price search and spatial competition abstract in this paper we study a model where two spatially scattered sellers face a population of consumers dispersed over a given geographical area they have to incur a transaction cost to place their purchase order moreover these consumers have imperfect knowledge of prices but obtain full information about prices at the first shop they solicit we study price competition between these firms the main outcomes of our analysis are as follows first we show that whenever a price equilibrium exists for given locations of firms it will necessarily display price dispersion second we study location configurations which ensure the existence of a price equilibrium furthermore we show that when it exists a price equilibrium is unique finally we analyze firms revenues when merchants anticipate the consequences of their locational choice on subsequent price competition then we find that there is an incentive for a firm to get as close as possible to its competitor

information costs intermediation and equilibrium price mainly for the sake of simplicity more important is the realization that markets do indeed differ significantly in the ways consumers can obtain information in some markets there are brokers test magazines leasing companies etc which serve to alleviate the information problem facing the buyers in other markets word of mouth recommendations and advertising are the only sources of information available it seems reasonable to suppose that the presence of informational intermediaries has some effect on market structure and performance it is thus of interest to analyse the structural differences that are responsible for the fact that certain types of intermediaries can be observed in some markets but not in others in this paper we develop a model that determines endogenously the type of information available to the consumers the exercise is of interest because it constitutes an attempt to determine market structure endogenously as a function of more fundamental underlying factors the exercise is also quite difficult because it involves the comparison of different regimes in this case the comparison of situations with and without informational intermediaries comparisons of regimes are notoriously difficult to make in explicit models we are able to do so here largely because we use a sufficiently simple model based on quite restrictive assumptions we hope the resulting loss in terms of generality is more than compensated for by the gain in terms of computational ease

oil wealth and regime survival in the developing world 1960 1999 the global oil market and its associated booms and busts have generated a large literature in political science one contention in this literature is that political instability is a near certain long term outcome of oil wealth another line of argument maintains just the opposite that oil makes authoritarian regimes stronger by funding patronage and repressive apparatuses in this article i conduct the first cross national tests of these arguments and investigate the effects of oil wealth and the oil booms and busts on political stability drawing on data from 107 developing countries between 1960 and 1999 i estimate the effects of oil wealth on regime failure antistate social protest and domestic armed conflict thus as a first goal this article addresses an analytic shortcoming in previous studies by separating regime survival empirically from both economic policy and regime type democratic or authoritarian and by focusing on the direct effects of oil wealth on several measures of political stability i address the relationship between oil wealth and these outcomes both by comparing exporters to the rest of the developing world and by comparing oil rich states across pre boom boom and bust periods the results indicate that oil wealth is robustly associated with more durable regimes and significantly related to lower levels of protest and civil war moreover

competition based environmental policy an analysis of farmland preservation in maryland policy makers have turned to competition based voluntary enrollment programs as a cost effective way to achieve preferred land uses this paper studies bidder behavior in an innovative auction based program in which farmers compete to sell and retire the right to develop their land we derive a reduced form bidding model that includes private and common values this model allows us to estimate the role of bidder competition winner s curse correction and the underlying distribution of private values we estimate that the auction enrolled as many as 3 000 acres 12 more than a take it or leave it offer would have enrolled for the same budgetary cost

an empirical study of an auction with asymmetric information this paper examines federal auctions for drain age leases on the outer continental shelf from 1959 to 1969 these are leases that are adjacent to tracts on which a deposit has been discovered the authors find that the data strongly support the hypotheses that neighbor firms are better informed about the value of a lease than nonneighbor firms that neighbor firms coordinate their bidding decisions and that both types of firms bid strategically in accordance with the bayesian nash equilibrium model for first price sealed bid auctions with asymmetric information

political parties world demand and unemployment domestic and international sources of economic activity this article replicates and extends earlier work on the politics of macroeconomic policy by considering political effects on unemployment in 14 western industrial nations between 1960 and 1983 changes of party control of government display broadly the expected effects namely that unemployment falls under left wing governments and rises under right wing governments however the principal conclusions of this article are that partisan effects on unemployment in open economies that is economies heavily dependent on trade with other countries can only be satisfactorily estimated relative to the constraint imposed by the level of world economic activity and that in addition to politicians strategic incentives political institutions and economic regime constraints also determine whether partisan effects on unemployment will be sustained transitory or absent with respect to the latter on the whole no effects are found where no such effects were promised by the new government before taking office where one party or dominant partner coalitions form the effect on unemployment is transitory whereas where broad coalitions form it is sustained or absent finally ceteris paribus any partisan effects are more likely where governments secure parliamentary majorities

a survey of recent empirical work concerning auctions in this paper the authors survey some recent empirical work concerning auctions first outlining two complementary approaches to the empirical analysis of auctions and then discussing several recent developments in the econometric analysis of field data concerning auctions

reserves regret and rejoicing in open english auctions auction sellers usually must set a reserve which is the lowest auction price that they will accept i propose that anticipated regret and rejoicing affect reserves regret occurs when the highest bid exceeds the seller s value for the property but is still below the reserve rejoicing occurs when the reserve forces the winning bidder to pay a higher price the impact of regret and rejoicing can be observed by examining sellers learning over sequential auctions particularly when they use a frequency heuristic results from an auction experiment with simulated bidders support the impact of anticipated regret and rejoicing on reserves

field experiments on the effects of reserve prices in auctions more magic on the internet i present experimental evidence on the effects of minimum bids in first price sealed bid auctions the auction experiments manipulated the minimum bids in a preexisting market on the internet for collectible trading cards from the game magic the gathering i examine a number of outcomes including the number of participating bidders the probability of sale the levels of individual bids and the auctioneer s revenues the benchmark theoretical model is one with symmetric risk neutral bidders with independent private values the results verify a number of the predictions concerning equilibrium bidding many bidders behave strategically anticipating the effects of the reserve price on others bids

a comparison of naive and experienced bidders in common value offer auctions a laboratory analysis laboratory economics experiments typically use financially motivated students as subjects an ongoing issue is whether this is an appropriate subject pool since the students are typically inexperienced in the types of decision making required of them in the lab this paper addresses this issue in the context of common value offer auctions as we compare the behaviour of experienced business executives in the construction contract industry experts with that of naive student subjects results of previous research of this sort have been equivocal in some cases experts make the same errors as novices in other cases they do not hogarth and reder i987 a series of sealed bid common value offer auctions in which bidders compete for the right to supply an item of unknown cost were conducted inherent to common value auctions cvas is an adverse selection problem which may result in below normal or negative profits the winner s curse experimental studies have documented the presence of the winner s curse with financially motivated student subjects in high price demand side auctions kagel et al i986 kagel and levin i986 the experiments reported here generalise these earlier studies from bid to offer auctions also in employing offer auctions we establish a setting with which our experts are familiar thus allowing their experience the best chance to manifest itself

testing for common costs in the city of helsinki bus transit auctions abstract i study the effects of competition in the city of helsinki bus transit market by conducting two tests for common costs in these first price sealed bid procurement auctions i introduce bidder asymmetry and pooling to the tests i also discuss the need for robustness checks for some arbitrary choices in these tests the information environment seems to be that of common costs the bus companies that have garages close to the contracted routes are influenced more by the common elements than those whose garages are further away more competition does not necessarily lower procurement costs and the city should not necessarily implement costly policies to induce more competition a recent merger of two public companies cannot be criticized from a competition perspective

bidding behavior in sequential cattle auctions the objectives of this study are to investigate the institutional speciflcs of sequential cattle auctions and their role as determinants of prices institutional speciflcs are the order of sale according to quality a secret reserve price bidders multi unit demand and difierent types of bidders prices decline and bidders with a higher demand pay on average lower prices the estimation results show that declining prices are caused by the order of sale according to quality and the secret reserve price the results further show that bidders take the strategic efiect of sequential auctions and multi unit demand into account

pennies from ebay the determinants of price in online auctions this paper presents an exploratory analysis of the determinants of prices in online auctions for collectible united states one cent coins at the ebay web site starting with an initial data set of 20 000 auctions we perform regression analysis on a restricted sample of 461 coins for which we obtained estimates of book value we have three major findings first a seller s feedback ratings reported by other ebay users have a measurable effect on her auction prices negative feedback ratings have a much greater effect than positive feedback ratings do second minimum bids and reserve prices have positive effects on the final auction price in particular minimum bids appear only to have a significant effect when they are binding on a single bidder as predicted by theory third when a seller chooses to have her auction last for a longer period of days this significantly increases the auction price on average

dynamic government performance honeymoons and crises of confidence we use a formal theoretical framework to explore the interplay between a government s longevity and its performance ministers perform well when their careers are valuable this is so when the government s duration is expected to be long the government s survival depends on its popularity and finally that popularity depends on its ministers performance the feedback loop between performance and longevity means that multiple rational expectations equilibria can arise ministers work hard for a popular government but divert efforts elsewhere if they believe the government is doomed these alternatives are both self fulfilling prophecies however the presence of perhaps small random events that buffet the performance and popularity of a government is sufficient to pin down a unique equilibrium we explore the dynamics that arise a crisis of confidence involving the rapid collapse of a government s performance is sparked when a sequence of negative shocks push the popularity of the government below a unique critical threshold

an empirical model of firm entry with endogenous product type choices i describe a model of entry with endogenous product type choices these choices are formalized as the outcomes of a game of incomplete information in which rivals differentiated products have nonuniform competitive effects on profits i estimate the model for location choices in the video retail industry using a nested fixed point algorithm solution the results imply significant returns to product differentiation simulations illustrate the tradeoff between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry

cabinet survival and competing risks we attempt to resolve a recent controversy in the study of cabinet terminations pertaining to the shape of hazard rates on the one hand warwick 1992b provides evidence that cabinets are more likely to terminate the longer they are in office alt and king s 1994 analysis on the other hand suggests that hazard rates are constant over the life time of a cabinet this issue is of particular theoretical importance since a constant hazard rate would add support to the nonstrategic model of cabinet termination due to browne et al 1986 while an increasing hazard rate would seem to favor lupia and strom s 1995 strategic approach by applying a semi parametric competing risk approach to data on cabinet durations we are able to show that through its use of theory based censoring the previous literature in effect analyzed only one mode in which cabinets terminate the case where one cabinet is replaced by another without a new election once cabinet terminations that lead to chamber dissolutions with subsequent elections are analyzed directly we can show that they are governed by a very different stochastic process hazard rates are not flat as in the case of replacements but increase over the life of the government further the covariates governing replacement terminations fail to explain dissolution terminations these findings add support to the strategic approach suggested by lupia and strom

do farmers value the environment evidence from a conservation reserve program auction the paper uses data from one conservation reserve program crp auction to elicit farmers attitudes toward the environment by analyzing their bids the crp pays farmers to remove chosen plots of land from agricultural production and put them to a conservation use an interesting aspect of this auction is that winners are determined by a combination of low bids and environmental scores of individual plots using decision theoretic approach to model this auction we show that farmers condition their bids on the strength of their environmental scores and that they value environmental benefits especially those that increase future soil productivity of their land

fly by night firms and the market for product reviews this paper presents a model that permits third party information provision in a market characterized by information asymmetries and reputation formation the model is used to examine how the market for information provision affects prices and supply in the primary market they find that decreasing the cost of providing and using information 1 increases rather than decreases the margins received by reputable service firms 2 decreases the price of new untested service firms so reputation is more costly to build and 3 leads to more high quality firms and less fly by night firms copyright 1989 by blackwell publishing ltd

semiparametric estimation of the optimal reserve price in first price auctions the optimal reserve price in the independent private value paradigm is generally expressed as a functional of the latent distribution of private signals which is by nature unobserved this feature has limited the implementation of the optimal reserve price in practice in this article we consider first price auctions within the general affiliated private values paradigm we show that the seller s expected profit can be written as a functional of the observed bid distribution we propose a semiparametric extremum estimator for estimating consistently the optimal reserve price from observed bids as an illustration we consider the outer continental shelf ocs wildcat auctions

auctions with resale markets an application to u s forest service timber sales when bidders anticipate an opportunity for resale trade the value of winning an auction is determined in part by the option values of buying and selling in the secondary market one implication is that a bidder s willingness to pay at an auction increases with the expected level of competition between resale buyers empirical evidence from auctions of timber contracts supports this prediction and rejects standard models that ignore resale the estimated effect is smaller after policy changes expected to diminish the prevalence of resale additional evidence supports the predicted presence of a common value element introduced by the resale opportunity

economic trends and government survival in west european parliamentary democracies in this study i investigate the linkage between trends in key economic indicators inflation unemployment and growth in gross domestic product and government survival in 16 postwar european parliamentary democracies the partial likelihood method which allows for variation in indicator values over the lifetimes of individual governments constitutes the basic analytic tool the findings reveal overall causal roles for both inflation and unemployment as well as important differences in these roles between socialist and bourgeois governments and between pre oil crisis and post oil crisis eras most significant the introduction of these indicators to the analysis helps to resolve the debate between two rival explanations of governmental stability the bargaining complexity hypothesis and the ideological diversity hypothesis in favor of the latter

rising hazards an underlying dynamic of parliamentary government this paper undertakes a quantitative examination of underlying rates of government termination in west european parliamentary systems most previous research assumed that these rates remain constant over the lifetimes of governments but this assumption has never been subjected to careful scrutiny a variety of tests is performed on a new data set that covers 16 systems over the 1945 89 period each of which points to a general tendency for the rate of termination or hazard rate to increase with the length of time a government remains in power this information is incorporated into an empirical model of government survival that also includes ideological policy differences within governments and the impact of economic trends

inflation unemployment and government collapse a poisson application as democracies enter an era of economic retrenchment the political costs associated with economic decline have come under close scrutiny by students of comparative politics and public policy of particular concern is the linkage between inflation unemployment and the collapse of incumbent governments the present study provides an initial application of an alternative approach to measuring this linkage across 8 european democracies and offers significant evidence linking political costs for cabinet governments with rising prices and the growing unemployment by utilizing the poisson method of determining probabilities of discrete events increasing probabilities of government collapse are significantly associated with rising inflation and unemployment in european democracies between january 1958 and december 1979 subsequent use of the sanders and herman s 1977 and warwick 1979 analyses of cabinet stability provides a useful means to disaggregate the nation sample of the study into four discrete s

endogenous outside options in coordination games experimental evidence abstract in this experiment traders choose between an outside option offered by an intermediary and playing a coordination game with each other the intermediary is either a broker or a dealer we find that intermediaries manage to attract traders even to offer levels lower than the payoff that traders could have obtained had they rejected the intermediary s offer for any given offer traders are more likely to accept a dealer s offer than a broker s offer the introduction of either intermediary type reduces average trader s earnings on the other hand intermediaries have a coordination role as predicted by the forward induction argument when traders reject the intermediary s offer and play the coordination sub game they achieve a significantly greater level of coordination

identification of standard auction models this paper presents new identification results for models of first price second price ascending english and descending dutch auctions we consider a general specification of the latent demand and information structure nesting both private values and common values models and allowing correlated types as well as ex ante asymmetry we address identification of a series of nested models and derive testable restrictions enabling discrimination between models on the basis of observed data the simplest model symmetric independent private values is nonparametrically identified even if only the transaction price from each auction is observed for richer models identification and testable restrictions may be obtained when additional information of one or more of the following types is available i the identity of the winning bidder or other bidders ii one or more bids in addition to the transaction price iii exogenous variation in the number of bidders iv bidder specific covariates while many private values pv models are nonparametrically identified and testable with commonly available data identification of common values cv models requires stringent assumptions nonetheless the pv model can be tested against the cv alternative even when neither model is identified

competition in the economic crisis analysis of procurement auctions we study the effects of the recent economic crisis on firms bidding behavior and markups in sealed bid auctions using data from austrian construction procurements we estimate bidders construction costs within a private value auction model we find that markups of all bids submitted decrease by 1 5 percentage points in the recent economic crisis markups of winning bids decrease by 3 3 percentage points we also find that without the government stimulus package this decrease would have been larger these two pieces of evidence point to pro cyclical markups

product differentiation with imperfect information the paper employs a model of monopolistic competition and product differentiation with consumers who are not well informed about the specification of the offered brands welfare analysis of the degree of product differentiation in such a market concludes that the socially desirable product variety is limited due to consumers imperfect information consequently when the number of consumers is sufficiently large or economies to scale in production are sufficiently weak the market would offer excessive variety the literature on product differentiation is motivated by the observation that only some of the potential brands of a differentiated product are produced and sold it studies issues such as the role of the market structure in the determination of product diversity and the welfare performance of alternative markets in making this product selection for example see lancaster 1979 and salop 1979 in the spatial models tradition spence 1976 and dixit and stiglitz 1977 in the diversifying representative consumer tradition these studies model product selection as an equilibrium outcome of monopolistic competition the welfare analysis focuses on the tradeoff between consumer benefits which naturally increase with variety and production efficiency which owing to economies to scale decreases with variety they find no natural relation between the socially optimal variety and the market outcome the latter can be smaller or larger than the former depending on the parameters of the model although it is natural to expect that in some markets for differentiated products consumers are imperfectly informed about the available brands all these studies assume that consumers possess perfect information the present paper assumes that consumers are imperfectly informed and indeed obtains qualitatively different results first regardless of how significant are the production economies of scale the optimal variety is below a predetermined level that depends on the parameters of consumer utility and information second when consumer population is sufficiently large or economies to scale in production are sufficiently weak the market would offer excessive variety the explanation is that consumers imperfect information limits the extent to which they can exploit the variety offered in the market it is therefore a social waste to increase variety to a level that consumers cannot benefit from

a unified model of cabinet dissolution in parliamentary democracies the literature on cabinet duration is split between two apparently irreconcilable positions the attributes theorists seek to explain cabinet duration as a fixed function of measured explanatory variables while the events process theorists model cabinet durations as a product of purely stochastic processes in this paper we build a unified statistical model that combines the insights of these previously distinct approaches we also generalize this unified model and all previous models by including 1 a stochastic component that takes into account the censoring that occurs as a result of governments lasting to the vicinity of the maximum constitutional interelection period 2 a systematic component that precludes the possibility of negative duration predictions and 3 a much more objective and parsimonious list of explanatory variables the explanatory power of which would not be improved by including a list of indicator variables for individual countries

the costs of coalition coalition theories and italian governments governments in italy both change and remain the same from 1946 to 1992 the christian democratic party always held governing power but almost no cabinet stayed in office more than a few years and many governments collapsed after only a few months how can instability coexist with stability in this way how can governments break up at such low cost and with so little effect on alternation these questions are rooted in but not resolved by the available game theoretic literature on coalitional behavior my answer is that politicians purposive actions can reduce the costs of coalition i argue that the costs of making breaking and maintaining coalitions depend on political institutions and on the array of parties and voters in policy space institutional and spatial conditions structure politicians opportunities and attempts to lower costs under some conditions as i show coalitions are cheap and politicians can easily make coalitions even cheaper the inference is that this framework comprehends both italy s extremes and the degrees of stability found in other parliamentary democracies

arriving in time estimation of english auctions with a stochastic number of bidders we develop a new econometric approach for the estimation of second price ascending bid auctions with a stochastic number of bidders our empirical framework considers the arrival process of new bidders as well as the distribution of bidders valuations of objects being auctioned by observing the timing of bidder arrival the model is identified even when the number of potential bidders is stochastic and unknown the relevance of our approach is illustrated with an empirical application using a unique dataset of art auctions on ebay our results suggest a higher impact of sellers reputation on bidders valuations than previously reported in cross sectional studies but the impact of reputation on bidder arrival is largely insignificant interestingly a seller s reputation impacts not only the actions of the bidders but the actions of the seller as well in particular experience and a good reputation increase the probability of a seller posting items for sale on longer lasting auctions which we find inc

economic dynamics and government stability in postwar italy in this paper i estimate a duration model of the italian government the main finding of the paper is that the downfall probability of an italian government depends on both political and economic factors in particular the higher the inflation rate and the higher the number of workhours lost in strikes both at the time a government forms and during its tenure in office the more likely it is for a government to collapse this result has important consequences for the validity of political theories of the business cycle

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices

child auctions in nineteenth century sweden an analysis of price differences during the nineteenth century destitute and or orphan swedish children were boarded out as a part of that time s public assistance the families to which they were allocated were determined by means of english auctions this paper studies the price differences among such children using empirical data from 601 auctions price is regressed on variables related both to the buyer and to the child the results suggest that variables related to the children s characteristics were important and that the willingness to take a poor or orphan child was dependent on the foster parents uses for a child in the household children who were old enough to be used as shepherd boys or girls were easily placed it was worse with those who were feeble incapacitated blind sick mentally deranged or confined to their beds they were useless to farmers and others as a rule the most miserable were boarded out to the poorest of the non property owners julius ejdestam 1969 the poor s sweden my translation