efficiency and equity are investigated more secure property rights and removal of restrictions on land markets have the potential to create both efficiency and equity benefits but there are high risks of elite capture of large land areas with inefficient and inequitable outcomes this situation is the case not only in land abundant areas but also in urban and peri urban areas where increasingly larger proportions of people will make their living increasing population pressure in densely populated rural areas contributes to more rapid rural urban migration and creating alternative livelihood opportunities for the migrating youth population is essential to achieving economic development with social stability

allocative efficiency of markets with zero intelligence traders market as a partial substitute for individual rationality we report market experiments in which human traders are replaced by zero intelligence programs that submit random bids and offers imposing a budget constraint i e not permitting traders to sell below their costs or buy above their values is sufficient to raise the allocative efficiency of these auctions close to 100 percent allocative efficiency of a double auction derives largely from its structure independent of traders motivation intelligence or learning adam smith s invisible hand may be more powerful than some may have thought it can generate aggregate rationality not only from individual rationality but also from individual irrationality

a simple testable model of double auction markets abstract we propose a model of price formation in double auction markets which employs the strong simplifying assumption that agents neglect strategic feedback effects and regard themselves as playing a game against nature agents otherwise are strict expected utility maximizers employing bayesian updating procedures we prove the optimality of simple aggressive reservation price strategies in our general model and propose a parametric form that yields very detailed and computable predictions of market behavior

equilibrium discovery and preopening mechanisms in an experimental market we experimentally analyze how to design preopening mechanisms facilitating coordination on high equilibrium liquidity and gains from trade we allow a call auction to be preceded by a preopening or not preopening orders to be binding or not and the opening time to be deterministic or random when the preopening is nonbinding traders place manipulative orders reducing the credibility of preplay communication random market opening deters manipulation but also hinders communication by making it costly gains from trade are maximized when preopening orders are binding this enables some traders to place early limit orders attracting further liquidity data as supplemental material are available at http dx doi org 10 1287 mnsc 2013 1787 this paper was accepted by wei xiong finance

sale of price information by exchanges does it promote price discovery exchanges sell both trading services and price information we study how the joint pricing of these products affects price discovery and the distribution of gains from trade in an asset market a wider dissemination of price information reduces pricing errors and the transfer from liquidity traders to speculators this effect reduces the fee that speculators are willing to pay for trading therefore to raise its revenue from trading a for profit exchange optimally charges a high fee for price information so that only a fraction of speculators buy this information as a result price discovery is not as efficient as it would be with free price information this problem is less severe if the exchange must compensate liquidity traders for a fraction of their losses this paper was accepted by wei xiong finance

effectivity and constructivity in economic theory the implicit nonconstructive and noneffective contents of some aspects of general equilibrium theory are formally investigated in particular the claims of some applied computable general equilibrium cge theorists regarding the constructivity and effectivity of cge models are rigorously analyzed and shown to be unsubstantiated an attempt is also made to extract some general methodological guidelines for the meaningful mathematization of economic theory

risks and returns from soil conservation evidence from low income farms in the philippines abstract this paper examines risks and returns associated with soil conservation on hillside farms in the philippines stochastic efficiency analysis is combined with a heteroskedastic regression model to assess the impacts of contour hedgerows on low income corn farms regression analysis indicates that over time contour hedgerows can improve yields up to 15 compared with conventional practices the analysis also provides weak support for a hypothesis that hedgerows are variance reducing however results show that the reduction in yield variability afforded by hedgerows is modest and that yield variability may increase by as much as 5 as hedgerow intensity rises tests for stochastic dominance show that compared with the conventional tillage system hedgerows do not constitute an unambiguously dominant production strategy stochastic efficiency with respect to a function is used to identify a range for the coefficient of relative risk aversion within which hedgerows dominate conventional tillage results suggest this range would be rather high hedgerows dominate the conventional cropping strategy only for decision makers with relative risk aversion coefficients in the range 3 5 5 implications for soil conservation adoption in low income settings are discussed

an experimental examination of the walrasian tatonnement mechanism this is a systematic experimental comparison of the efficiency and competitive properties of a computerized multiunit tatonnement with or without a dynamic improvement rule with or without publicity of order flow information all versions of the tatonnement are comparatively less efficient than the continuous double auction the tatonnement yields competitive prices but both sides tend to underreveal demand supply causing inefficiency only the full information no improvement rule version of the tatonnement procedure approaches the efficiency of the double auction

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

bargaining with deadlines and imperfect player control anecdotal and experimental evidence suggests that bargaining sessions subject to deadlines often begin with cheap talk and rejected proposals agreements if they are reached at all tend to be concluded near the deadline we attempt to capture and explain these phenomena in a strategic bargaining model that incorporates a bargaining deadline the possibility of strategic delay and a lack of perfect player control over the timing of offers imperfect player control is generated by an exogenous uniformly distributed random delay in offer transmission our model has a symmetric markov perfect equilibrium unique at almost all nodes in which players adopt strategic delay early in the game make and reject offers later on and reach agreements late in the game if at all in equilibrium players miss the deadline with positive probability the expected division of the surplus is unique and close to an even split

information disclosure and price manipulation during the pre closing session evidence from an order driven market on 20 february 2012 the taiwan stock exchange corporation launched an order matching simulation mechanism for five minutes during the start of the pre closing session in order to increase information disclosure during this period 13 25 13 30 pre closing information disclosure significantly reduces both trading costs and closing price volatility as well as price manipulation the decrease in price manipulation found in this work is due to pre closing information disclosure not the behaviour of investors shifting to an earlier time further if a stock price rises or falls by more than 3 5 in the simulation in the last minute during the closing session trading of the stock will be suspended for two minutes from 13 31 to reduce volatility however this trading mechanism suspended closing does not seem to have achieved the intended goals of the authorities as it has not been able to significantly reduce closing price volatility and price manipulation

experimental economics accounting and society in memory of john dickhaut abstract this volume consists of papers presented at a conference in memory of john dickhaut the conference sponsored by the economic science institute at chapman university focused on four areas of john s research interests during his career accounting and society methodology in experimental economics neural economics and trust and reciprocity all of the papers make novel interesting contributions to the study of human behavior in economic institutions and should interest readers in a range of fields including accounting anthropology economics finance neurology and psychology

conservation payments under risk a stochastic dominance approach conservation payments can be used to preserve forest and agroforest systems to explain landowners land use decisions and determine appropriate conservation payments it is necessary to focus on revenue risk marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates an empirical application to shaded coffee protection in the biologically important choco region of west ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk neutral assumptions further the extant distribution of land has strong impacts on the required payments

the heterogeneous effect of shocks on agricultural innovations adoption microeconometric evidence from rural ethiopia abstract theoretically the relationship between shocks and agricultural innovation adoption could be ambiguous while shocks could lower the competence and capacity of households to adopt new agricultural innovations households can also take up agricultural innovations as a coping mechanism against the different shocks they face using a nationally representative household data from ethiopia of the living standards measurement study integrated surveys on agriculture lsms isa of the world bank this paper analyzes the effect of idiosyncratic and covariate shocks on adoption of different agricultural innovations assuming interdependence among the innovations we find shocks to have heterogeneous effects on the adoption of agricultural innovations specifically production and health shocks have negative effects on the adoption of high cost innovations such as improved seeds chemical fertilizer and irrigation however production shocks are positively associated with low cost innovations such as organic fertilizer to enhance farmers adoption of agricultural innovations especially high cost innovations there is a greater need towards the design of policies and interventions that would reduce household s exposure to production and health shocks

bargaining under incomplete information this paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty under the bargaining rule proposed the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price the nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent s reservation price issues of relative bargaining advantage and efficiency are examined for a number of special cases finally we discuss the appropriateness of the nash solution concept

who benefits from an open limit order book the nyse opened the limit order book to off exchange traders during trading hours we address the welfare implications of this change in market structure we model a market similar to the auction that the exchange uses to open the trading day we consider two different environments in the first only the specialist sees the limit order book while in the second the information in the book is available to all traders we compare equilibria and find that traders who demand liquidity are better off when the book is open while liquidity suppliers are better off when the book is closed

opening and closing the market evidence from the london stock exchange we investigate the performance of call markets at the open and close using a unique natural experiment provided by the london stock exchange where traders can choose between a call and an off exchange dealership system although the call market dominates dealers in terms of price discovery it suffers from a high failure rate to open and close trading especially when trading conditions are difficult the call s trading costs increase with asymmetric information slow trading order flow imbalances and uncertainty traders resort to use of call auctions is negatively correlated with firm size implying that the call may not be the optimal method for opening and closing trading of medium and small sized stocks

stock market structure and volatility the procedure for opening stocks on the nyse appears to affect price volatility an analytical framework for assessing the magnitude of the structurally induced volatility is presented the ratio of variance of open to open returns to closeto close returns is shown to be consistently greater than one for nyse common stocks during the period 1982 through 1986 tbe greater volatility at the open is not attributable to the way in which public information is released since both the opento open return and the close to close return span the same period of time instead the greater volatility appears to be attributable to private information revealed in trading and to temporaryprice deviations induced by specialist and other traders the implied cost of immediacy at the open is significantly higher than at the close other empirical evidence in this article documents the volume of trading at the open the time delays between the exchange opening and the first transaction in a stock the difference in daytime volatility versus overnight volatility and the extent to which volatility is related to trading volume

price discovery in auction markets a look inside the black box opening mechanisms play a crucial role in information aggregation following the overnight nontrading period this article examines the process of price discovery at the new yorkstockexchange single price opening auction we develop a theoretical model to explain the determinants of the opening price and test the model using order level data we show that the presence of designated dealers facilitates price discovery relative to a fully automated call auction market this is consistent with specialists extracting information from observing the evolution of the limit order book in addition the specialist s opening trade reflects noninformational factors such as price stabilization requirements

soil erosion and smallholders conservation decisions in the highlands of ethiopia abstract soil erosion is one of the most serious environmental problems in ethiopia coupled with growing populations falling per capita food production and worsening poverty loss of productive land due to land degradation undermines rural livelihoods and national food security despite their awareness of the erosion problem peasants investments in land have been limited we use an applied nonseparable model to simulate conservation decisions pervasive market imperfections poverty and high rates of time preference seem to undermine erosion control investments lack of technologies which provide quick returns to subsistence constrained peasants also seem to deter such investments lower private incentives to internalize the intertemporal land degradation externality may require public intervention

investment in soil conservation in northern ethiopia the role of land tenure security and public programs abstract a double hurdle statistical analysis of 250 farms in the tigray region of ethiopia reveals different causal factors for soil conservation adoption versus intensity of use farmers reasons for adopting soil conservation measures vary sharply between stone terraces and soil bunds long term investments in stone terraces were associated with secure land tenure labour availability proximity to the farmstead and learning opportunities via the existence of local food for work ffw projects by contrast short term investments in soil bunds were strongly linked to insecure land tenure and the absence of local food for work projects public conservation campaigns on private plots reduced adoption of both stone terraces and soil bunds whereas capacity factors largely influenced the adoption decision expected returns carried more influence for the intensity of stone terrace adoption measured as metres of terrace per hectare more stone terracing was built where fertile but erodible silty soils in higher rainfall areas offered valuable yield benefits intensity of terracing was also greater in remote villages where limited off farm employment opportunities reduced construction costs these results highlight the importance of the right kind of public interventions direct public involvement in constructing soil conservation structures on private lands appears to undermine incentives for private conservation investments when done on public lands however public conservation activities may encourage private soil conservation by example secure land tenure rights clearly reinforce private incentives to make long term investments in soil conservation

why markets should not necessarily reduce the tick size abstract this paper studies the consequences of a tick size change on the paris bourse thus providing a natural experiment on an order driven market the change raised the tick size for some stocks and lowered it for other in contrast with us exchanges results this generated neither a reduction in liquidity provision for large trades nor a change in the spread based on this paper and on us results it appears an increasing but convex relationship between the relative tick size and the relative spread thus it implies that a new pricing grid does not necessarily lead to change execution costs but it changes the level of transparency in the liquidity supply

de stabilizing speculation on futures markets an alternative view point abstract this paper offers a new interpretation for possible destabilizing effects of opening futures markets in our model adapted from stein 1987 speculation on futures markets reduces the likelihood of occurrence of a rational expectations equilibrium although the equilibrium price is less volatile after the futures market is opened which is usually viewed as a stabilizing effect traders may find it more difficult or even impossible to coordinate their expectations in order to implement this equilibrium

why do expectations models of the term structure fail abstract this paper provides evidence that the apparent rejection of the expectations theory for data on nominal treasury bill yields is primarily due to the failure of market participants to forecast inflation in a consistent manner over horizons of different length

market stability backward bending supply in a laboratory experimental market 1999 presidential address western economic association the paper investigates the stability properties of markets with backward bending supply curves parameters are chosen so that the two classic models of price dynamics the walrasian model and the marshallian model give opposite predictions the results are 1 market instability can be observed 2 in the backward bending case stability is captured by the walrasian model and the marshallian model of dynamics is rejected previous experiments have demonstrated that the marshallian model works in the forward falling case thus which theory of dynamics is appropriate for a market depends upon the underlying reasons for demand and supply shapes

costly offers and the equilibration properties of the multiple unit double auction under conditions of unpredictable shifts of demand and supply the paper reports on the behavior of markets in which a cost is imposed in the form of a tax on bids and asks but not contracts that are tendered in the market the markets were nonstationary in the sense that market demand and market supply shifted unpredictably in each period the results are as follows 1 a market equilibration process is observed across the periods of nonstationary markets 2 the price discovery process in the costly offer condition was incomplete relative to the free offer case 3 price equilibration with the offer cost was slower and efficiencies were reduced

anchoring in experimental asset markets we investigate the relationship between anchoring and the emergence of bubbles in experimental asset markets we show that setting a visual anchor at the fundamental value fv in the first period only is sufficient to eliminate or to significantly reduce bubbles in laboratory asset markets if no fv anchor is set bubble crash patterns emerge our results indicate that bubbles in laboratory environments are primarily sparked in the first period if prices are initiated around the fv they stay close to the fv over the entire trading horizon our insights can be related to initial public offerings and the interaction between prices set on pre opening markets and subsequent intra day price dynamics

farmers perceptions and adoption of new agricultural technology evidence from analysis in burkina faso and guinea west africa economists investigating consumer demand have accumulated considerable evidence showing that consumers generally have subjective preferences for characteristics of products and that their demand for products is significantly affected by their perceptions of the product s attributes however the role of farmers preferences in adoption decisions have received very limited attention in adoption studies conducted by economists this paper tests the hypothesis that farmers perceptions of technology characteristics significantly affect their adoption decisions the analysis conducted with tobit models of modern sorghum and rice varietal technologies in burkina faso and guinea respectively strongly supports this hypothesis our results provide a strong case for future adoption studies to expand the range of variables used away from the broad socio economic demographic and institutional factors to include farmers subjective perceptions of the characteristics of new agricultural technologies

walras s theories of tatonnement it is shown that leon walras developed two separate theories of tatonnement one is a disequilibrium production model the other is a pledges model in which transactions and production occur only at the equilibrium set of prices these models are explained and the manner in which they appear in the vari ous editions of walras s elements is used to account for the developm ent of conflicting interpretations of his writings on tatonnement it is shown that the disequilibrium production model is more representa tive of walras s work than the pledges model and that the latter is i ncompatible with the theories of particular aspects of economic behav ior on which the elements depends for its verisimilitude and explanat ory power copyright 1987 by university of chicago press