a profile of new venture success and failure in an emerging industry abstract this study examined three types of factors 1 the characteristics of the lead entrepreneur 2 startup processes undertaken during the founding of the firm and 3 firm behaviors after start up including management practices and strategic behaviors associated with new venture success and failure the research involved a field study of 26 small young firms 13 successful and 13 less successful or failed each engaged in the distribution of fresh juices in eight metropolitan centers about 30 of the total market in the united states both quantitative and qualitative data were collected through field work at each firm location a statistical analysis of data collected in a structured questionnaire was the primary method for testing the factors case studies of all of the firms were developed to provide qualitative support for the quantitative findings of the study results from these analyses indicated significant differences between successful and unsuccessful firms in all three categories lead entrepreneurs in successful firms were more likely to have been raised by entrepreneurial parents have had a broader business and more prior startup experience and believed they had less control of their success in business than unsuccessful entrepreneurs successful entrepreneurs seek to reduce risk in their businesses they work long hours have a personal investment in the firm and are good communicators successful firms were those initiated with ambitious goals lead entrepreneurs had a clear broad business idea which provided the adaptive torque required to overcome adversity confrontation and often a troubled financial condition effective startup or purchase required broad planning efforts that considered all aspects of the industry and firm successful firms spent more time planning 237 hours than unsuccessful firms 85 hours the use of outside professionals and advisors for help in solving specific problems during startup was important for success as well as the advice and information provided by other industry participants particularly customers and suppliers most ventures did not have written business plans nearly all purchased firms failed buyers of competitively troubled firms were negatively displaced generally unemployed managers who lacked broad management experience and while often well educated had no prior experience in purchasing a business successful firms were found to be more flexible participative and adaptive organizations these firms had employees who could perform the work duties of others and were likely to be managed in a way that provided these workers with the flexibility to modify their jobs to adapt to changing industry and organizational conditions lead entrepreneurs of successful firms were likely to spend more time communicating with partners customers suppliers and employees than the lead entrepreneurs of unsuccessful firms successful firms sought to become larger firms and embarked upon sales to broad sectors of the market successful firms achieved high market shares with market shares came higher financial returns less successful firms were restricted to narrow market sectors consisting of smaller customers and those more difficult to service while customer service remained an important concern the commodity nature of fresh juices failed to support differentiation and the narrowly focused firm was typified by high product costs and unprofitable operations

revenue maximizing dutch auctions with discrete bid levels abstract this paper is concerned with setting a predetermined number of bid levels in a dutch auction to maximize the auctioneer s expected revenue as a departure from the traditional methods used by applied economists and game theorists a novel approach is taken in this study to tackle the problem by formulating the auctioning process as a constrained nonlinear program and applying standard optimization techniques to solve it aside from proposing respective closed form formulae for computing the optimal bid levels and the auctioneer s maximum expected revenue we also show that the bid decrements should be increasing if there are two or more bidders in the dutch auction additionally the auctioneer s maximum expected revenue increases with the number of bidders as well as the number of bid levels finally managerial implications of the key findings as well as limitations of this research work are discussed

bidding behavior in descending and ascending auctions this research examines how individual differences and institutional practices influence consumer bidding in auctions bidders may be motivated by different goals e g thrill of winning the item with minimal attention to what they pay for it versus prudence winning the item at a price at or below its perceived value also innate or auctioneer induced differences may exist in the precision and salience of bidder cognitions about the item s value we report two studies on how these motivational and cognitive factors influence bids in descending and ascending auctions respectively each study also manipulated a situational variable wait time at each price step the two auctions realized different average prices for the same item set average bids were higher in the descending versus ascending auction in several study conditions in both auction formats bidders primed with thrill versus prudence bid higher but more precise and or salient values attenuated this goal effect among other results in the descending auction longer wait times elicited higher bids from bidders primed with thrill but not prudence in the ascending auction longer wait times produced lower bids for bidders primed with prudence but not thrill these findings on consumer bidding behavior have practical implications for auction design

the economics of the internet infrastructure and regulation the purpose of this article is to inform users regulators and economists about the basic economics of the internet focusing on regulation of its infrastructure it defines the internet and describes its development and organization it analyses the regulatory and competition issues associated with conveyance on the internet it then discusses three current puzzles of economic interest while the article reaches several conclusions the overall message is that much more work is needed in this area

the optimal mechanism for selling to a budget constrained buyer abstract this paper finds an optimal mechanism for selling a good to a buyer who may be budget constrained we consider a seller with one unit of a good facing a buyer with a quasilinear utility function if the buyer does not face a binding budget constraint textbook monopoly pricing is optimal by contrast the possibility of a binding budget constraint can make it optimal for the seller to use nonlinear pricing to commit to a declining price sequence to require the buyer to disclose his budget or to offer financing journal of economic literature classification numbers c70 d42 d45 d89 l12

allocating priority with auctions an experimental analysis there are many examples of markets where resources that were allocated ex ante must be rationed ex post two alternative methods of rationing are considered in this paper priority service see chao and wilson american economic review 77 1987 and wilson econometrica 57 1989 and proportional rationing see spulber international economic review 33 1992 an experimental environment is developed in which the two rules are implemented within two well known institutions the english and the uniform price sealed bid auctions under two different information conditions we find that priority service generates more efficient allocations than proportional rationing and the sealed bid auction performs better than the english both mechanisms and rationing rules are more efficient when there is a lack of common information

limits of exact equilibria for capacity constrained sellers with costly search abstract this paper studies finite versions of competitive matching models in which sellers announce prices and buyers understand the relationship between price and probability of trade two equilibrium concepts are studied for finite games subgame perfect equilibrium and rational expectations equilibrium it is shown that the distribution of prices offered by sellers under both equilibrium concepts converges weakly to the same competitive equilibrium distribution of prices furthermore the payoffs that sellers face in both kinds of equilibrium have the market utility property in the limit journal of economic literature classification numbers c78 d41 d45

optimal pricing in electrical networks over space and time an electrical system is modelled with a transmission network customers central generators and independent generators the system is subject to stochastic failures and stochastic demand parameters optimal spot prices are derived for the system they vary stochastically with space and time and depend on electrical load flow patterns the price difference between two locations or two voltage levels and the wheeling charge between them will change magnitude and sometimes sign over time as a function of events throughout the network current spatial pricing methods are significantly different from the spot price based methods derived here

entrepreneurs perceived chances for success abstract entrepreneurs involved in planning or starting firms must engage in a continuing process of appraising prospects for success these assessments presumably bear upon the preparations they make as well as at some later point whether they decide to make major changes or even to discontinue the business in this study data from 2994 entrepreneurs who had recently become business owners were analyzed to determine their perceived changes of success although previous evidence on business survival led to the hypothesis that the entrepreneurs would only be cautiously optimistic this was not the case they perceived their prospects as very favorable with 81 seeing odds of 7 out of 10 or better and a remarkable 33 seeing odds of success of 10 out of 10 in considering the prospects for other businesses like their own they perceived odds which were significantly lower but still moderately favorable based upon previous research on factors associated with new business success it was hypothesized that those who were more likely to succeed based upon their personal backgrounds and the nature of their new firms would be more optimistic however this was not the case those who were poorly prepared were just as optimistic as those who were well prepared at this point shortly after having become business owners the assessment by entrepreneurs of their own likelihood of success was dramatically detached from past macro statistics from perceived prospects for peer businesses and from characteristics typically associated with higher performing new firms the psychological literature on post decisional bolstering suggests that decision makers in many settings tend to bolster or exaggerate the attractiveness of an option after it has been chosen this coupled with the tendency of entrepreneurs to believe that they can control their own destinies implies that the extreme optimism observed here is probably a typical occurrence for entrepreneurs the findings suggest that it is probably natural to experience feelings of entrepreneurial euphoria when first becoming a business owner with the available evidence it is difficult to judge whether this leads to inadequate preparations or an inability to diagnose problems and make adjustments after the business is started this extreme optimism probably does contribute to the heavy personal commitments observed here in which the median entrepreneur devoted more than 60 hours per week to the business the entrepreneur would seem well advised to form relationships with outsiders such as board members and professional advisors who can be objective and detached in diagnosing problems and assessing objectively the prospects for the business in its current form

entrepreneurial success and failure confidence and fallible judgment excess entry or the high failure rate of market entry decisions is often attributed to overconfidence exhibited by entrepreneurs assuming that these decisions depend on assessments of business opportunities we model boundedly rational entrepreneurs and show analytically that whereas excess entry is an inevitable consequence of imperfect judgment it does not necessarily imply overconfidence indeed judgmental fallibility can lead to excess entry even when all potential entrepreneurs are underconfident we further demonstrate that as a group individuals who decide to start a new business exhibit more confidence than those who do not and that successful entrants are less confident than failures our results therefore question general claims that overconfidence leads to excess entry we conclude by emphasizing the need to understand the role of judgmental fallibility in producing economic outcomes and implications for both venture capitalists and the training of entrepreneurs

shared ownership and pricing in a network switch abstract we observe that many wholesale switches in automated teller machine atm networks are jointly owned by their members and that this tends to occur more frequently when the wholesale industry is highly concentrated we also observe that network switches are natural monopolies their costs being largely fixed and their demand exhibiting substantial network externalities motivated by these observations we model the competition for members between wholesale switches and the role joint ownership can play in attracting members the model analyzes both the adoption decision which network a bank chooses to join and the subsequent pricing of switch and atm services we compare competition between two solely owned switches with competition between one solely owned and one jointly owned switch our analysis shows that a more concentrated structure results under the latter and that retail prices are higher this calls into question the leniency of antitrust policy toward jointly owned structures

time of use rates vs hopkinson tariffs redux an analysis of the choice of rate structures in a regulated electricity distribution company abstract recent proposals to restructure the electricity industry in north america may effect the disintegration of a vertically integrated company into several smaller entities including distribution companies discos we explore whether time of use tou pricing or a hopkinson tariff would be more suitable for a regulated disco focusing on the economic efficiency of these alternative rate structures we argue that a hopkinson tariff with demand subscription is superior to tou rates as it can better handle the limited load diversity of local transmission and distribution td demands made on the contemporary disco while finessing the problem of endogenous marginal costs of local td capacity

installed base and compatibility innovation product preannouncements and predation a good is often more valuable to any user the more others use compatible goods the authors show that this effect may inhibit innovation if an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs this can produce excess inertia the installed base however is stranded if the new standard is adopted this may create excess momentum these dynamic effects have strategic implications temporary price cutting can permanently prevent entry and product preannouncements can be critical in innovation these strategic actions have ambiguous welfare effects

efficient competition through cheap talk the case of competing auctions we consider a large market where auctioneers with private reservation values compete for bidders by announcing cheap talk messages if auctioneers run efficient first price auctions then there always exists an equilibrium in which each auctioneer truthfully reveals her type the equilibrium is constrained efficient assigning more bidders to auctioneers with larger gains from trade the choice of the trading mechanism is crucial for the result most notably the use of second price auctions equivalently ex post bidding leads to the nonexistence of any informative equilibrium we examine the robustness of our finding in various dimensions including finite markets and equilibrium selection

internet advertising and the generalized second price auction selling billions of dollars worth of keywords we investigate the generalized second price gsp auction a new mechanism used by search engines to sell online advertising although gsp looks similar to the vickrey clarke groves vcg mechanism its properties are very different unlike the vcg mechanism gsp generally does not have an equilibrium in dominant strategies and truth telling is not an equilibrium of gsp to analyze the properties of gsp we describe the generalized english auction that corresponds to gsp and show that it has a unique equilibrium this is an ex post equilibrium with the same payoffs to all players as the dominant strategy equilibrium of vcg

a theory of jump bidding in ascending auctions abstract jump bidding is a commonly observed phenomenon that involves bidders in ascending auctions submitting bids higher than required by the auctioneer such behavior is typically explained as due to irrationality or to bidders signaling their value we present field data that suggests such explanations are unsatisfactory and construct an alternative model in which jump bidding occurs due to strategic concerns and impatience we go on to examine the impact of jump bidding on the outcome of ascending auctions in an attempt to resolve some policy disputes in the design of ascending auctions

a theory of credibility this paper presents models in which one agent must decide whether to trust another whose motives are uncertain reliability can only be communicated through actions in this context it pays for people to build a reputation based on reliable behaviour someone becomes credible by consistently providing accurate and valuable information or by performing useful services the theory provides a justification for long term arrangements without binding contracts it also describes those situations where it pays an agent to cash in on his reputation many decisions depend on trusting someone consumers must decide whether to believe advertisements banks need to judge the reliability of loan applicants and employers must decide how much responsibility to delegate to their employees this paper attempts to model situations that arise when someone is uncertain about whether to trust the people he deals with in this context reputations for reliability are valuable an agent becomes credible by consistently providing accurate valuable information or by always acting responsibly i analyse a series of simple abstract models of information transmission in the basic model there are two agents the sender s and the receiver r who are to play the game a known finite number of times at each stage both players learn the value of a parameter measuring the importance of that period s play of the game that is the value of making a correct decision and s obtains payoff relevant information s then sends a signal to r who makes a decision that affects the welfare of both players after both players learn the consequences of r s decision the process repeats at each stage r must decide what action to take in order to do that he must assess the credibility of s the difficulty arises because r is uncertain about s s preferences when play begins i model this by assuming that with positive probability s has identical preferences to r s is a friend and with positive probability s has completely opposed preferences to r s is an enemy this uncertainty creates a trade off for enemy senders at each stage providing honest information enhances s s reputation but only at the expense of foregoing an opportunity for immediate gain by duping r the possibility that s is a friend lends credibility to what he says but this credibility may also be exploited by an enemy s the principal equilibrium has the following form in the basic model where s has no control over the importance of a given play s typically conveys accurate information for the first several periods r raises the probability he places on s being friendly after receiving accurate information if he believes that an enemy would have lied to him with positive probability the more important the information the more likely an enemy will attempt to deceive r an enemy will eventually take advantage of r by misleading him when this happens the sender loses all opportunities for deception in the future i

subsidy free pricing of interruptible service contracts abstract this article analyzes the issue of cross subsidy in the pricing structure of a utility offering interruptible service contracts utilizing a simple theoretical model in which available capacity is subject to random shocks we derive a set of sufficient conditions for the presence of subsidies in the pricing of priority service we find that low priority customers receive no subsidies whenever they pay prices in excess of variable costs a test for subsidies to high priority customers is derived that can be implemented utilizing available information extensions of the analysis are discussed

optimal nonlinear pricing and contingent contracts rationing of output may be required to allocate resources when it is costly to operate a system of spot markets in electric power markets for example interruptible service is the most frequently used form of capacity sensitive allocation after time of use pricing this paper examines the welfare properties and ease of implementation of alternative rationing rules and the pricing of contracts based on rationing rules the model allows for both demand and supply shocks the theoretical analysis is illustrated by application to curtailment rules and pricing in electric power markets rationing rules are a means of sharing risk and joint costs insurance provides a means of sharing the financial costs of random events however there are additional welfare gains to be obtained from pooling physical quantities of goods in the presence of random demand and supply see spulber 1985 by rationing goods the common costs of production or productive capacity can be reduced while also reducing individual risk this explains in part the extensive attention devoted to rationing of electric power electric power is subject to significant randomness in both supply and demand allocation mechanisms based on prices that adjust in real time on complete contingent contracts or on renegotiation of contracts in response to new information can involve prohibitive transaction costs avoidance of the need to ration would require inefficiently high capacity investment electric utilities must therefore employ rationing rules these rules must be

selling to advised buyers in many cases agents that make purchase decisions are uninformed and rely on the advice of biased experts for example when contemplating an acquisition the board of the bidder relies on the advice of the managerial team when deciding what oer to make for the target in this paper we study how to sell assets to such advised buyers if the goal is i to maximize revenues ii to maximize allocative eciency in static mechanisms such as rst and second price auctions advisors communicate a coarsening of information and a version of the revenue equivalence theorem holds in contrast dynamic mechanisms such as multiple round auctions result in more informative communication between buyers and their advisors which leads to more ecient allocations and may lead to higher revenues when advisors are biased toward overpaying an ascending price auction dominates any static mechanism in terms of both eciency and revenues when advisors are biased towards underpaying a descendingprice auction dominates static mechanisms in terms of eciency but often results in

efficient pricing and investment in electricity markets with intermittent resources facing growing technological and environmental challenges the electricity industry needs effective pricing mechanism to promote efficient risk management and investment decisions in a restructured electricity market with competitive wholesale prices and traditionally regulated retail rates however there are technical and institutional barriers that prevent dynamic pricing with price responsive demand in regions with limited energy storage capacity intermittent renewable resources present special challenges this could adversely affect the effectiveness of public policies causing inefficient investments in energy technologies in this paper we present an updated economic model of pricing and investment in restructured electricity market and use the model in a simulation study for an initial assessment of renewable energy strategy and alternative pricing mechanisms a key objective of the study is to shed light on the policy issues so that effective decisions can be made to improve efficiency

simple menus of contracts in cost based procurement and regulation in an influential paper jean jacques laffont and jean tirole 1986 formulated a principal agent model of cost based procurement and regulation and showed that the principal can implement the optimal mechanism by offering the agent a menu consisting of a continuum of linear contracts two related problems with applying this theory in practice have been that the economic logic and the underlying mathematics involved in calculating the optimal menu are quite complex and the principal must be able to specify the agent s entire disutility of effort function in order to calculate the optimal menu as a result the model has not been widely used in practice to either calculate actual incentive contracts or even to develop useful qualitative guidance about the nature of the optimal solution and how it is affected by various economic factors the purpose of this paper is to show that dramatically simpler menus which are easy to understand and calculate and which have lower informational requirements can at least in some cases capture a substantial share of the gains achievable by the fully optimal complex menu in particular this paper considers two item menus where one item is a cost reimbursement contract and the other item is a fixed price contract such menus are called fixed price cost reimbursement fpcr menus for the case where the agent s utility is quadratic and the agent s type is distributed uniformly it is shown that the optimal fpcr menu always captures at least three quarters of the gain that the optimal complex menu achieves where the gain is measured relative to the result of using a cost reimbursement contract this paper s research was originally motivated by a policy issue in defense procurement in the united states the department of defense dod purchases almost all major weapons systems from sole source contractors using contracting methods that essentially amount to using cost reimbursement contracts the best way to understand why dod uses costreimbursement contracting methods is that they perform precisely the function identified in laffont and tirole s principal agent model they guarantee in a situation that amounts to a bilateral monopoly that dod and the firm can reach an agreement i e they guarantee that the agent will always produce the good of course the use of cost reimbursement contracting methods

compact bid languages and core pricing in large multi item auctions we introduce an auction design framework for large markets with hundreds of items and complex bidder preferences such markets typically lead to computationally hard allocation problems our new framework consists of compact bid languages for sealed bid auctions and methods to compute second price rules such as the vickrey clarke groves or bidder optimal core selecting payment rules when the optimality of the allocation problem cannot be guaranteed to demonstrate the efficacy of the approach for a specific complex market we introduce a compact bidding language for tv advertising markets and investigate the resulting winner determination problem and the computation of core payments for realistic instances of the respective winner determination problems very good solutions with a small integrality gap can be found quickly although closing the integrality gap to find marginally better solutions or prove optimality can take a prohibitively large amount of time our subsequent adaptation of a constraint

investment and usage of new technologies evidence from a shared atm network when new technologies become available it is not only essential that firms have the correct investment incentives but often also that consumers make the proper usage decisions this paper studies investment and usage in a shared atm network be cause all banks coordinate their atm investment decisions there is no strategic but only a pure cost saving incentive to invest at the same time because retail fees for cash withdrawals are regulated to zero at both branches and atms consumers may not have the proper incentives to substitute their transactions from branches to the available atms we develop an empirical model of coordinated investment and cash withdrawal demand where banks choose the number of atms and consumers decide whether to withdraw cash at atms or branches we find that banks substantially underinvested in the shared atm network and thus provided too little geographic coverage this contrasts with earlier findings of strategic overinvestment in networks with partial incompatibility furthermore we find that consumer usage of the avail able atm network is too low because of the zero retail fees for cash withdrawals at branches a direct promotion of investment through subsidies or other means can improve welfare but the introduction of retail fees on cash withdrawals at branches would be more effective even if this does not encourage investment per se

electricity rationing through a two stage mechanism analysis of interruptible service mechanisms has focused on the efficiency losses due to the absence of complete contingent contracts there exists a second type of inefficiency which to a large extent has been ignored it originates from the fact that the relative order or ranking of consumers willingness to pay for a given quantity generally varies throughout the contract period a more general model of electricity demand allowing for changes in the order of consumer willingness to pay for a given quantity is presented under such demand conditions the use of a two stage rationing mechanism is proposed rationing plans which maximize expected aggregate surplus are established in the first stage the second stage consists in a market for allocation rights to be operated once the states of nature are revealed allocations under this two stage mechanism are shown to be pareto superior to existing rationing plans directions for future research are discussed

network effects on cash card substitution in transactions and low interest rate regimes we develop a nash game on the adoption of a new eftpos electronic fund transfer at point of sale card payment media given cash is dispensed by a competitive atm automated teller machine network equilibrium conditions when cash and card use coexist entail a specific relationship between the card network coverage parameter super k and the proportion of cash financed expenditures we derive a payments innovation technology constrained transactions demand for money which is highly interest rate sensitive in low interest rate regimes data on cash card use in the uk 1990 97 is used to calibrate the model

failure is an option institutional change entrepreneurial risk and new firm growth does an institutional change that lowers failure barriers improve new firm growth we take advantage of a quasi natural experiment in japan that drastically reduced the stringency of bankruptcy regulations to examine this question using longitudinal data over a 10 year period we find that bankruptcy reform increases the rates of bankruptcy and founding and more importantly the likelihood of high growth ventures by disproportionately encouraging elite individuals i e those with superior human and social capital to start firms in turn these firms are more likely than others to achieve high growth broadly put we contribute to research at the nexus of institutional theory and entrepreneurship by emphasizing the connectedness of barriers to failure venture growth and elite entrepreneurs we also highlight how institutional change that eases bankruptcy change can foster a regenerative cycle of failure founding and growth by attracting more capable entrepreneurs overall we conclude that lowerin

hindsight bias risk perception and investment performance once they have observed information hindsight biased agents fail to remember how ignorant they were initially they knew it all along we formulate a theoretical model of this bias providing a foundation for empirical measures and implying that hindsight biased agents learning about volatility will underestimate it in an experiment involving 66 students from mannheim university we find that hindsight bias reduces volatility estimates in another experiment involving 85 investment bankers in london and frankfurt we find that more biased agents have lower performance these findings are robust to differences in location information overconfidence and experience

information and usage of congestible facilities under different pricing regimes uncertainty about usage conditions is common in many congestible facilities in this paper the authors consider the effects of providing information to prospective users under three regimes free access nonresponsive congestion tolling and responsive tolling based on current information with either free access or nonresponsive tolling better information can induce changes in usage that reduce expected social surplus but responsive tolling assures that better information is welfare improving the joint welfare gains from providing information and tolling can be larger or smaller than the sum of the gains from implementing each independently superadditivity is likely to obtain when demand is price elastic

the impact of discrete bidding and bidder aggressiveness on sellers strategies in open english auctions reserves and covert shilling in practice the rules in most open english auctions require participants to raise bids by a sizeable discrete amount furthermore some bidders are typically more aggressive in seeking to become the current bidder during competitive bidding most auction theory however has assumed bidders can place any tiny continuous bid increase and recommend as optimal the tiniest possible increase this article examines how incorporating discrete bidding and bidder aggressiveness affect optimal strategies for an important decision for auction sellers which is setting the lowest acceptable bid at which to sell the property we investigate two alternative methods sellers often use to enforce this decision these are setting an irrevocable reserve before the auction and covert shilling where the seller or confederates pose as bona fide bidders and raise bona fide bids unsuspected by bidders these optimal strategies interest auction participants especially sellers who must recognize the bidding rules and bidder aggressiveness they will encounter in actual auctions we also examine how these strategies change with the auction context such as the number of bidders and how they differ from corresponding strategies already identified for continuous bidding our model examines open english auctions where bidders have independent private valuations we find that discrete bidding does affect these strategies as does the aggressiveness of the bidder with the highest valuation relative to the average aggressiveness of all other remaining bidders we identify the seller s optimal discrete reserve and show that if the highest valuator is relatively more less aggressive this increases decreases from the optimal continuous reserve and also increases decreases as the number of bidders increases with continuous bidding by contrast this reserve is invariant to the number of bidders as this bidder becomes relatively more aggressive for a given number of bidders the optimal discrete reserve increases while as he or she becomes less aggressive the seller s expected auction utility increases which increases the set of auctions where discrete bidding generates higher seller welfare than continuous we propose a covert shilling model that requires shilling sellers and any confederates and auctioneers to outwardly act no differently than with reserves to avoid detection we identify cases where the seller optimally shills once the bona fide bidding has stopped and identify the corresponding optimal point to stop shilling and accept the next bona fide bid if offered this stopping point does not depend on where bona fide bidding stops or aggressiveness or the number of bidders or on whether shill bids alternate with bona fide bids or are consecutively entered we also find that the optimal lowest acceptable bid with shilling can be higher lower than that with reserves if the highest valuator is sufficiently unaggressive aggressive by comparison in continuous bidding shilling and reserves yield identical lowest acceptable bids sometimes the seller using a shilling strategy optimally should not shill at all and instead accept the bid where bona fide bidding stops this can occur when that bid or the number of bidders is sufficiently high or when the highest valuator is as or less aggressive than other bidders optimal shilling can be as practical to implement as reserves because it does not require sellers to have any information beyond that needed in a reserve auction if sellers shill optimally they can never be worse off compared to using a reserve and can be better off shilling can make bidders worse off but can also make them better off when the seller using a shilling strategy optimally accepts bids below the optimal reserve in these latter cases shilling pareto dominates reserves ex ante we provide numerical examples to illustrate these results we discuss how our results might be affected if shilling is not covert or bidders valuations have a common value component rather than being independent or by the rules used in many discrete bid internet auctions

assessing venture capital investments with noncompensatory behavioral decision models abstract this article examines the prospect of a decision support system for the assessment of venture capital investments it approaches the task of developing decision models from the perspective of the venture capitalist thus venture capitalists have played an active role in defining the predictor variables and in providing data on their own investments venture capitalists and recent research underscore the importance of the entrepreneur in new ventures and the predictor variables selected reflect this bias the literature is now replete with studies demonstrating the superiority of multiattribute actuarial models over human judgment for diverse decision environments ranging from medical science to finance this class of behavioral decision models consists of the simultaneous consideration of several attributes relevant to a decision actuarial models of this kind can be applied to attribute and decision data based on the decision maker s judgments i e expected outcomes before the events transpire termed judgment based models they can also be applied to data on past events or actual outcomes where known termed environment based models again it needs to be emphasized that actuarial models whether based on the decision maker s judgments or on the environment usually outperform the decision maker these general principles are applied here among actuarial models a particular subclass of models is called noncompensatory in these models a low value for one attribute cannot be compensated by a high value for another attribute as an example in selecting a place kicker in football athletic skills other than kicking ability are irrelevant in this study two types of noncompensatory actuarial models conjunctive and disjunctive are used to model both venture capitalists judgments and the environment interviews with venture capitalists reveal that some place strong emphasis on one or two attributes in judging a potential investment this type of decision making behavior indicates a disjunctive decision process at the same time there can be a tendency to ensure that a prospective investment is satisfactory at a minimum the entrepreneur s tenacity courage is a redundant variable that is sublimated in desire for success and enthusiasm capacity for work

efficient advert assignment we develop a framework for the analysis of large scale ad auctions where adverts are assigned over a continuum of search types for this pay per click market we provide an efficient mechanism that maximizes social welfare in particular we show that the social welfare optimization can be solved in separate optimizations conducted on the time scales relevant to the search platform and advertisers here on each search occurrence the platform solves an assignment problem and on a slower time scale each advertiser submits a bid that matches its demand for click throughs with supply importantly knowledge of global parameters such as the distribution of search terms is not required when separating the problem in this way exploiting the information asymmetry between the platform and advertiser we describe a simple mechanism that incentivizes truthful bidding has a unique nash equilibrium that is socially optimal and thus implements our decomposition further we consider models where advertisers ad

simple competitive internet pricing abstract it is widely recognised that pricing is required to control congestion on the internet one lesson that has emerged from many proposals is that any price system should be simple and robust to competition this is highlighted in the question currently under debate in the market for internet services should usage prices should be employed at all in a duopoly model with overall positive network effects it is shown that flat rate pricing can occur in equilibrium even when the costs of measuring variable demand are very small

information and usage of free access congestible facilities with stochastic capacity and demand we investigate the effect of information on users participation decisions at a free access congestible facility that is subject to unpredictable fluctuations in capacity and demand with demand isoelastic in user cost and user cost isoelastic in the ratio of demand to capacity optimal design capacity is larger with mean preserving spreads in capacity and demand if and only if demand elasticity is less than one expected welfare is greater with better information interestingly with nonconstant elasticity demand and or user costs information can be welfare reducing

the changing form of overconfidence and its effect on growth expectations at the early stages of startups in this article we attempt to explain the failure of many studies to show a link between entrepreneurs beliefs in their entrepreneurial skills and the actual or expected growth of their venture by using frese and gielnik s action characteristics model of entrepreneurship as an analytical framework and analyzing global entrepreneurship monitor adult population survey data we show that entrepreneurs perceived entrepreneurial skills are consistently inflated over the different phases of the startup albeit in different ways depending on the typical form of overconfidence the link between skill beliefs and growth expectations may be mediated by expectations about competitive advantages moreover the huge drop in growth expectations is not associated with a drop in perceived skills instead other entrepreneurial expectations also become more realistic and their effect strengthens with experience

bayes nash equilibria of the generalized second price auction abstract we develop a bayes nash analysis of the generalized second price gsp auction the multi unit auction used by search engines to sell sponsored advertising positions our main result characterizes the efficient bayes nash equilibrium of the gsp and provides a necessary and sufficient condition that guarantees existence of such an equilibrium with only two positions this condition requires that the click through rate of the second position is sufficiently smaller than that of the first when an efficient equilibrium exists we provide a necessary and sufficient condition for the auction revenue to decrease as click through rates increase interestingly under optimal reserve prices revenue increases with the click through rates of all positions further we prove that no inefficient equilibrium of the gsp can be symmetric our results are in sharp contrast with the previous literature that studied the gsp under complete information

frontiers in spectrum auction design abstract spectrum auction design has seen number innovations in the recent years regulators have used various types of combinatorial auction formats including simple ascending combinatorial clock auctions and first price sealed bid combinatorial auctions the simultaneous multi round auction smra and the two stage combinatorial clock auction cca are the most wide spread auction formats for spectrum sales to date we provide an accessible overview of strategic problems in these auction formats and summarize research challenges in this field for a broader audience of readers in industrial organization

redefining business success distinguishing between closure and failure new firms are believed to have high closure rates and these closures are believed to be failures but two u s census bureau data sources illustrate that these assumptions may not be justified the business information tracking series bits showed that about half of new employer firms survive beyond four years and the characteristics of business owners cbo showed that about a third of closed businesses were successful at closure the cbo also made it possible to compare results of models of business survival and business success but because of non response bias logit models were used similar to previous studies firms having more resources that were larger with better financing and having employees were found to have better chances of survival factors that were characteristic of closure such as having no start up capital and having a relatively young owner were also common in businesses considered successful at closure hence few defining factors can be isolated leading to true failures the significant proportion of businesses that closed while successful calls into question the use of business closure as a meaningful measure of business outcome it appears that many owners may have executed a planned exit strategy closed a business without excess debt sold a viable business or retired from the work force it is also worth noting that such inborn factors as race and gender played negligible roles in determining survivability and success at closure

analysis and design of business to consumer online auctions business to consumer online auctions form an important element in the portfolio of mercantile processes that facilitate electronic commerce activity much of traditional auction theory has focused on analyzing single item auctions in isolation from the market context in which they take place we demonstrate the weakness of such approaches in online settings where a majority of auctions are multiunit in nature rather than pursuing a classical approach and assuming knowledge of the distribution of consumers valuations we emphasize the largely ignored discrete and sequential nature of such auctions we derive a general expression that characterizes the multiple equilibria that can arise in such auctions and segregate these into desirable and undesirable categories our analytical and empirical results obtained by tracking real world online auctions indicate that bid increment is an important factor amongst the control factors that online auctioneers can manipulate and control we show that consumer bidding strategies in such auctions are not uniform and that the level of bid increment chosen influences them with a motive of providing concrete strategic directions to online auctioneers we derive an absolute upper bound for the bid increment based on the theoretical upper bound we propose a heuristic decision rule for setting the bid increment empirical evidence lends support to the hypothesis that setting a bid increment higher than that suggested by the heuristic decision rule has a negative impact on the auctioneer s revenue

priority service pricing investment and market organization tingent forward delivery contracts offered by a seller each customer s selection of one contract from the menu determines the customer s service order or priority in each contingency the seller rations supplies by serving customers in order of their selected priorities until the supply is exhausted or all customers are served various forms of priority service are widely

an alternating recognition model of english auctions we present an alternative abstraction of an english oral ascending auction to the standard in milgrom and weber 1982 that accords more closely with practices in some auction markets in particular the assumptions that exits are irrevocable and necessarily public are dropped making endogenous the decision to compete silently and privately or openly in the model the price rises in a stylization of an auctioneer alternately recognizing two bidders who affirm willingness to pay the current price the auctioneer pays attention to other bidders only when a recognized bidder exits such exits may be temporary although we construct an equilibrium in which there is no benefit to exit and reentry the number of public exits is stochastic frequently a losing bidder will remain silent giving no indication of his willingness to pay and hence yielding no useful inference about his private information thus the source of the expected revenue advantage of english auctions over second price auctions is only stochastically available moreover when public exits are incomplete the ordinal rank of the bidder whose private information can be inferred is unknown making that information less valuable consequently the simpler formula for expected revenue in second price auctions may be the preferred approximation for english auctions

perceiving and managing business risks differences between entrepreneurs and bankers abstract we compared entrepreneurs with bankers in their perception and management of a variety of risks problems included financial risk risk to human life and health and risk of a natural disaster cluster analysis and content analysis of think aloud protocols revealed surprising details entrepreneurs accept risk as given and focus on controlling the outcomes at any given level of risk they also frame their problem spaces with personal values and assume greater personal responsibility for the outcomes bankers focus on target outcomes attempting to control risk within structured problem spaces and avoiding situations where they risk higher levels of personal responsibility

efficient and competitive rationing abstract the contracts that interest us here are called priority service contracts the salient feature of such contracts is that they specify each customer s priority in obtaining service that is they specify the tank order in which a customer is served out of the available supply until all customers are served or supply is exhausted such contracts essentially establish queues for customers in section 1 the author provides some background about priority service section 2 formulates a basic model and offer several illustrations also describes two main examples that motivate the theoretical development section 3 derives some key results that show how the prices of priority service contracts are designed to induce customers to self select efficient service orders in section 4 the author discusses various ways that state enterprises can organize markets that implement priority service efficiently in section 5 we study the operation of competitive markets for priority service section 6 concludes with some summary remarks two themes are emphasized one is that a state enterprise can promote substantial efficiency gains by substituting priority service for absent spot markets the other is that oligopolistic firms may have insufficient incentives to offer efficient product diversity consequently allocative efficiency depends on entry of numerous firms even so dispersal of supplies among many firms can prevent productive efficiency when there are advantages from pooling supplies

simplified mechanisms with an application to sponsored search auctions abstract a mechanism can be simplified by restricting its message space if the restricted message spaces satisfy a certain outcome closure property then the simplification is tight for every e 0 any e nash equilibrium of the simplified mechanism is also an e nash equilibrium of the unrestricted mechanism prominent auction and matching mechanisms are tight simplifications of mechanisms studied in economic theory and often incorporate price adjustment features that facilitate simplification the generalized second price auction used for sponsored search advertising is a tight simplification of a series of second price auctions that eliminates the lowest revenue equilibrium outcomes and leaves intact only higher revenue equilibria

entrepreneurial risk have we been asking the wrong question entrepreneurs are often thought to engage in risky behaviors thus they may be seen as more willing than average to take risks we offer a dissenting view central to entrepreneurship is the alertness perspective which suggests that entrepreneurs may assess opportunities and threats differently than non entrepreneurs that differential assessment may be understood in terms of bayesian probability the bayesian model argues that differing assessments of prospective outcomes may be attributable to differences in prior information this perspective on risk assessment has implications for entrepreneurial decision making whether to launch a new venture or adopt a growth strategy the literature is reviewed a synthesis is offered a numerical example is developed and a research agenda is proposed

some economics of seasonal gas storage we propose a model of seasonal gas markets which is flexible enough to include supply and demand shocks while also considering exhaustibility the relative performances of alternative policies based on price caps and associated measures or tariffs are discussed we illustrate with structural estimates on us data how this theory can be used to give insights into the intertemporal incidence of policy instruments

the long run link between money growth and inflation is inflation always a monetary phenomenon many economists believe that the link between money growth and inflation in the u s has weakened over the last two decades due in part to the federal reserve s policy experiment in 1979 1982 and innovations in the financial sector of the economy i find that the long run relationship between money growth and inflation is strong in a statistical sense and important economically the key result is that the trend or growth component in cpi inflation is entirely due to the trend component of monetary base growth jel c32 e31 e51

on the role of discrete bid levels in oral auctions abstract bids in oral auctions are restricted to discrete levels this paper both examines the choice of levels at which bids will be allowed and also presents a simple model of the role of the discrete levels in bidding strategy we consider two different distributions of bidders values identifying cases in which revenue is maximized by increasing intervals by constant intervals and by decreasing intervals moreover conditions under which the choice of bid levels that maximizes bid taker revenue also maximizes economic efficiency are developed we present a model of the economic trade off between auction duration and step size we consider the previously undiscussed issue of when economically motivated bidders should skip bid levels and when they should merely make minimum advances and develop a model in which it is equilibrium behavior always to make the minimum allowed advance

competition among sellers who offer auctions instead of prices abstract in this paper we study a large market in which sellers compete by offering auctions to buyers instead of simple fixed price contracts two variants of the model are studied one extends a model first analyzed by wolinsky rev econ stud 55 1988 71 84 in which buyers learn their valuations only after meeting sellers the other variant extends the model of mcafee econometrica61 1993 1281 1312 in which buyers know their valuations before they choose among available auctions the equilibrium array of auctions is characterized for each case and the efficiency properties of the equilibria are analyzed journal of economic literatureclassification numbers d41 d44 d82

effects of minimum bid increments in internet auctions evidence from a field experiment i study the role of minimum bid increments mbi in internet auctions using natural field experiment data from a finnish online auction site huuto net internet auctions are typically viewed as secondprice implying truthful bidding however due to the presence of the mbi equilibrium bidding behavior involves bid shading i sell otherwise identical gift cards while varying the mbi and test between truthful bidding and bid shading truthful bidding is rejected consistently with equilibrium behavior bid shading increases as the mbi increases this implies that real world bidders are capable of reacting rationally even to seemingly small variations in their strategic environment this version september 17 2015 replaces the february 15 2013 version this abstract was borrowed from another version of this item

two tier pricing of shared facilities in a free entry equilibrium we explore how well the market will provide shared facilities which are subject to congestion it is usually efficient to have multiple facilities because it is more efficient to spend resources on facilities than to endure crowding costs we assume firms can charge a membership price and a visit price we present a symmetric nash equilibrium in these two prices we show that ifthe number offirms is large the membership price will be small thus the membership price is a measure of market power when entry occurs in response to positive profit but such that entry is deterred by the prospect of negative profit in a symmetric nash equilibrium the endogenous number offirms is bounded below by one fewer than the efficient number thefees paid by a client converge to an appropriately defined competitive price as the economy is replicated

socially optimal procurement with tight budgets and rationing abstract we investigate the behaviour of a social planner that secures the supply of a good e g an environmental benefit through contracting with private agents while the social planner seeks to maximise net social benefits she is also controlled with a fixed budget private agents are profit maximising and hold private information concerning their variable costs of production they also have known fixed costs of contracting we find that budget constraints and fixed costs change the optimal contract design in more than one way the social planner minimises costs rations high cost contracts to reduce fixed costs and information rents and distorts contracts for all agent types including low cost agents we find that rationing improves social welfare also even though social costs including tax distortion are explicitly taken into consideration they do not affect the design of optimal contracts when budgets are tight in those cases the budget constraint dominates the solution

flexible and semiflexible consumer demands with quadratic engel curves in this paper we introduce three flexible consumer demand systems in which expenditures on goods are quadratic functions of income we view these alternatives as to the demand systems used heretofore in the empirical modeling of rank three demands namely those in which expenditure shares are quadratic functions of the logarithm of income curvature conditions required by theory can be imposed locally during the estimation for each and a semiflexible version can be estimated for illustrative purposes we estimate various forms of two of the systems using canadian data on seven categories of goods for the period 1947 to 1995

involuntary unemployment and worker self selection abstract consider a firm that lacks information about the reservation wage or ability of any specific worker but is aware that workers with higher reservation wages tend to be more able on average we show that under a simple condition that the efficiency wage exceeds the lowest reservation wage the optimal hiring policy for the firm involves 1 no wage discrimination and 2 rationing of jobs when demand for its product is low the result also extends to the case where hours of work are variable provided each worker is most productive when working a strictly positive number of hours per week

overoptimism and the performance of entrepreneurial firms recent theoretical and empirical research on cognitive bias in decision making suggests that overoptimism critically influences entrepreneurs decisions to establish and sustain new ventures we investigate whether such cognitive bias influences entrepreneurial venture performance using data on commercialization efforts for university inventions in contrast to prior studies our results suggest that entrepreneurial overoptimism does not appear to be the determining factor in the decision to found a firm we do find that entrepreneurs continue unsuccessful development efforts for longer periods of time than do established firms which is consistent with entrepreneurial overoptimism in the development of technologies with uncertain market prospects this latter finding is also consistent with rationality based models of decision making behavior however we find that the economic returns associated with many of the technologies in our sample are realized after the start up has been acquired by an established firm suggesting that start ups may serve as a transitional organizational form in the market for technology commercialization

on the equivalence of walrasian and non walrasian equilibria in contract markets the case of complete contracts this paper explores two models of an economy in which contracts are exchanged in the first model contracts are exchanged on a competitive market in which traders expectations concerning conditions that prevail within specific markets adjust until markets clear in the second model contract designers compete directly against one another by offering alternate contracts it is shown that walrasian allocations correspond with the equilibrium allocations in the model with direct competition when the number of traders is made large furthermore the expectational assumptions that drive the walrasian analysis coincide with off the equilibrium path conjectures in the problem with direct competition

matching with contracts we develop a model of matching with contracts which incorporates as special cases the college admissions problem the kelso crawford labor market matching model and ascending package auctions we introduce a new law of aggregate demand for the case of discrete heterogeneous workers and show that when workers are substitutes this law is satisfied by profit maximizing firms when workers are substitutes and the law is satisfied truthful reporting is a dominant strategy for workers in a worker offering auction matching algorithm we also parameterize a large class of preferences satisfying the two conditions

profit maximizing matchmaker abstract this paper considers a resource allocation mechanism that utilizes a profit maximizing auctioneer matchmaker in the kelso crawford 1982 many to one assignment problem we consider general and simple individualized price message spaces for firms reports following milgrom 2010 we show that in the simple message space i the matchmaker s profit is always zero and an acceptable assignment is achieved in every nash equilibrium and ii the sets of stable assignments and strong nash equilibria are equivalent by contrast in the general message space the matchmaker may make a positive profit in a nash equilibrium this shows that restricting message space not only reduces the information requirement but also improves resource allocation

a note on the wallet game with discrete bid levels abstract it is well known that in the wallet game with two bidders bidding twice the individual signal is an equilibrium we prove that this strategy is never an equilibrium in a japanese english auction once discrete bid levels are introduced we also discuss the implications of this result

silent auctions in the field and in the laboratory we analyze data from hundreds of auctions from three field silent auction sessions we focus on the descriptive statistics and on a parametric model of jump bidding we then report data from six laboratory sessions of silent auctions as a controlled environment this allows us to evaluate the auctions in ways not available within the field the laboratory experiments capture essential features of the field sessions and thus comprise a credible laboratory testbed for further examination of institutional perturbations in the silent auction jel d44 h41

advance purchase discounts and monopoly allocation of capacity optimal pricing by a monopoly airline that faces capacity constraints during the peak demand period is studied the existence of capacity constraints means that in order to expand output the airline must divert demand from the peak period to the off peak period a particular advance purchase discount policy is shown to be the profit maximizing method of selling tickets if the advance purchase requirement were infeasible output and total surplus would both be lower jel l12 substantial discounts for air travel are generally available to travelers who are willing to purchase tickets a week or more in advance of the departure date this paper demonstrates why the imposition of an advance purchase requirement may be a profit maximizing strategy for a monopoly airline facing capacity constraints during times of peak demand 1 the practice of imposing an advance purchase requirement on discount tickets is also placed in a favorable light in terms of its impact on social

equilibrium price dispersion under demand uncertainty the roles of costly capacity and market structure when capacity is costly and prices are set in advance firms facing uncertain demand will sell output at multiple prices and limit the quantity available at each price i show that the optimal price strategy of a monopolist and the unique pure strategy nash equilibria of oligopolists both exhibit intrafirm price dispersion moreover as the market becomes more competitive prices become more dispersed a pattern documented in the airline industry while generating similar predictions the model differs from the revenue management literature because it disregards market segmentation and fare restrictions that screen customers

overconfidence and excess entry an experimental approach psychological studies show that most people are overconfident about their own relative abilities and unreasonably optimistic about their futures e g shelly e taylor and j d brown 1988 neil d weinstein 1980 when assessing their position in a distribution of peers on almost any positive trait like driving ability ola svenson 1981 income prospects or longevity a vast majority of people say they are above the average although of course only half can be if the trait is symmetrically distributed this paper explores whether optimistic biases could plausibly and predictably influence economic behavior in one particular setting entry into competitive games or markets many empirical studies show that most new businesses fail within a few years for example using plant level data from the u s census of manufacturers spanning 1963 1982 timothy dunne et al 1988 estimated that 61 5 percent of all entrants exited within five years and 79 6 percent exited within 10 years most of these exits are failures see also dunne et al 1989a 1989b d shapiro and r s khemani 1987

the heterogeneity of animal spirits a first taxonomy of entrepreneurs with regard to investment expectations investment expectations are highly subjective and subjectivity is inherently diverse we propose an analytical taxonomy of entrepreneurs with regard to investment expectations of how diverse animal spirits are we draw on past research so as to outline the relevant independent classification variables motivations skills management styles and affective traits comprise our four groups of classification variables based on a field study using a sample of 289 entrepreneurs and performing two different cluster analyses we find 11 stable groups of entrepreneurs we portray them as ideal types a la weber there may be major and minor memberships our 11 groups are the neoclassical manager the builder the administrator the paternalistic manager the hero the mogul the prophet the craftsman the inventor the gambler and the explorer

monopoly price dispersion under demand uncertainty when a monopolist sets its price before its demand is known then it may set more than one price and limit the availability of its output at lower prices this article adds demand uncertainty and price rigidities to the standard model of monopoly pricing when there are two states of demand and the ex post monopoly price is greater when demand is high then the monopolist s optimal ex ante pricing strategy is to set two prices and limit purchases at the lower price

jumping and sniping at the silents does it matter for charities abstract despite its popularity as a fundraiser for charities very little research has been done on the bidding and revenue properties of the silent auction this paper examines the consequences of two behaviors common in silent auctions jump bidding and sniping in laboratory experiments with endogenous participation our results suggest that deliberative jumping the result of impatient bidders attempting to telescope time tends to increase revenue while deliberative sniping by experienced bidders tends to decrease it we also show that when charities can encourage jumping and discourage sniping silent auctions can perform as well as their sometimes more entertaining but more expensive alternative the english auction

design of discrete dutch auctions with consideration of time abstract as a departure from much of the existing literature that aims at maximizing the expected revenue from a single auction this research work is concerned with the design of discrete dutch auctions to achieve the optimal balance between the selling price of the object and the auction duration so that the auctioneer s expected revenue per unit of time is as high as possible the new objective is especially important in trading perishable products or services when multiple auctions are to be conducted by the auctioneer for different sellers during a limited period of time our findings indicate that the proposed discrete dutch auction models generate higher average revenues per unit of time for the auctioneer than their counterparts without consideration of time this is achieved by reducing the duration of each auction in exchange for more auctions to be held within the given time frame so that the small decrease in the revenues from the longer auctions is more than compensated for by the large increase in the total revenues from the shorter auctions the numerical results show that the proposed discrete dutch auction design becomes extremely useful when the number of bidders becomes large it is also shown that complete knowledge about the number of bidders in the auction results in a higher auctioneer s expected revenue per unit of time

more than you think an inclusive estimate of business entries abstract the wells fargo nfib series on business entries and exits collected data throughout 1995 from 36 000 households regarding the business formation activity occurring among adults within those households after adjusting for the 1 37 owners per firm and the 10 of households with more than one entry there were an estimated 4 553 million business entries in the 12 month period involving 6 211 million active owners seventy eight and one half 78 5 percent of those businesses were de novo starts 20 0 purchases and the remainder other forms of entry including missing responses most of the entries were quite small whether started or purchased the number of business entries is significantly larger than prior estimates however the 4 553 million figure when dissected into component parts is consistent with other measures of business entry the primary reason for the larger estimate is that this research was able to capture the significant number of very small entries that either do not appear in other databases or appear only after a substantial delay these new data offer a significantly expanded view of the american business population and its dynamics more specifically they provide quantification of the smaller end of the entry scale thereby introducing new population distributions and raising fundamental research and marketing questions about the unit of analysis what is a business what constitutes a reasonable survey sample to what population do we generalize survey data what are the market segments of the small business population and how do they differ what are the public policy requirements of these segments and how do they coincide and conflict and what do real entry numbers tell us about the operation of the american economy on both a secular and cyclical basis the foregoing are obvious however there are more subtle and perhaps more interesting questions for example the more people try to go into business for themselves the more our collective american experience is influenced by the experience of business ownership small business draws enormous empathy from the american public few americans institutions are as popular this is obviously a complex phenomenon however one explanation for its popularity is that so many americans are exposed to business ownership either personally or through someone they know part of this research not yet published shows that small business ownership pervades every class income category racial grouping etc the penetration of business formation into the american experience therefore is not only deep it is also broad and when its dimensions are so great the remaining issue is not the existence of influence but its degree if there are more starts than previously recognized there must also be more exits and if there are more exits the dynamics of the business entry exit process become even more tumultuous than previously recognized particularly for those interested in either policy or management the question becomes why is exit so common one path of inquiry leads to motivation for entry including career alternatives and income supplementation to what extent do people intend to grow their businesses and to what extent do they intend their businesses to fill financial occupational or time gaps until something better comes along another path of inquiry leads to resources do resource constraints or constraints of other natures impede business development then there is the issue of preparation how well prepared are entrants and what reasonable steps can be taken to improve their assessments of potential opportunities or to effectively implement plans to capitalize on them these are not necessarily new issues but they become more conspicuous and pressing when the large number of exits is appreciated the technique used to capture these data at a reasonable cost is called an omnibus or caravan survey this survey technique is not well known outside the commercial survey industry but it presents considerable opportunity for researchers either with limited budgets or desirous of asking fewer than 10 15 minutes worth of questions from a sample of the adult population its advantage is financial multiple sponsors can ask a limited number of proprietary questions at their own expense but they then share the costs and results of reaching respondents and of asking the demographic questions for example age or sex of respondent the current research posed two screen questions to all 36 000 households interviewed the sponsors paid for those 72 000 questions but only about 2 000 respondents passed one of the screens these respondents were led through several more questions thus the sponsors paid just for the screen questions and those questions administered to the 2 000 an extensive set of demographic data about the respondents was thrown in free

communication and efficiency in auctions abstract we study auctions under restricted communication agents have valuations distributed over an interval but can only report one of a finite number of messages we provide necessary conditions for welfare as well as revenue maximizing auctions in the independent private values case when bidders report simultaneously we also show that the seller who chooses how to allocate a fixed number of messages allocates them evenly over all agents

managing water supply shortage interruption vs pricing abstract supply shortage is a common problem faced by a consumer solutions for allocating the limited supply include rationing queuing interruption and pricing while previous research has examined the welfare losses generated by each solution there is little evidence on their relative magnitudes within a common framework the objective of this paper is tospecify a model of consumer behaviour under service interruption to estimate the exact welfare loss of service interruption the same model is used to estimate the loss of a price increase intended to resolve a supply shortage using water consumption data collected for hong kong we find that relative to pricing service interruption is inefficient for water shortage management

the role of the bidding process in price determination jump bidding in sequential english auctions i introduction standard auction theory predicts that in a private value english oral auction the winner will be the bidder with the highest valuation for the object and the selling price will be the second highest valuation in those auctions a reasonable strategy for a bidder would be to increase each bid by the minimum bid increment this solution is referred to as the ratchet solution straightforward bidding or as pedestrian bidding jump bidding occurs when a new offer is submitted that is above the old offer plus the minimum bid increment permitted in this paper i study the sequence of bidding in an open outcry english auction to examine how strategic bidding affects price determination i do this by examining the nature of jump bidding in data i have collected from a series of public auctions of used cars in new jersey the auction literature has not fully addressed and characterized jump bidding in english auctions the theoretical literature on the conditions under which jump bidding will emerge e g avery 1998 daniel and hirshleifer 1998 easley and tenorio 2004 isaac salmon and zillante 2007 macskasi 2000 rothkopf and harstad 1994 does not include any models of english auctions with affiliated values and discrete bid levels table 1 summarizes the different models predictions the empirical and experimental literature on jump bidding is also quite narrow plott and salmon 2004 isaac salmon and zillante 2005 2007 and isaac and schnier 2005 found support for jump bidding in their studies borgers and dustmann 2005 in analyzing the united kingdom s sale of licenses for third generation mobile telephone services found that although the majority of bids in the auction were the lowest admissible bids there were a significant number of jump bids haile and tamer 2003 also documented jump bidding in a regular english auction and reported that the gap between first and second highest bids is usually above the minimum bid increment allowed section ii provides a detailed literature survey in order to characterize jump bidding and because the auctions i study have no seller s reserve price i define the first jump as the first offer submitted by any bidder the second jump is the difference between the second offer submitted by a bidder and the first offer the last jump is the difference between the winning bid and the previous offer 1 i further define the average jump 2 across all jumps excluding the first and last jumps figure 1 describes these variables graphically i find that jump bidding is a widespread empirical regularity in the sale of all items the jumps depend on the presale estimate of the item s price and are not affected by the selling order for almost all items bidders use jump bidding to increase the current offer furthermore on average the first jump is greater than the second jump which is greater than the average jump which in turn is greater than the last jump i offer several explanations for the existence of jump bidding these findings suggest that there is some strategic bidding behavior in the way bidders advance their bids bidders consider the way the auction progresses which implies that a bidder s strategy includes not only the stopping point along the bidding path but also the precise nature of the path that led there consideration of jump bidding strategy sheds light on whether an open outcry auction is best interpreted with models that assume private or common item valuations under the assumption of independent private values bidding history should not affect the point at which a bidder drops out this is not the case in a common value auction in which each stage of the auction is used as a device for signaling the selling price in an english auction with common values will be path dependent hence a simple test of the effect of the first jump on the selling price determines the type of the auction

a smart market for industrial procurement with capacity constraints we address the problem of designing multi item procurement auctions for a monopsonistic buyer in capacity constrained environments using insights from classical auction theory we construct an optimization based auction mechanism smart market relying on the dynamic resolution of a linear program minimizing the buyer s cost under the suppliers capacity constraints suppliers can modify their offers in response to the optimal allocation corresponding to each set of bids giving rise to a dynamic competitive bidding process to assist suppliers we also develop a bidding suggestion device based on a myopic best response mbr calculation that solves an associated optimization problem assuming linear costs for the suppliers we study within a game theoretic framework the sequence of bids arising in this smart market under a weak behavioral assumption and some symmetry requirements an explicit upper bound for the winning bids is established we then formulate a complete behavioral model and solution methodology based on the mbr rationale and show that the bounds derived earlier continue to hold we analytically derive some structural and convergence properties of the mbr dynamics in the simplest nontrivial market environment which suggests further possible design improvements and investigate bidding dynamics and incentive compatibility issues via numerical simulations