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

prices and the winner s curse we usually assume that increases in supply allocation by rationing and exclusion of potential buyers reduce prices but all these activities raise the expected price in an important set of cases when common value assets are sold furthermore when we make the assumptions needed to rule out these anomalies for symmetric buyers small asymmetries among the buyers necessarily cause the anomalies to reappear our results help explain rationing in initial public offerings and outcomes of spectrum auctions we illustrate our results in the wallet game and in another new game we introduce the maximum game

multiple object auctions with budget constrained bidders in the last few years governments in many parts of the world have aggressively sought to privatize socially held assets this wave of privatization has included the sale of industrial enterprises in the former soviet union and eastern europe the sale of public transportation systems in britain and scandinavia and the sale of radio spectra in the u s both the enormity and the importance of these sales have naturally led to an examination of how best to accomplish this task auctions have been proposed and have frequently been used as time honoured convenient and attractive mechanisms for such sales this in turn has led to a revival of interest in the theory of auctions particularly those involving multiple objects the magnitude of these privatization sales has meant that in many instances it is realistic to consider that buyers may run up against liquidity or borrowing constraints the presence of these financial constraints introduces important differences into traditional auction theory for instance pitchik and schotter 1986 and che and gale 1996 1998 have shown that when bidders are subject to such constraints the conclusion of the celebrated revenue equivalence theorem no longer holds when multiple objects are auctioned in the presence of budget constraints it may be advantageous for a bidder to bid aggressively on one object with a view to raising the price paid by his rival and depleting his budget so that the second object may then be obtained at a lower price in effect a bidder may wish to raise a rival s costs in one market in order to gain advantage in another thus unlike in traditional auction theory a particular bidder s payoff is affected by the price paid by a rival bidder it is important to note that this effect comes into play only when several objects are sold

caps in sequential contests i introduction in many competitions we can often observe situations where severe constraints are imposed on contestants for example in the u s electoral campaign there is a specific maximum campaign contribution that a single agent can make to a candidate 1 in sports where equipment plays a major role e g sailing motor races etc explicit or implicit technological constraints are imposed on the allowed equipment also several sports leagues e g the national basketball association nba implement a salary cap which places a limit on the total amount of money a team can spend on players salaries salary caps are clearly binding and teams are sometimes forced to trade expensive players in order to make place for other needed team members the usual reason for applying salary caps is that they facilitate even competition between small and large city teams otherwise large city teams could pay more buy the best talent and ultimately destroy any semblance of competition in the league the goal of caps imposed by designers of competitions is to create what we call a competitive balance so that many players have a chance to win and not necessarily the strongest ones in addition if the contest is more competitively balanced the uncertainty of the outcome is higher and therefore the contest is more attractive furthermore competitive balance may lead to an improvement of the expected total performance of all the players rather than just the performance of the top player several other ways have been suggested to enhance the competitive balance in contests for example baye kovenock and de vries 1993 showed that in all pay auctions contests by excluding the strongest player the player with the highest value of winning the contest becomes more competitively balanced and then the players expected total bid may increase moldovanu and sela 2001 found that in all pay auctions under incomplete information when cost functions are convex several positive prizes may be optimal for a designer who wishes to maximize the expected total bid in other words by increasing the number of the prizes the chances of the players with relatively low values of winning to win one of the prizes increase and therefore these players will increase their efforts accordingly cohen kaplan and sela 2008 studied all pay auctions with effort dependent rewards under incomplete information and demonstrated that when the designer maximizes the total bid effort and when there is a sufficiently large number of contestants the optimal reward decreases in the contestants bid this means that a designer will offer higher prizes to the players with relatively low values of winning those who exert lower efforts than to the players with relatively high values of winning those who exert higher efforts such a distribution of prizes balances the bids submitted by the players with high and low values of winning we focus here on the role of bid caps to enhance the competitive balance in contests relatively weak players players with low abilities or low values of winning usually exert low efforts which are lower than the level of the bid cap imposed by a designer in a contest with a bid cap if these players exert an effort that is equal to the bid cap they will have a higher chance to win since no one can exert a higher effort than the bid cap thus the weak players exert more effort than they would in a contest without a bid cap however relatively strong players players with high abilities or high values of winning usually exert higher efforts than the level of the bid cap thus the strong players exert less effort than they would in a contest without a bid cap hence the effect of the bid cap on the players total effort depends on the trade off between the increase of the weaker players efforts and the decrease of the stronger players efforts to be fully effective the bid cap system must guarantee that as many players as possible raise their efforts to the level of the bid cap and as less as possible reduce their efforts to this level

uncertain effects of money and the link between the inflation rate and inflation uncertainty in the postwar period high rates of inflation are associated with high levels of inflation uncertainty in this paper i argue that the inflation rate and inflation uncertainty are linked by forecasters uncertainty about the impact of money growth on the price level and i present evidence indicating that this has been the case as long as the impact of money growth on the price level remains unpredictable then even predictable money growth will cause inflation uncertainty with its accompanying adverse effects on employment and output

catalogue vs order of sale effects in sequential auctions theory and evidence from a rare book sale we examine bidding in a rare book sequential auction that has features of a natural experiment lots were arranged in alphabetical order the reserve set non strategically and half the bids placed by mail in bidders we distinguish between the effects induced by the print order of the catalogue from those by the sequential nature of the sale we document the existence of distinct catalogue effects on prices number of bids and price variability and determine their causes we demonstrate that these catalogue effects also influence floor bidder behaviour we derive a theoretical model that generates key aspects of floor bidder behaviour copyright 2004 royal economic society

ordering revenue and anchoring in art auctions we estimate the effect of ordering by value on revenues in sequential art auctions held by sotheby s and christie s we exploit a pre determined rotation of which of these two houses holds their auction first during auction week in new york city when the house that goes first has relatively expensive paintings compared to the other house we find that the sale premium for the week is around 21 higher relative to the mean sale premium and the fraction of paintings sold during the week is around 11 higher we provide evidence that this is due to an anchoring effect

perfect equilibria in budget constrained sequential auctions an experimental study this article presents an experimental study of bidding behavior in sequential auctions in which there are budget constraints and perfect information our experiments test both the properties of such auctions and the predictive power of a refinement of the nash equilibrium concept we find that budget constraints affect the behavior of bidders and that the trembling hand perfect equilibrium is generally a good predictor of prices

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

the translog production function and variable returns to scale this paper examines existing methods of estimating the translog production function and provides a general framework that allows for variable returns to scale the model is based on the inverse input demand function and embeds a nonhomothetic production technology previous estimation methods are valid only for homogeneous technologies with fixed scale effects estimation results for u s manufacturing show that neither homotheticity and homogeneity nor constant returns to scale is a proper characterization of the underlying structure of production thereby vindicating the empirical relevance of the inverse demand framework that entails a nonhomothetic technology copyright 1992 by mit press

revealed preference and activity rules in dynamic auctions activity rules constraints that limit bidding in future rounds based on past bids are intended to limit strategic bidding delays in high stakes auctions this article provides a general treatment of activity rules traditional point based rules are effective for homogeneous goods and reasonably suited for substitute goods however they are simultaneously too strong and too weak for general environments they allow parking while sometimes preventing straightforward bidding we prove that the activity rule operationalizing the generalized axiom of revealed preference garp is essentially the unique rule that enforces the law of demand while enabling straightforward bidding and never producing dead ends

liquidity risk in sequential trading networks abstract this paper studies a model of intermediated exchange with liquidity constrained traders intermediaries are embedded in a trading network and their financial capacities are private information we characterize our model s monotone pure strategy equilibrium agents earn positive intermediation rents in equilibrium an experimental investigation supports the model s baseline predictions concerning agents strategies price dynamics and the division of surplus while private financial constraints inject uncertainty into the trading environment our experiment suggests they are also a behavioral speed bump preventing traders from experiencing excessive losses due to overbidding

bid costs and endogenous bid caps we study contests where several privately informed agents bid for a price all bidders bear a cost of bidding that is an increasing function of their bids and moreover bids may be capped we show that regardless of the number of bidders if agents have linear or concave cost functions then setting a bid cap is not profitable for a designer who wishes to maximize the average bid on the other hand if agents have convex cost functions i e an increasing marginal cost then affectively capping the bids is profitable for a designer facing a sufficiently large number of bidders

sequential auctions of endogenously valued objects two completely informed but possibly asymmetric bidders buy or sell identical claims in sequential auctions they subsequently receive monetary prizes that depend upon the final allocation of claims iterated elimination of weakly dominated strategies leaves a unique nash equilibrium for any prize schedule prices weakly decline as the auctions progress and points of strict decline have a simple characterization for one class of prize schedules which arises naturally if duopolists bid for a scarce input the equilibrium is completely characterized many initial allocations generate the same final unequal division of claims which may be interpreted as the natural market structure journal of economic literature classification numbers d43 d44 l11

high bids and broke winners abstract this paper analyzes auctions where budget constrained bidders have options to declare bankruptcy it predicts a bidding equilibrium that changes discontinuously in a borrowing rate available to bidders when the borrowing rate is above a threshold high budget bidders win and the likelihood of bankruptcy is low when the borrowing rate is below the threshold the winner is the most budget constrained bidder and is most likely to declare bankruptcy this result explains the high bids and broke winners anomaly in the c block fcc spectrum auction based on its equilibrium analysis the paper proves that a seller can profit from offering to finance the highest bidder at a below market interest rate even with default risk journal of economic literature classification numbers d44 d45 d82 g33 l96

technical change and model specification u s agricultural production u s agricultural crop and livestock relationships are examined in the context of both duality and time series econometrics based on time series test results cointegrated models are estimated traditional models generally overestimated the precision of statistical relationships and gave a considerable number of spurious results particularly with regard to technical change when time series properties of the data were addressed there was much less evidence of bias in technical change model specification test results were sensitive both to the time series specification of the maintained model and its functional form preferred functional form depended on the choice criterion

jeea fbbva lecture 2018 the microeconomic foundations of aggregate production functions aggregate production functions are reduced form relationships that emerge endogenously from input output interactions between heterogeneous producers and factors in general equilibrium we provide a general methodology for analyzing such aggregate production functions by deriving their first and second order properties our aggregation formulas provide nonparametric characterizations of the macroelasticities of substitution between factors and of the macrobias of technical change in terms of microsufficient statistics they allow us to generalize existing aggregation theorems and to derive new ones we relate our results to the famous cambridge cambridge controversy

derivation of the hicks or direct elasticity of substitution using the input distance function abstract i derive a new symmetric elasticity of complementarity from the input distance function by imposing a constant distance condition assuming technical efficiency and a single output the hicks elasticity of substitution is its reciprocal