male interracial wage differentials competing explanations persistent interracial wage differentials present a challenge for neoclassical models of discrimination which claim that long rung competition is not consistent with persistent discrimination this study provides an empirical examination of the missing variable and job competition models of interracial wage inequality the results argue strongly against the missing variables approach and strongly in favor of the job competition model specifically this study finds that about one half of the male african american white and latino white interracial wage differentials are due to market discrimination against african americans and latinos in addition the positive and significant coefficients on the race gender employment density variables strongly affirm the job competition model s contention that access to white especially male dominated jobs increases an individual s wage rate regardless of race racial job segregation then is an important explanatory variable for racial wage discrimination copyright 1999 by oxford university press

the effect of occupational segregation on the relative earnings of black males abstract an earnings model which incorporates racial differences in occupational attainment is employed to investigate sources of the earnings differential between black and white males our results suggest that occupational segregation of black men accounts for nearly half of the observed racial earnings differential

occupational self selection a human capital approach to sex differences in occupational structure a rich and diverse literature exists concerning the distribution of labor incomes one approach namely that of human capital concentrates on lifetime accumulation paths of earnings capacity units human capital individual variations in human capital imply differences in earnings power thereby yielding strong implications concerning earnings distribution within a population despite its explanatory power the human capital model has been widely criticized one criticism centers on its inability to obtain inferences concerning occupational distribution the purpose of this paper is to alleviate at least some such criticism by applying the hedonic price approach so as to embed occupational choice into the human capital framework the significance is that neoclassical economic theory can be used to obtain implications concerning the determinants of occupational structure excerpt

efficient sequential assignment with incomplete information abstract we study the welfare maximizing assignment of several heterogeneous commonly ranked objects to impatient agents with privately known characteristics who arrive sequentially according to a poisson or renewal process there is a deadline after which no more objects can be allocated we first show that the dynamically efficient allocation characterized by albright albright s c 1974 optimal sequential assignments with random arrival times manage sci 21 1 60 67 is implementable by the dynamic version of vcg mechanism we then obtain several properties of the welfare maximizing policy using stochastic dominance measures of increased variability and majorization arguments we also propose redistribution mechanisms that 1 implement the efficient allocation 2 satisfy individual rationality 3 never run a budget deficit 4 may run a budget surplus that vanishes asymptotically

capacity and pricing policies with consumer overflow behavior we analyze consumers choice and overflow behavior between two potential market segments with different fares capacity allocated and then develop the optimal capacity and pricing polices assuming

the determinants of occupational success in britain this paper is concerned with measuring the true impact of certain human capital variables on an individual s occupational position the particular variables which are analysed are training qualifications and spells of sickness and unemployment the longitudinal nature of the data enables us to control for all relevant individual attributes which remain fixed over the period of the sample this is vitally important because these attributes are strongly correlated with the variables of interest and would seriously corrupt estimates derived from a single cross section a method of generating consistent estimates as n oo t fixed for a dynamic model with fixed effects is also illustrated

allocation of individuals to job levels under rationing summary we augment an ordered response model for the job level at which individuals desire to work with allowance for individual reporting of a discrepancy between actual and desired job level and we also investigate possible biases from restricting the observations to the employed and omitting the unemployed we find that the latter bias can be ignored and interpret this as evidence that the unemployed are not choosier than the employed people claiming inadequate capability utilization are not markedly differently allocated than those claiming a proper match women s lower job levels cannot be explained from rationing by capability utilization

occupational attainment and gender earnings differentials in mexico women earned about 20 8 less than men in mexico in 1987 a difference that increased to 22 0 by 1993 using 1987 93 data from mexico s national urban employment survey the authors study the role of occupational attainment in this wage differential most of the 1987 93 increase in the gender log monthly earnings gap they find can be explained by relative chnges in human capital endowments wage coefficient changes would have slightly reduced the gap all else equal the increasing male female earnings differential was tempered by a substantial decline in gender differences in occupational attainment from 1987 to 1993 most of the male female differences in earnings in both 1987 and 1993 can be explained by differences in rewards to individual endowments rather than gender differences in endowments

optimal procurement contracts with pre project planning the paper studies procurement contracts with pre project investigations in the presence of adverse selection and moral hazard to model the procurer s problem we extend a standard sequential screening model to endogenous information acquisition with moral hazard the optimal contract displays system atic distortions in information acquisition due to a rent effect adverse selection induces too much infor mation acquisition to prevent cost overruns and too little information acquisition to prevent false project cancellations moral hazard mitigates the distortions related to cost overruns yet exacerbates those related to false negatives the optimal mechanism is a menu of option contracts that achieves the dual goal of providing incentives for information acquisition and truthful information revelation

occupational transition and country of origin effects in the early stage occupational assimilation of immigrants some evidence from australia we examine the occupational attainment of recent immigrants at 2 years post migration in order to study their early stage assimilation into the labour market in australia human capital endowments and country of origin effects are examined for six occupational groups we also study transitions across occupations from source to host country the empirical approach utilizes the ordered generalized extreme value ogev model which embodies differing utility functions across occupational outcomes as well as accounting for any ordering in these outcomes the results suggest that the transferability of knowledge and skills is affected by cultural and social backgrounds and that non western immigrants are disproportionately channelled into inferior jobs post migration the investigation of the country of origin effect on the skilled migrants occupational transition process is especially apt in the context of skill shortages in many host countries

on the determination of occupational attainment and mobility the underlying motivation for much of the research into the determinants of occupational attainment is to enable inferences to be made as to the relative position of various groups at a point in time or an individual s economic mobility over time in this paper we compare unordered and ordered discrete choice approaches to estimating models of occupational attainment estimates from these methods differ substantially indicating that the determination of which technique is more appropriate is an important issue the ordered method appears to be more consistent with the motivation of previous research and requires less computer time unordered models however are better able to predict occupational distribution

the price of advice we develop a model of consulting advising where the role of the consultant is to reveal signals to her client that refine the client s original private estimate of the profitability of a project although the client can perfectly observe and evaluate these signals the consultant may only be able to do the same imperfectly or not at all this captures the idea that the expert may not fully understand the impact of her advice on the client we characterize the optimal contract between the consultant and her client it is a menu consisting of pairs of transfers specifying payments between the two parties in case the project is undertaken by the client and in case it is not the main result of the article is that in the optimal mechanism the consultant obtains the same profit as though she could perfectly observe and evaluate the impact of the signals whose release she controls on the client s profit estimate

wage discrimination occupational segregation and visible minorities in canada the earnings gap between each of whites asians and blacks is decomposed into the effects on earnings of productivity related characteristics wage discrimination and occupational segregation unlike previous canadian studies this paper analyses the relative economic position of both immigrant and native born visible minorities and explicitly incorporates the effect of discrimination in occupational attainment on the earnings gap the results indicate that policies aimed at increasing the ethnic representation across occupational categories would be effective only for black men anti discrimination legislation aimed at decreasing the earnings gap between visible minority and white women should have a dual focus they should aim at reducing the inter occupational wage discrimination they should provide training programs to extend the career ladders confronting ethnic minority women

optimal dynamic mechanism design and the virtual pivot mechanism we consider the problem of designing optimal mechanisms for settings where agents have dynamic private information we present the virtual pivot mechanism which is optimal in a large class of environments that satisfy a separability condition the mechanism satisfies a rather strong equilibrium notion it is periodic ex post incentive compatible and individually rational we provide both necessary and sufficient conditions for immediate incentive compatibility for mechanisms that satisfy periodic ex post incentive compatibility in future periods the result also yields a strikingly simple mechanism for selling a sequence of items to a single buyer we also show that the allocation rule of the virtual pivot mechanism has a very simple structure a virtual index in multiarmed bandit settings finally we show through examples that the relaxation technique we use does not produce optimal dynamic mechanisms in general nonseparable environments

dynamic competition with random demand and costless search a theory of price posting this paper studies a dynamic model of perfectly competitive price posting under demand uncertainty firms must produce output in advance after observing aggregate sales in prior periods firms post prices for their unsold output in each period the demand of a new batch of consumers is randomly activated existing customers who have not yet bought and then new customers arrive at the market in random order observe the posted prices and either purchase at the lowest available price or delay their purchase decision we construct a sequential equilibrium in which the output produced and its allocation across consumers is efficient thus consumers endogenously sort themselves efficiently with the highest valuations purchasing first transaction prices in each period rise continuously as firms become more optimistic about demand followed by a market correction by the last period prices are market clearing

customer return policies for experience goods this paper studies the economic rationale for customer return policies by focusing on the experience goods aspect of many products return policies allow consumers to defer their purchasing decisions until after they gain some experience with goods in so doing they insure consumers against ex post loss which allows a monopoly seller to charge more than otherwise it is shown that the seller adopts the return policy when consumers are highly risk averse or retail costs are high consumers are strictly better off under the return policy but there is too little adoption of the policy in equilibrium copyright 1996 by blackwell publishing ltd

revenue management by sequential screening abstract using a mechanism design approach we consider a firm s optimal pricing policy when consumers are heterogeneous and learn their valuations at different times we show that by offering a menu of advance purchase contracts that differ in when and for how much the product can be returned a firm can more easily price discriminate between privately informed consumers in particular we show that screening on when the return option can be exercised increases firm profits relative to screening on the size of the refund alone only if the expected gains from trade are higher for consumers who learn later we show that in some settings mean preserving spread the firm can achieve the complete information profits and analyze the optimal contract in other settings first order stochastic dominance in which the first best allocation is not always feasible

awarding monopoly franchises the authors analyze how to award a monopoly franchise when the objective is to maximize expected consumers surplus net of transfer payments to the producer potential producers initially possess independent private information about uncertain production costs only the chosen producer subsequently observes realized production costs after awarding the franchise to the producer with the lowest expected costs prices are optimally set above realized marginal cost these ex post distortions foster more competitive bidding ex ante the distortions for any bid cost pair are invariant to the number of bidders n though expected distortions and profits decline with n copyright 1987 by american economic association

price discrimination through refund contracts in airlines this paper shows how an airline monopoly uses refundable and non refundable tickets to screen consumers who are uncertain about their travel our theoretical model predicts that the difference between these two fares diminishes as individual demand uncertainty is resolved using an original data set from u s airline markets we find strong evidence supporting our model price discrimination opportunities through refund contracts decline as the departure date nears and individuals learn about their demand

dynamic mechanism design dynamic arrivals and changing values abstract we study the optimal mechanism in a dynamic sales relationship where the buyer s arrival date is uncertain and where his value changes stochastically over time the buyer s arrival date is the first date at which contracting is feasible and is his private information to induce immediate participation the buyer is granted positive expected rents even if his value at arrival is the lowest possible the buyer is punished for arriving late i e he expects to earn less of the surplus optimal allocations for a late arriver are also further distorted below first best levels conditions are provided under which allocations converge to the efficient ones long enough after contracting and this convergence occurs irrespective of the time the contract is initially agreed put differently the so called principle of vanishing distortions introduced by battaglini 2005 continues to apply irrespective of the buyer s arrival date

revenue management with partially refundable fares we introduce and analyze an intertemporal choice model where customer valuations are uncertain and evolve over time the model leads directly to the study of call options on capacity that are similar to partially refundable fares we show that the capacity provider earns significantly higher revenues by selling real options on capacity than on low to high pricing we also investigate the social implications and show that the use of options is both socially optimal and socially efficient

a comparison of choice based multinomial and nested logit models the family structure and welfare use decisions of divorced or separated women home based work differs from other employment because the work site is the home itself this difference means that the fixed costs of working at home are less than the fixed costs of working on site and that home based workers may engage in joint market

optimal pricing mechanisms with unknown demand the standard profit maximizing multi unit auction intersects the submitted demand curve with a preset reservation supply curve which is determined using the distribution from which the buyers valuations are drawn however when this distribution is unknown a preset supply curve cannot maximize monopoly profits the optimal pricing mechanism in this situation sets a price to each buyer on the basis of the demand distribution inferred statistically from other buyers bids the resulting profit converges to the optimal monopoly profit with known demand as the number of buyers goes to infinity and convergence can be substantially faster than with sequential price experimentation

the efficiency of advance purchase discounts in the presence of aggregate demand uncertainty abstract the pricing behavior of two airlines is examined one is operated by a welfare maximizing social planner the other by an unregulated monopolist total capacity is fixed and aggregate demand is uncertain it is shown that advance purchase discounts can assist in attaining an efficient allocation of capacity when it is not feasible to operate a spot market on the day of the flight it is further shown that the planner may offer larger or smaller discounts than the monopolist

theory and estimation of the household production function for wildlife recreation abstract the household production function is an intuitively appealing way to model man s interaction with nature this paper models the interaction between the household s behavior and publicly provided inputs into wildlife recreation the paper shows how to compute benefits assuming that the household production function is known the household production function approach collapses to the simple travel cost approach when households are unable to substitute their own inputs for publicly provided inputs in addition the paper demonstrates the conditions under which the parameters of cost and preference functions can be identified the conditions for identification are quite restrictive when several choices are endogenous

price discrimination on booking time abstract even if consumers are forward looking and free to choose when to purchase a firm can price discriminate on booking time if consumers learn their valuations at different times and consumers who learn later have higher valuations the model is related to our work on optimal screening with returns contracts akan ata and dana 1 but here we consider a simpler binary valuation distribution and consider more realistic consumer learning assumptions the main contribution is to show that the profitability of screening on time is robust to relaxing the assumption that consumers learn instantaneously in addition to analyzing a bad news model in which information arrives gradually we characterize a general bound on consumer optimism that guarantees that the instantaneous learning results are robust

when is price discrimination profitable we consider a general model of monopoly price discrimination and characterize the conditions under which price discrimination is and is not profitable we show that an important condition for profitable price discrimination is that the percentage change in surplus i e consumers total willingness to pay less the firm s costs associated with a product upgrade is increasing in consumers willingness to pay we refer to this as an increasing percentage differences condition and relate it to many known results in the marketing economics and operations management literatures

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

partially verifiable information and mechanism design in a principal agent model with adverse selection we study the implementation of social choice functions when the agent s message space is a correspondence which depends on this true characteristic we characterize such correspondence for which the revelation principle is valid returns must not contradict easily observable elements of the taxpayer s lifestyle in this paper we present a model of two person organizations in which these considerations are important we ask whether the restrictions on fallacious statements inherent in the system are sufficient to achieve the goals of the organization we show that the optimal way of eliciting the agent s response may not be to establish incentives for truthtelling in all instances in our model there is one player the agent who observes the state of the economic system another player the principal takes an action based on the information presented to him by the agent this class of models is often referred to as the principal agent problem in the extensive and growing literature on this problem it has always been assumed that the agent could lie to the principal and therefore that he had to be properly motivated to act at least partially in the principal s interest our formal way of modelling the partial verifiability of information is to introduce the restriction that the agent s responses must lie in a set m o that varies with the true state 0 it is assumed that this set always admits the possibility of responding with the true state the way in which the allowable response set varies with the true state is known to the principal in other respects we retain the usual principal agent formalization in particular the principal is the stackelberg leader in this game he can commit himself to choose a collective action as a function of the message transmitted by the agent whether the variation of the message space with the true observation is purely technological or whether it is induced by the severity of potential actions of the principal

airline seat allocation with multiple nested fare classes this paper addresses the problem of determining optimal booking policies for multiple fare classes that share the same seating pool on one leg of an airline flight when seats are booked in a nested fashion and when lower fare classes book before higher ones we show that a fixed limit booking policy that maximizes expected revenue can be characterized by a simple set of conditions on the subdifferential of the expected revenue function these conditions are appropriate for either the discrete or continuous demand cases these conditions are further simplified to a set of conditions that relate the probability distributions of demand for the various fare classes to their respective fares the latter conditions are guaranteed to have a solution when the joint probability distribution of demand is continuous characterization of the problem as a series of monotone optimal stopping problems proves optimality of the fixed limit policy over all admissible policies a comparison is made of the optimal solutions

trade union membership tenure and the level of job insecurity recently there have been suggestions that job insecurity is on the increase two factors which may explain this are the reduced role of the trade unions and increasing flexibility in the labour market with an associated reduction in the proportion of workers in permanent fulltime employment for the first time the relationship between trade union membership tenure and the workers perception of job insecurity is examined using british data drawn from the 1986 7 social change and economic life initiative econometric evidence supports in part the view that while job insecurity encourages workers to join trade unions overall trade unions tend to increase job security and also suggests that there is a strong relationship between tenure and job insecurity

does employee body weight affect employers behavior in this paper we study the possible segregation of overweight individuals already established in the labor market when firms make decisions on hiring firing and promoting most existing studies use wage equations to document wage differences but little is known about the reason for the differences and the sorting of workers using an equilibrium search model search frictions are taken into account additionally sorting is examined using a logit model we find that wage differences between workers who have a normal weight and workers who are overweight or obese can be explained by differential firm behavior with respect to both the job offer arrival rate and the probability of being promoted

advance purchase discounts as a price discrimination device in an intertemporal setting in which individual uncertainty is resolved over time advance purchase discounts can serve to price discriminate between consumers with different expected valuations for the product consumers with a high expected valuation purchase the product before learning their actual valuation at the offered advance purchase discount consumers with a low expected valuation will wait and purchase the good at the regular price only in the event where their realized valuation is high we characterize the profitmaximizing pricing strategy of the monopolist furthermore adopting a mechanism design perspective we provide a necessary and sufficient condition under which advance purchase discounts implement the monopolist s optimal mechanism

optimal information disclosure in auctions and the handicap auction we analyze a situation where a monopolist is selling an indivisible good to risk neutral buyers who only have an estimate of their private valuations the seller can release without observing certain additional signals that affect the buyers valuations our main result is that in the expected revenue maximizing mechanism the seller makes available all the information that she can and her expected revenue is the same as it would be if she could observe the part of the information that is new to the buyers we also show that this mechanism can be implemented by what we call a handicap auction in interesting applications in the first round of this auction each buyer picks a price premium from a menu offered by the seller a smaller premium costs more then the seller releases the additional signals in the second round the buyers bid in a second price auction where the winner pays the sum of his premium and the second highest non negative bid in the case of a single buyer this mechanism simplifies to a menu of european call options