bidding behaviour in multi unit auctions an experimental investigation we present laboratory experiments of five different multi unit auction mechanisms two units of a homogeneous object were auctioned off among two bidders with flat demand for two units we test whether expected demand reduction occurs in open and sealed bid uniform price auctions we also test revenue equivalence for these auctions as well as for the ausubel the vickrey and the discrim inatory sealed bid auction furthermore we compare the five mechanisms with respect to the efficient allocation of the units auctions play a more and more important role in everyday business life an increasing number of important markets are organised as auctions and auction design is probably one of the most successful applications of economic theory to practice among the prominent examples are the spectrum auctions in the us and in europe treasury auctions in the us the design of electricity spot markets oil and timber sales as well as the massive use of procurement auctions both by the public sector and by private firms the spectrum auctions across the world have demonstrated that carefully designed auctions raise high revenues and often succeed in implementing efficient allocations

the derived demand for consolidated financial reporting abstract during the latter half of the 1930s australian taxation law changes induced companies to adopt a holding company legal structure which increased agency costs associated with external financing this paper argues that contracting practices designed to minimize these costs played an important part in the evolution of consolidated financial reporting consistent with this view the likelihood of consolidation is found to be a function of the presence of cross guarantees management s share of a firm s equity and the number and type of subsidiaries

self organising behaviour in the presence of negative externalities a conceptual model of commuter choice abstract we use a model with local interaction a one dimensional cellular automaton to study how commuters choose among alternative roads commuters have information about their neighbours most recent experience local interaction and they remember their own experiences memory we illustrate how a simple self organizing system based on local information and locally rational agents can in some cases outperform the nash equilibrium while the social optimum is unenforceable without a central planner due to the variations in individual travel times i e the social optimum is not individually rational variations across commuters in the steady state of our self organising system are at least equivalent to and mostly significantly larger than those required for the social equilibrium increasing the neighbourhood size illustrates that more information without co ordination leads to worse overall performance

demand reduction in multi unit auctions with varying number of bidders and units we examine the effect of varying the number of bidders and units on bid values in multi unit auctions our results suggest that the uniform price auction is sensitive to demand reduction however increasing the number of bidders or and units can significantly decrease it

accounting for retail land sales analysis of a mandated change abstract this study assesses the stock market s reaction to a series of events leading up to a mandated change in accounting for retail land sales evidence is found to support the conclusion that the market reacted to some of these events in a manner consistent with the effects of the accounting change on debt annagement contracts a distinctive aspect of the analysis is the efficient use of security returns data to detect market reactions and to derive empirical distributions of test statistics employed the analysis is extended by a model for grouping regression equations known as seemingly unrelated regressions however the gains from this extension are modest

efficiency and surplus bounds in cournot competition we derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under cournot competition to do so we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of concavity and convexity the more concave is demand the larger the share of producer surplus in overall surplus the smaller is consumer surplus relative to producer surplus and the lower the ratio of deadweight loss to producer surplus deadweight loss over total potential surplus is at rst increasing with demand concavity then eventually

deadweight loss in oligopoly a new approach ever since harberger s 18 pioneering article researchers have attempted to estimate the welfare loss resulting from the exercise of market power despite nearly four decades of work in this area however surprisingly few researchers disagree with harberger s finding that deadweight loss is quite small while many dispute his claim that deadweight loss in manufacturing amounts to only about 0 1 of gnp few estimates exceed more than 1 3 of the value of output some of the higher estimates moreover include losses of a broader nature than the purely allocative losses on which harberger focuses in this paper i use a generalization of a recent model of oligopoly to estimate the magnitude of deadweight loss in the u s manufacturing sector while the exact magnitude of the losses depends on several parameters the estimates indicate that deadweight loss may be considerably higher than earlier work suggests ranging from roughly 6 10 of the value of shipments if demand is inelastic to over 20 if demand is elastic

multivariate tests of the zero beta capm abstract a cross sectional regression test csrt of the capm is developed and its connection to the hotelling t2 test of multivariate statistical analysis is explored algebraic relations between the csrt the likehood ratio test and the langrange multiplier test are derived and a useful small sample bound on the distribution function of the csrt is obtained an application of the csrt suggests that the crsp equally weighted index is inefficient but that the inefficiency is not explained by a firm size effect from february to december

how do selling mechanisms affect profits surplus capacity and prices with unknown demand i analyze a model in which a seller wishes to sell multiple homogeneous goods to a large group of buyers with unknown demand the seller may either sell objects via a posted price mechanism a discriminatory price auction a uniform price auction their open bid analogs or a revelation mechanism in which the seller first asks all potential buyers to report their valuations and then sets a reserve price i show that the revelation mechanism leads to the greatest profits the auction mechanisms result in identical expected profits and the posted price mechanism results in the smallest profits however the more profitable mechanisms impose stronger informational requirements that may make these mechanisms infeasible in practice and the posted price mechanism also results in the greatest total surplus i also find the seller chooses a lower capacity and reserve price in an auction than in the posted price mechanism

welfare and barriers to entry an empirical study the early tests for the existence of barriers to entry e g comanor wilson 8 were based on regressing various measures of profitability on barriers and other structural variables the results of these tests were widely debated a different approach undertaken by dale orr 24 was to use entry de novo as the dependent variable and examine whether so called barriers to entry indeed impeded or retarded entrants masson and shaanan 19 combined these two approaches and examined profits and entry simultaneously on the theoretical side the arguments on the subject of barriers have been intense one reason for the keen interest in this topic has been the fear of misguided policy resulting from a misunderstanding of the role of barriers salop 25 suggests that barriers to entry might be divided into two categories innocent and strategic barriers von weizsacker 33 and demsetz 10 offer an alternative classification based on a different definition of barriers to entry this definition deals directly with the negative connotations sometimes associated with barriers von weizsacker 33 400 writes a barrier to entry is a cost of producing which must be borne by a firm which seeks to enter an industry and which implies a distortion in the allocation of resources from the social point of view von weizsacker demonstrates within the context of his models cournot and rational expectations that expenditures to deter entry are not necessarily socially harmful thus an increase in minimum efficient scale caused by exogenous factors or an increase in spending on goodwill a variant of product differentiation may be welfare enhancing demsetz

e sourcing in procurement theory and behavior in reverse auctions with noncompetitive contracts one of the goals of procurement is to establish a competitive price while affording the buyer some flexibility in selecting the suppliers to deal with reverse auctions do not have this flexibility because it is the auction rules and not the buyer that determines the winner in practice however hybrid mechanisms that remove some suppliers and a corresponding amount of demand from the auction market are quite common we find that in theory such hybrid mechanisms increase competition and make buyers better off as long as suppliers are willing to accept noncompetitive contracts it turns out that suppliers often do because under a wide variety of conditions these contracts have a positive expected profit our theory relies on two behavioral assumptions 1 bidders in a multiunit uniform price reverse auction will follow the dominant strategy of bidding truthfully and 2 the suppliers who have been removed from the market will accept noncompetitive contracts that have a positive expected profit our experiment demonstrates that bidders in the auction behave very close to following the dominant strategy regardless of whether this auction is a stand alone or a part of a hybrid mechanism we also find that suppliers accept noncompetitive contracts sufficiently often although not always to make the hybrid mechanism outperform the reverse auction in the laboratory as well as in theory

an empirical test of the free rider and market power hypothesis this analysis tests the free rider hypothesis as it applies to the sealy mattress licensing system one of the oldest and most prominent examples of vertical and horizontal distribution restraints the results reported here focus on the period following the elimination of sealy s territorial restraints in 1980 using alternative samples units of measurement and estimating techniques the analyses yield consistent results supporting the market power hypothesis the sealy territorial restraints on distribution decreased output and increased prices copyright 1991 by mit press

evidence on the effect of bond covenants and management compensation contracts on the choice of accounting techniques the case of the depreciation switch back abstract provisions of bond indenture agreements and management compensation contracts are examined to derive testable implications concerning management s incentives to choose among alternative accounting techniques the hypotheses are subjected to empirical examination by investigating the voluntary change from accelerated to straight line depreciation for financial reporting purposes only the methodology utilized incorporates an expectations model of accounting earnings in an attempt to separate out of the effects of earnings announcements from accounting change announcements which are often concurrent the evidence from both price and non price data is not consistent with the general hypothesis that bond covenants and management compensation contracts are important determinants of the decision to change depreciation techniques five potential explanations for the results are offered

aggregation of test statistics an evaluation of the evidence on contracting and size hypotheses abstract more powerful tests of a theory of choice of accounting methods and the effect of changes in these choices on equity values are provided the power increase comes from efficiently aggregating results across studies one conclusion is that at least six variables common to more than one study have explanatory power these variables are managerial compensation leverage size risk and constraints on interest coverage and dividends another conclusion is that the posterior probability that the theory taken as a whole has explanatory power is close to one this conclusion includes the effect of variables that only appear in one study

efficiency of large private value auctions we consider discriminatory and uniform price auctions for multiple identical units of a good players have private values possibly asymmetrically distributed and for multiple units our setting allows for aggregate uncertainty about demand and supply in this setting equlibria generally will be inefficient despite this we show that such auctions become arbitrarily close to efficient if they are large and use this to derive an asymptotic characterization of revenue and bidding behavior

learning from neighbours when payoffs from different actions are unknown agents use their own past experience as well as the experience of their neighbours to guide their decision making in this paper we develop a general framework to study the relationship between the structure of these neighbourhoods and the process of social learning we show that in a connected society local learning ensures that all agents obtain the same payoffs in the long run thus if actions have different payoffs then all agents choose the same action and social conformism obtains we develop conditions on the distribution of prior beliefs the structure of neighbourhoods and the informativeness of actions under which this action is optimal in particular we identify a property of neighbourhood structures local independencewhich greatly facilitates social learning simulations of the model generate spatial and temporal patterns of adoption that are consistent with empirical work

subperiod aggregation and the power of multivariate tests of portfolio efficiency abstract when testing portfolio efficiency empiricists usually perform tests using subperiods and aggregate the results in some manner although the power of individual subperiod tests has been studied previously little is known about the power of the aggregate test power is evaluated here through simulations using two different aggregation techniques aggregate power is substantially higher than that for a single subperiod for example in one scenario the aggregate power is 0 77 over a sixty year period but only 0 17 for each five year subperiod in addition the level of power depends on the method of aggregation

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

pre auction short positions and impacts on primary dealers bidding behavior in us treasury auctions abstract we model the uniform price us treasury security auction as a static symmetric game with incomplete information in which each player is a primary dealer who submits a demand schedule given two independent sources of private information her his pre auction short position of the auctioned security and her his valuation of this security under the assumptions of constant marginal value and additive separability of the demand schedule we obtain closed form solutions for the dealer s optimal demand schedule and we find that her his pre auction short position impacts her his bidding behavior in three ways first the primary dealer s demand for the auctioned security increases with her his pre auction short position second the primary dealer s differential bid shading decreases with her his pre auction short position third primary dealers with higher pre auction short positions assign lower values to the auctioned security based on our findings we propose policy recommendations that would allow the us treasury to increase taxpayers revenue

the dynamics of market structure abstract in this paper changes in market concentration are modelled in terms of long run steady state levels and the adjustment towards them both the speed of adjustment and the long run levels of concentration are allowed to vary across industries non linear three stage least squares estimates for allowing for the endogeneity of profits and advertising for 184 u s industries 1963 1967 suggest that both the speed of adjustment and the levels of concentration in the long run are largely determined by minimum efficient scale

dominant firms price leadership and the measurement of monopoly welfare losses abstract the possible welfare losses associated with monopoly power have been the subject of numerous studies over a number of decades recent estimates seem to confirm the earliest estimates which suggested that such losses were relatively trivial this paper suggests that the basis of such estimates is questionable in particular it is argued that the familiar dominant firm price leadership model is not well suited to the task of estimating monopoly welfare losses more appropriate assumptions are identified and their implications for assessing the magnitude of potential welfare losses are illustrated

mandated accounting changes and debt covenants the case of oil and gas accounting abstract the relationships among mandated accounting changes bond covenants and security prices has been the focus of several studies these studies have provided mixed evidence on the existence of a bond covenant effect on security prices this paper suggests that inconclusive prior results are a consequence of inappropriately measuring the default risk of debt using an option pricing framework it is shown that the debt to equity alone is not an adequate measure of default risk in particular both the debt to equity ratio and the total risk of the firm are necessary to adequately model the bond covenant effects of an accounting change these theoretical propositions are supported by the empirical analysis of the security market reaction to changes in oil and gas accounting

seller beware supply and demand reduction and price manipulation in multiple unit uniform price auctions we experimentally compare under revelation of supply and demand across alternative variations of ascending and descending two sided price clock auctions we find that buyers reduce demand more when the price is ascending but sellers behavior is consistent across clock directions as a result the clock price rule has empirical effects on efficiency even though it is theoretically neutral

user delay costs and internal pricing for a service facility this paper studies optimal pricing and capacity decisions for a service facility in an environment where users delay cost is important the model assumes a general nonlinear delay cost structure and incorporates the tradeoff between the delay cost and capacity cost we find necessary and sufficient conditions for the optimality of a pricing rule that charges out service resources at their marginal capacity cost we examine the issue of budgetary balance and find that net value maximization entails a budget deficit for the service facility that is the service facility should be evaluated as a deficit center the results provide guidelines under which the optimal magnitude of the deficit can be determined

social costs of oligopoly and the value of competition in this study we present a new methodology for estimating welfare losses caused by market power we depart from past studies by explicitly taking into account different levels of market power we provide estimates of a actual social costs arising from existing market structures and b expected monopoly social costs that would occur if there were no competition actual or potential the difference between actual and monopoly welfare losses represents the value of competition in existing markets we further estimate the separate contributions of actual and potential competition to this value our methodology is based upon an empirical model of oligopoly behaviour and limit pricing from this model we estimate the markup which would occur were there no competition we use this markup in turn to estimate industry demand elasticity at the monopoly price with this elasticity and the assumption of linear demand we can characterise demand cost and welfare conditions at each equilibrium monopoly actual and competitive with this new methodology and some other modifications of earlier techniques we provide not only new estimates of welfare losses but also estimates of the value of competition under existing conditions we find that the actual deadweight loss triangle averages 2 9 of value of shipments for a sample of 37 industries we also estimate that were these industries to maximise joint profits with no threat of entry the welfare loss would be i i 6 the difference 8 7 we attribute to the beneficial effects of potential competition 4 9 and actual competition 3 8 our monopoly benchmark thus yields additional understanding of the value of competition we cannot represent our study as having solved all of the problems associated with social cost estimation of monopoly power indeed given general equilibrium problems associated with horizontal vertical and cross industry aggregation interacting with the second best problem we doubt that all the problems can be solved although we can point out some of the potentials for bias after presenting our estimates we discuss the implications of sampling methodology and aggregation problems demonstrating that potentially strong but possibly offsetting biases exist in all studies including ours

the effects of debt covenants and political costs on the choice of accounting methods the case of accounting for r d costs abstract until 1974 firms could capitalize or expense all or part of their research and development r d costs managerial choice between these two alternatives is hypothesized to be affected by the existence of debt covenants which employ accounting numbers relating to leverage interest coverage and ability to pay dividends in addition the use of public versus private debt is hypothesized to affect the accounting choice due to differential renegotiation costs lastly a political cost hypothesis is tested this study uses a multivariate statistical technique the generalized jackknife the results suggest that firms which capitalized r d costs were more highly levered used more public debt were closer to dividend restrictions and were smaller than firms which expensed r d costs

welfare loss calculation for japanese industries abstract this paper calculates social welfare loss due to market imperfections in japanese industries for the two periods 1966 1970 and 1976 1980 utilizing firm data and then investigates into the characteristics at a disaggregated level our principal findings are 1 the aggregate loss as a percent of national income is relatively stable over time and is similar to the order of magnitude reported for the u s and european countries 2 a relatively small number of industries and also a few firms account for a larger share of total loss and 3 regulated industries show larger loss to sales ratio

divisible good auctions with asymmetric information an experimental examination an experimental approach is used to compare bidding behavior and auction performance in uniform price and discriminatory auctions when there is incomplete information concerning the common value of the auctioned good in a symmetric information environment the different auction formats provide the same average revenue however when information is asymmetric the discriminatory auction results in higher average revenue than the uniform price auction the volatility of revenue is higher in the uniform price auctions in all treatments the results therefore provide support for the use of the discriminatory format subject characteristics and measures of experience in recent auctions are found to be useful in explaining bidding behavior

demand reduction in multi unit auctions with varying numbers of bidders theory and evidence from a field experiment recent auction theory and experimental results document strategic demand reduction by bidders in uniform price auctions the present article extends this area of research to consider the effects of varying the number of bidders our theoretical model predicts that demand reduction should decrease with an increase in the number of bidders considerable demand reduction remains even in the asymptotic limit although truthful bidding yields profits very close to those of equilibrium play we experimentally confirm several of our predictions by examining bidding behavior of subjects in an actual marketplace auctioning dozens of sportscards using both uniform price and vickrey auction formats

excess capacity and limit pricing an empirical test entry may be inhibited by expectations that incumbents have lower marginal costs incumbents may be able to use limit pricing or excess capacity to further this expectation we construct an empirical model of oligopoly capacity and pricing decisions and of entrant responses the results support the hypothesis that both lower prices and greater excess capacity inhibit entry they further support limit pricing but provide no evidence that oligopolies deliberately install excess capacity to deter entry the results suggest however that limit pricing firms may exploit the entry inhibiting effects of unintended excess capacity by raising their limit prices

auctions for initial sale of annual catch entitlement we use a laboratory experiment calibrated to a representative new zealand fishery to assess three sealed bid multi unit demand auction mechanisms under consideration for allocating quota for species being introduced into the quota management system these auctions allocate the k units to the k highest bids but prices are determined according to discriminative kth price and k 1st price rules in our experiment the auctions are equally efficient but revenue is highest in the discriminative auction and lowest in the k 1st price auction results are robust to industry subjects and subjects are responsive to the across unit bidding incentives present in multi unit demand auctions

optimal oligopoly pricing and the threat of entry in earlier work we tested stochastic dynamic limit pricing using u s data we replicate these tests using canadian data the results are weak but consistent with the earlier tests along the way we deal with several methodological problems how does the new rational limit pricing relate to the test how might oligopoly influences be integrated into limit pricing how should existing concentration affect entrant behavior might factors which suppress industry profitability not ceteris paribus deter entry what might one do with correlated proxy variables should weak results be interpreted the same in a replication test as in a de novo test