the optimal auction a mechanism for optimal third degree price discrimination abstract recently bulow and roberts have indicated that there is a close correspondence between the optimal auction mechanism introduced by myerson and the problem of a monopolist practising third degree price discrimination in several markets they find differences however in the choice variables and in the constraints of the two problems a reinterpretation of the price discrimination problem leads to the demonstration that an optimal auction is an optimal way to practise price discimination

efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

auctions with endogenous entry abstract predictions from auction models with endogenous bidder participation depend on whether entry takes place under asymmetric information or not auctions that are not revenue equivalent in the former set up may be so in the latter moreover under asymmetric information the social planner does not discourage entry even when the bid preparation cost is large

uniform vs discriminatory auctions with variable supply experimental evidence in the variable supply auction considered here the seller decides how many customers with unit demand to serve after observing their bids bidders are uncertain about the seller s cost we experimentally investigate whether a uniform or a discriminatory price auction is better for the seller in this setting exactly as predicted by theory it turns out that the uniform price auction produces substantially higher bids and consequently yields higher revenues and profits for the seller furthermore again as predicted by theory the uniform price auction yields a higher number of transactions which makes it also the more efficient auction format

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

procurement auctions under quality manipulation corruption abstract in procurement quality manipulation corruption arises when the agent tasked with quality evaluation exaggerates the quality of a corrupt firm if an inefficient firm is favored by the agent the buyer can adjust the procurement mechanism such that the corruption rent of the inefficient firm erodes the technological rent of the efficient firm however doing so may require procuring the project at an undesirable quality level to resolve this trade off between corruption deterrence and quality distortion unlike standard results in the literature the buyer may overstate her preference for quality and the dominance of scoring auctions over minimum quality auctions disappears

collusion via signalling in simultaneous ascending bid auctions with heterogeneous objects with and without complementarities collusive equilibria exist in simultaneous ascending bid auctions with multiple objects even with large complementarities in the buyers utility functions the bidders collude by dividing the objects among themselves while keeping the prices low in the most collusive equilibrium the complementarities are never realized the scope for collusion however narrows as the ratio between the number of bidders and the number of objects increases

reinterpreting a temporally aggregated consumption cap model recent literature has found that the coefficient of relative risk aversion estimated through consumption based asset pricing models is implausibly high even when the phenomenon of temporal aggregation is taken into account this article suggests that an ima 1 1 process be assumed as the generating mechanism of consumption instead of the standard random walk process in this case if the coefficient of the moving average component is negative the implied value of the coefficient of relative risk aversion can be reduced to plausible levels some empirical and theoretical support for the ima 1 1 hypothesis is also presented and discussed

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

collusion in second price auctions with heterogeneous bidders abstract we show that efficient collusion by any subset of bidders in second price private value auctions is possible even when the bidders are heterogeneous an important property of efficient collusion is that a bidder s net payoff from participating in collusion is independent of her valuation we show that the cooperative game whose characteristic function evaluated at a coalition is the ex ante collusive surplus of that coalition has a nonempty core a feature of more technical interest is the mechanism characterization when the private information of agents does not enter in a linear or even piecewise linear manner

managing online auctions current business and research issues the internet s computational power and flexibility have made auctions a widespread and integral part of both consumer and business markets though online auctions are a multi billion dollar annual activity with a growing variety of sophisticated trading mechanisms scientific research on them is at an early stage this paper analyzes the current state of management science research on online auctions it develops a broad research agenda for issues such as the behavior of online auction participants the optimal design of online auctions the integration of auctions into the ongoing operation of firms and the use of the data generated by online auctions to inform future trading mechanisms these research areas will draw from applied and theoretical work spanning management science economics and information systems

new light on the impressionistic view of the balancing item in australia s balance of payments accounts recently fausten and brooks offered what they refer to as an impressionistic view of the temporal evolution of australia s balancing item which is a measure of the accuracy of the balance of payments accounts they claim that the balancing item has been increasing in magnitude and volatility violating with increasing frequency internationally agreed acceptability criteria for smallness in the present paper it is shown that fausten and brooks results derive from data that incorporates excessively a dynamically asymmetric concentration of revisions and is therefore unsuitable for statistical analysis this paper develops and empirically evaluates a model of the process of revisions of balance of payments data this model illustrates that dynamically inconsistent time series of the balancing item such as that employed by fausten and brooks are bound to generate an artificial impression that it follows an explosive time trend subsequently it is illustrated that when alternative dynamically c

cartel sustainability in retail markets evidence from a health service sector abstract this paper studies the role of cost asymmetries and product differentiation on cartel sustainability by drawing data from a failed retail cartel unlike the extensive theoretical literature little empirical evidence exists on these relationships first we analyze cartel compliance and find that players are more likely to comply when cost is symmetric and own cost is high next based on a structural model and counterfactual experiments we show that a cartel price that satisfies all cartel members does not exist this result indicates an inherent difficulty of sustaining collusion in retail markets with heterogeneous players we also show that firm heterogeneities especially product differentiation rather than cost asymmetries hinder collusion more finally we derive the level of patience or the discount factor required for cartel sustainability when firms split profits based on the shapley value

a study of collusion in first price auctions this paper examines the bidding for school milk contracts in florida and texas during the 1980s in both states firms were convicted of bid rigging the data and legal evidence suggest that the cartels in the two states allocate contracts in different ways one cartel divides the market among members while the other cartel also uses side payments to compensate members for refraining from bidding we show that both forms of cartel agreements are almost optimal provided the number of contracts is sufficiently large in the auction the cartel bidder may face competition from non cartel bidders the presence of an optimal cartel induces an asymmetry in the auction the selected cartel bidder is bidding as a representative of a group and has on average a lower cost than a non cartel bidder the data support the predicted equilibrium bidding behaviour in asymmetric auctions in accordance with optimal cartels

a test that discriminates between two models of the dutch first auction non isomorphism abstract previous experiments reject the hypothesis that the dutch and first auctions are isomorphic two alternatives to the standard normal form analysis of the dutch auction are formalized 1 bidders violate bayes rule 2 bidders experience a utility of suspense that is additive with the utility of monetary reward paired comparisons of bidding behavior between groups in which the treatment is to triple the payoff of the baseline group yields no significant effect of this treatment we therefore reject the utility of suspense model

collusive bidder behavior at single object second price and english auctions models of collusive bidder behavior at single object second price and english auctions are provided the ind ependent private values model is generalized to permit the formulatio n of coalitions and a strategic response by the auctioneer cooperati ve strategies are found to be dominant in these models coalitions of any size are viable and the payoff to each member increases with th e size of the coalition in addition the collusive strategies of the coalition represent a noncooperative equilibrium the optimal respon se of the auctioneer is to establish a reserve price that is a functi on of the coalition s size these and other features of the model are found to be consistent with the essential features of actual behavio r copyright 1987 by university of chicago press

adjustment costs durables and aggregate consumption abstract previous tests of the permanent income hypothesis pih have focused on either non durables or durables expenditures in isolation this paper studies consumer purchases of non durables and durables as the outcome of a single optimization problem it is shown that with non separability in utility the presence of adjustment costs of changing durables stocks may affect the time series properties of both components of expenditure an econometric test of the pih based on the model developed in the paper is both more efficient and less prone to bias than those in some previous studies however this test confirms earlier rejections of the pih in aggregate quarterly data

intra industry trade and imperfect information about product quality abstract this paper investigates the role of imperfect information on international trade in differentiated products we construct a model within which we capture the feature of differential information that is when consumers information about the quality of products varies according to the suppliers country origin based on this feature we show that the patterns of trade are determined by both production and informational comparative advantage these factors affect either the composition or the viability of exports of differentiated products the nature of the impact on any particular country depends on whether this country is relatively more efficient in the production of low or high quality goods the model generates two major results first it explains two way trade in identical products second it shows that imperfect information is sufficient to lead to the violation of the law of one price i e in the same market identical products are priced differently furthermore we investigate the impact of non tariff barriers to trade such as minimum quality standards on imports as well as various types of subsidies on the pattern of trade and the composition of trade in differentiated products

evaluating predictions of change this article applies a technique developed by robert c merton 1981 and roy d henriksson and robert c merton 1981 for evaluating the market timing of financial managers to macroeconomic predictions of change this methodology may be used to determine whether the predictions may be of value to the user as an illustration the methodology is applied to a set of real gross national product forecasts copyright 1990 by the university of chicago

the vulnerability of auctions to bidder collusion previous work has addressed the relative vulnerability of different auction schemes to collusive bidding the common wisdom is that ascending bid and second price auctions are highly susceptible to collusion we show that the details of ascending bid and second price auctions including bidder registration procedures and procedures for information revelation during the auction can be designed to completely inhibit or unintentionally facilitate certain types of collusion if auctions are designed without acknowledging the possibility of collusion then the design will ignore key features that impact the potential success of colluding bidders

a study of the internal organization of a bidding cartel this paper examines bidding in over 1 700 knockout auctions used by a bidding cartel or ring of stamp dealers in the 1990s the knockout was conducted using a variant of the model studied by daniel graham robert marshall and jean francois richard 1990 following a reduced form examination of these data damages induced inefficiency and the ring s benefit from colluding are estimated using a structural model in the spirit of emmanuel guerre isabelle perrigne and quang vuong 2000 a notable finding is that nonring bidders suffered damages that were of the same order of magnitude as those of the sellers

oligarchies and development in a global economy a tale of two elites this paper studies how comparative advantage and the political elites endowments shape long run performance in economies with imperfect political institutions the trade regime interacts with industrial policy and regulations on capital mobility in governing capital accumulation in a capital scarce economy capitalist oligarchs striving for import substitution industrialization isi initially shelter the economy from trade while promoting industrial policies that promote total factor productivity growth in the manufacturing sector this gradually shifts the comparative advantage toward manufacturing and renders the economy attractive to foreign investors allowing for trade and foreign capital inflows are thus complementary policies that spur growth in the capital oligarchy by contrast landed oligarchs in a capital scarce economy favor openness to trade at an early stage of development neglect industrial policies and block foreign capital to maximize extractable rents the policy mix causes the economy to stagnate consistent with the experiences of south korea and argentina in the postwar era the model predicts that the success of isi policies depends crucially on the conditions governing the incentives for capital accumulation jel f10 f20 p40 p50 o10 o24

an application of the shapley value to fair division with money the author considers fair division when monetary compensations are feasible and utilities are quasi linear four axioms are discussed individual rationality resource monotonicity population solidarity and the stand alone test the latter views the utility from consuming all the goods as an upper bound on every coalition s actual joint utility under efficiency the four axioms show little compatibility however when the goods have enough substitutability in everyone s preferences the shapley value of the surplus sharing game satisfies all four axioms an example is the optimal assignment of indivisible goods when every agent consumes only one good copyright 1992 by the econometric society

seasonal fluctuations and the life cycle permanent income model of consumption this paper examines a new possible explanation for the recent rejections of the life cycle permanent income model of consumption the treatment of seasonal fluctuations the paper shows that when the seasonal fluctuations in consumption purchases are included in an analysis of the life cycle permanent income model there is no evidence in the aggregate data against the model the estimates of the parameters of agents utility functions obtained with seasonally unadjusted data are plausible and the unadjusted data do not reject the overidentifying restrictions on the model

auctions an introduction abstract this is a detailed introduction to auction theory it begins with a simple analysis of standard auctions and then uses a strikingly simple general solution of symmetric private values auctions to prove the payoff equivalence of many auction rules the basic framework is then modified to admit risk aversion multi unit and repeated auctions as well as collusion then follows an introduction to optimal auctions with and without stochastic entry and to common value auctions and the winner s curse problem the survey closes with a sample of applications from the regulation of natural monopolies to price competition in oligopoly and the government securities market

differential payments within a bidder coalition and the shapley value bidder coalitions at english auctions frequently distribute collusive gains among members via a secondary auction or knockout when coalition members are sufficiently heterogeneous nested coalition structures are observed in which a knockout is conducted at each level of nesting the nested knockout s characteristics are investigated within many settings we find that the expected payments to coalition members via the nested knockout equal the shapley value incentive compatibility problems of the nested knockout are also analyzed

collusion with almost no information we analyze noncooperative collusion in an infinitely repeated bertrand game where each of the n firms receives a privately observed i i d cost shock in each period and firms only and privately observe whether they have won the unit mass of consumers no other information is available and no communication is allowed we prove that there exist equilibria in private strategies approximating first best profits when firms are sufficiently patient in particular productive efficiency obtains in the limit

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

shared agents and competition in laboratory english auctions at livestock auctions the same purchasing agent can represent more than one processor repeated multiple unit english auctions are created in a laboratory to measure the impact of shared agents on trade prices under alternative treatments with six and as few as two agents representing six principals treatments are constructed in which the agents either know or do not know quantity for sale and in which there are progressively fewer agents bidding knowledge of quantity for sale can be anticompetitive evolution toward increased market concentration leads to consistent anticompetitive pricing resulting in prices significantly lower than the predicted competitive equilibrium prices

tacit collusion in repeated auctions abstract this paper considers the question of tacit collusion in repeated auctions with independent private values and with limited public monitoring mcafee and mcmillan show that the extent of collusion is tied to the availability of transfers monetary transfers allow cartels to extract full surplus a folk theorem proved by fudenberg et al econometrica 62 1994 997 1039 shows that transfers of future payoffs are almost as good if players are patient and communicate before auctions we ask how the scope of collusion is affected if players dispense with explicit communication and their monitoring is limited collusion better than bid rotation is still feasible but full surplus cannot be extracted this constraint becomes less severe with more players and large cartels can become asymptotically efficient even with very limited monitoring

irreversibility and consumer durables expenditures abstract this paper examines the implications of resale market imperfection on consumer durables expenditures the consumer optimization problem under resale market imperfection is formulated and solved numerically by dynamic programming algorithm the obtained decision rules of consumers reveal the slow upward and downward adjustments of durables stock the simulated aggregate durables expenditures with resale market imperfection exhibit substantial serial correlations similar to those found in actual durables expenditures time series the substantial serial correlations are found to be related to the pattern of the decision rules under resale market imperfections

collusion in uniform price auctions experimental evidence and implications for treasury auctions in uniform price auctions of shares there exist collusive equilibria in which bidders capture the entire surplus from the auction as well as competitive equilibria in which the auctioneer captures the entire surplus from the auction we provide experimental evidence that in uniform price auctions non binding pre play communication facilitates convergence to collusive equilibrium outcomes on the other hand regardless of the opportunities for communication in discriminatory auction experiments subject strategies conform closely with the unique equilibrium in undominated strategies in which bidders gains are equal to the smallest tick size in the bidding schedule this evidence suggests that uniform price auctions of treasury securities may result in lower revenues than the currently employed discriminatory procedure

numerical analysis of asymmetric first price auctions abstract we propose numerical algorithms for solving first price auction problems where bidders draw independent valuations from heterogeneous distributions the heterogeneity analyzed in this work is what might naturally emerge when subsets of distributionally homogeneous bidders collude bid functions and expected revenues are calculated for two special cases extensions to more general asymmetric first price auctions are discussed journal of economic literature classification numbers d44 c63 c72 d82

cooperative models for allocating an object abstract this paper starts from a classical fair division situation of allocating an object among a set of agents the problem is studied from both a cooperative and a bankruptcy point of view analyzing the fairness properties of the proposed solutions

the folk theorem with imperfect public information the authors study repeated games in which players observe a public outcome that imperfectly signals the actions played they provide conditions guaranteeing that any feasible individually rational payoff vector of the stage game can arise as a perfect equilibrium of the repeated game with sufficiently little discounting the central condition requires that there exist action profiles with the property that for any two players no two deviations one by either player give rise to the same probability distribution over public outcomes the results apply to principal agent partnership oligopoly and mechanism design models and to one shot games with transferable utilities copyright 1994 by the econometric society

eliciting and utilizing willingness to pay evidence from field trials in northern ghana we utilize the becker degroot marschak 1964 mechanism to estimate the willingness to pay for clean drinking water technology in northern ghana the bdm mechanism has attractive properties for empirical research allowing us to directly estimate demand compute heterogeneous treatment effects and study the screening and causal effects of prices with minor modifications to a standard field experiment setting we demonstrate the implementation of bdm along these three dimensions compare it to the standard take it or leave it method for eliciting willingness to pay and discuss practical issues for implementing the mechanism in true field settings jel classifications c93 d12 d82 l11 l31

temporal aggregation and hall s model of consumption behaviour a simple exercise of time series analysis shows that the presence of the phonomenon of temporal aggregation in quarterly consumption data can substantially alter the empirical inference about hall mocel of consumption behaviour this fact has received almost no attention in the econometric research in this field

an analysis of a panel of spanish gdp forecasts this article undertakes an analysis of the forecasts included in the panel of spanish forecasts in order to highlight the fact that the predictions made and the errors committed by the entities participating on this panel contain information that is particularly useful in analysing the evolution of the spanish economy here a study is undertaken of the gdp growth forecasts for the spanish economy for the period 2000 to 2002 made in distinct forecast time horizons specifically it analyses whether the forecasts are optimistic or pessimistic and whether new information concerning the variable being predicted is used efficiently in revising earlier forecasts

econometrics of first price auctions a survey of the theoretical and applied literature the analysis of auctions is an active area of research for both theoretical and empirical economists this paper provides an overview of the literature relevant to the econometrics of auctions from a structural approach perspective the structural approach is a framework to analyze auction data in which theory and econometrics are closely related there are three fundamental issues at the heart of the structural analysis i are there any testable restrictions imposed by the theoretic model on the data ii is it possible to identify the structural elements that characterize an auction without a priori parametric information iii what can be said about feasible estimation procedures which do not rely on parametric assumptions this survey shows how the structural approach literature has answered each question

auctions with endogenous quantity this article studies auctions in which several sellers compete for the right to sell to a market characterized by a negatively sloped demand curve in this environment the quantity traded becomes endogenous this effect leads to three results concerning the outcomes of open versus first price sealed bid auctions first an open auction yields a higher expected price than does sealed bidding second and more important the open auction captures less of the potential gains from trade than does the sealed bid auction third for broad classes of demand curves the efficiency gains from switching to sealed bids from an open auction accrue to both sellers and the buyer so that all concerned parties would agree to the change a direct application of the theory is to procurement the heavy use of sealed bidding in procurement is seen as rational in light of these results auction models with endogenous quantity could be an alternative to price setting oligopoly models for the study of price formation in general for the latter impose strong information requirements on agents and yield only equilibrium price vectors not equilibrium processes for determining prices

no profitable decompositions in quasi linear allocation problems abstract we study the problem of allocating a bundle of perfectly divisible private goods from an axiomatic point of view in situations where compensations can be made through monetary transfers the key property we impose on the allocation rule requires that no agent should be able to gain by decomposing the problem into sequences of subproblems combined with additional standard properties it leads to a characterization of the rule that shares the total surplus equally hence a traditional welfarist rule emerges as the unique consequence of our axioms phrased in a natural economic environment

import controls under imperfect information abstract this paper examines the effects of governmentally imposed quality controls upon an industry which consists of a domestic monopolist which is facing competition from a large number of foreign firms domestic consumers know the quality of the home good while their information about the quality of imports is imperfect although minimum quality standards are directly imposed on imports they indirectly affect the behavior of the domestic monopolist the domestic firm raises quality but its price response is ambiguous furthermore its market share and profitability decline import controls harm some consumers and benefit others we state conditions which lead to a lower national welfare

the effectiveness of english auctions abstract we study the performance of the english auction under different assumptions about the seller s degree of bayesian sophistication we define the effectiveness of an auction as the ratio between the expected revenue it generates for the seller and the expected valuation of the object to the bidder with the highest valuation total surplus we identify tight lower bounds on the effectiveness of the english auction for general private values environments and for private values environments where bidders valuations are non negatively correlated for example when the seller faces 12 bidders who the seller believes have non negatively correlated valuations whose expectations are at least as high as 60 of the maximal possible valuation an english auction with no reserve price generates an expected price that is more than 80 of the value of the object to the bidder with the highest valuation

commercial policy and intra industry trade abstract this paper constructs a model of intra industry trade within a multi product industry whose output range is limited to that obtainable from a particular type of capital intra industry trade is a natural outcome in this structure without requiring increasing returns to scale or imperfectly competitive markets and with its pattern determined along traditional relative factor abundance lines the volume of this trade will vary inversely with the level of trade restrictions as observed empirically other policies are then considered for their influence on the range rather than the level of domestic production since the former is the more likely policy objective under these circumstances

weak cartels and collusion proof auctions abstract we study private value auctions in which bidders may collude without using side payments in our model bidders coordinate their actions to achieve an outcome that interim pareto dominates the noncooperative outcome we characterize auctions that are collusion proof in the sense that no such coordination opportunities exist and show that the efficient and revenue maximizing auctions are not collusion proof unless all bidders exhibit a concave distribution of valuations we then solve for revenue maximizing collusion proof auctions if distributions of valuations are symmetric and single peaked the optimal selling mechanism is a standard auction with a minimum bid followed by sequential negotiation in case no bidder bids above the minimum bid

private monitoring in auctions abstract we study infinitely repeated first price auctions in which a bidder only learns whether or not he won the object while repetition of the stage game equilibrium is the unique nash equilibrium in public strategies with patient bidders there are simple nash equilibria in private strategies that improve on bid rotation sequential rationality is appropriately captured by essentially perfect bayesian equilibrium epbe which ignores behavior after irrelevant histories our main result is the construction of epbea that improve upon bid rotation assuming symmetry the exclusionary schemes of skrzypacz and hopenhayn tacit collusion in repeated auctions j econ theory 114 2004 153 169 including asymptotically efficient ones are supported as epbea

a laboratory comparison of uniform and discriminative price auctions for reducing non point source pollution auctions allow regulators to identify land management changes with substantial environmental benefit and low opportunity cost this paper reports an experiment in which seller subjects compete in sealed offer auctions to obtain part of a fixed budget allocated by the experimenter regulator to subsidize pollution abatement one treatment employs uniform price auction rules whereas another treatment employs discriminative price auction rules we find that most offers in the uniform price auction are within 2 of cost whereas most offers in the discriminative price auction are at least 8 greater than cost nevertheless the discriminativeprice auction has superior overall market performance

oligopolistic competition and international trade quantity and quality restrictions abstract we examine trade restrictions such as quantity and quality limitations on imports in an oligopolistic industry consisting of foreign and domestic firms we find that the effects of trade policy hinge on the location of the quality produced by the firms in the quality spectrum a quota leads to positive protection while minimum quality standards leads to negative protection furthermore minimum standards lower national welfare and a quota has an ambiguous effect on welfare

equilibrium in sealed high bid auctions there is a voluminous theoretical literature on sealed high bid auctions auctions in which bids are sealed and the high bidder pays his bid see for example vickrey 1961 myerson 1981 riley and samuelson 1981 milgrom and weber 1982 matthews 1983 maskin and riley 1984 holt 1980 cox smith and walker 1988 a critical property on which this literature relies is the existence of equilibrium in which buyers bidding strategies are monotonic in their types this enables the analyst to perform comparative statics as the distribution of types changes and to compare the welfare properties of the high bid auction with those of other auction institutions one case in which the existence of monotonic equilibrium is readily established is that in which buyers types are distributed smoothly independently and symmetrically in this case there exists a symmetric equilibrium one in which all bidders share the same bidding behaviour as a function of their valuations and this bid function is the solution to a first order differential equation

auction design for the allocation of emission permits in the presence of market power to the extent that emission permits have been allocated using market mechanisms this has been done using a sealed bid auction design typically with discriminatory prices however several authors have recommended the ascending auction format basically two competing ascending auction designs have been suggested the standard ascending auction with clock or demand schedules or an alternative ascending clock implementation of vickrey pricing the latter design was introduced as a response to problems of bid shading under the sealed bid and the standard ascending auction format the purpose of this paper is to investigate the allocation of permits under these two alternative mechanisms the auction process and the resulting market outcome in the presence of oligopolistic competition are simulated in this setting it is not obvious that bid shading is the optimal strategy under the standard design nor is it obvious that sincere bidding is the optimal strategy under the alternative ascending auction design the alternative auction format makes it less costly to pursue a strategy to increase market shares through the acquisition of emission permits thus increasing the competitor s costs leading to overbidding as the optimal strategy

auction cartels and the absence of efficient communication abstract this paper examines the feasibility of collusive mechanisms in single unit auctions a model is constructed with private and common value information asymmetry and continuous type space we show that an incentive compatible bid coordination mechanism bcm does not exist if common value uncertainty is present this result contradicts actual antitrust cases where common effects or resale opportunities created uncertainty about valuations but a price fixing cartel was formed we solve the puzzle by relaxing the assumption that all bidder types truthfully reveal their private information the introduced bayesian bid coordination mechanism bbcm exists if the main source of information asymmetry is private value in that case a designated ring member can signal high valuation and suppress competition our results demonstrate the rationale behind cartel mechanisms with pre auction knockouts

multi criteria auctions without full comparability of bids the emergence of auction mechanisms that support bids characterized by several attributes is one of the most recent evolutions within auction theory these mechanisms referred to as multi attribute multiple issue or multi dimensional auctions are at the intersection between multi criteria decision and auction theories the purpose of this paper is to introduce multi criteria auctions the originality of which is not to require full comparability between bids we claim that this distinctive feature is of great interest especially in procurement situations furthermore the existence of potential incomparability between multi dimensional offers will permit us to manage different bidding niches coexisting within the same bidding space a theoretical framework based on a general preference structure will be introduced and then referenced to existing approaches such as multi attribute auctions or new ones such as dominance based multi criteria auctions or butterfly auctions

bidder collusion at forest service timber sales allegations of bidder collusion at forest service timber sales in the pacific northwest were common in the 1970s of course prices may be low for reasons other than collusion we formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions noncooperative behavior in which a single unit is sold the standard auction model is a special case it is found to be definitively outperformed by a model of collusion we also find that supply effects are dominated by collusion in determining the winning bids in the market

bid rotation and collusion in repeated auctions this paper studies bidder collusion with communication in repeated auctions when no side transfer is possible it presents a simple dynamic bid rotation scheme which coordinates bids based on communication history and enables intertemporal transfer of bidders payoffs the paper derives a sufficient condition for such a dynamic scheme to be an equilibrium and characterizes the equilibrium payoffs in a general environment with affiliated signals and private or interdependent values with ipv it is shown that this dynamic scheme yields a strictly higher payoff to the bidders than any static collusion scheme which coordinates bids based only on the current reported signals

the reliability of u s gross national product two aspects of reliability revisions and errors need separate analysis revisions in gross national product gnp estimates are large in relation to the size of changes that matter to businesses and policy makers nevertheless preliminary estimates convey a lot of information about what the revised estimates will show errors in gnp estimates can plausibly be either larger or smaller than revisions the distinction between gathering errors and adjustment errors helps us understand a the absence of any measure of the size of gnp errors and b the ways in which national income statisticians go about reducing errors these ideas suggest several guidelines for improving gnp estimates

the outsourcing of r d through acquisitions in the pharmaceutical industry abstract we examine the performance of 160 pharmaceutical acquisitions from 1994 to 2001 and find evidence that on average acquirers realize significant positive returns these returns are positively correlated with prior acquirer access to information about the research and development activities at target firms and a superior negotiating position a unique desperation index is employed to determine the current status of a firm s internal productivity we find that firms experiencing declines in internal productivity or which are more desperate are more likely to engage in an outsourcing type acquisition in an effort to replenish their research pipelines

optimal collusion proof auctions abstract we study an optimal collusion proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation despite their ability to collude on participation informational asymmetry facing the potential colluders can be exploited significantly to weaken their collusive power the second best auction i e the optimal auction in a collusion free environment can be made collusion proof if at least one bidder is not collusive or there are multiple bidding cartels or the second best outcome involves a non trivial probability of the object not being sold regardless optimal collusion proof auction prescribes non trivial exclusion of collusive bidders i e a refusal to sell to any collusive bidder with positive probability

quantification of sanitary phytosanitary and technical barriers to trade for trade policy analysis this paper presents promising methodologies for modeling and quantifying non tariff barriers ntb to trade in the agricultural and food sectors we limit the analysis to sanitary phytosanitary and technical regulations that can have an impact on trade and to methods that provide some quantitative estimates of the impact of such barriers on market equilibrium trade flows economic efficiency and welfare given the heterogeneous nature of these regulations a unifying methodology does not exist quantification of the effects of such measures has focused on a particular product and has relied on methods that belong to different fields of the economic literature we provide a concise description and evaluation of the various methods available for a more comprehensive assessment of the impact of ntbs on trade and welfare we conclude by identifying promising areas for future applied research

measuring consumers willingness to pay at the point of purchase abstract economists psychologists and marketing researchers rely on measures of consumers willingness to pay wtp in estimating demand for private and public goods and in designing optimal price schedules existing market research techniques for measuring wtp differ in whether they provide an incentive to consumers to reveal their true wtp and in whether they simulate actual point of purchase contexts the authors present an empirical comparison of several procedures for eliciting wtp that are applicable directly at the point of purchase in particular the authors test the applicability of becker degroot and marschak s 1964 well known incentive compatible procedure for assessing the utility of lotteries to measuring consumers wtp in three studies the authors explore the reliability validity and feasibility of the procedure and show that it yields lower wtp estimates than do non incentive compatible methods such as open ended and double bounded contingent valuation they show experimentally t

auctions and bidding a primer maybe the contractor was right to think bid jobs are different but it is more likely that he suffered from too simple a view of what is involved in preparing a competitive bid our analysis will show that even an experienced estimator working in familiar terrain can lose money if he doesn t understand the subtleties of competitive bidding the phenomenon experienced by the painting contractor known as the winner s curse is just one of the surprising and puzzling conclusions that have been turned up by modern research into auctions another is the theoretical proposition supported also by some experimental evidence that for example a sealed bid treasury bill auction in which each buyer pays a price equal to the highest rejected bid would yield more revenue to the treasury than the current procedure in which the winning bidder pays the seemingly higher amount equal to his own bid there are also subtle results that demonstrate the equivalence of such apparently different institutions as the standard sealed bid auction in which the auctioneer seller sells the goods to the highest bidder for a price equal to his bid and the dutch auction in which the auctioneer seller begins by asking a high price and gradually lowers the price until

a profit based unit commitment ga for the competitive environment as the electrical industry restructures many of the traditional algorithms for controlling generating units need modification or replacement previously utilized to schedule generation units in a manner that minimizes costs while meeting all demand the unit commitment uc algorithm must be updated a uc algorithm that maximizes profit will play an essential role in developing successful bidding strategies for the competitive generator simply bidding to win contracts is insufficient bidding strategies must result in contracts that on average cover the total generation costs no longer guaranteed to be the only electricity supplier a generation company s share of the demand will be more difficult to predict than in the past removing the obligation to serve softens the demand constraint in this paper the authors provide a price profit based uc formulation which considers the softer demand constraint and allocates fixed and transitional costs to the scheduled hours the authors describe a genetic algorithm solution to this new uc problem and present results for an illustrative example

data revisions and forecasting the relationship between two sets of gnp data the earliest and the first revisions is examined this comparison enables us to determine whether the early numbers are valuable to forecasters the analysis uses two methods the first is based on a technique which has been used to evaluate whether financial and economic forecasts are valuable to the users the second approach uses time series techniques we conclude that revisions to the 15 day estimates that occur when the 45 day numbers are released are successful and that the 15 day numbers are useful to forecasters

collusion and the choice of auction auctions are used in many different markets including the leasing of a substantial fraction of the natural resources in the united states the procedures used in the auctions conducted by the federal government have been a continuing source of controversy one of the concerns has been the possibility of collusion among bidders this article shows that cartels are stable if the seller uses open ascending bid oral auctions but not if he uses sealed high bid auctions this may help to explain the frequent use of sealed high bid auctions

repeated games with private monitoring two players we investigate two player infinitely repeated games where the discount factor is less than but close to unity monitoring is private and players cannot communicate we require no condition concerning the accuracy of players monitoring technology we show the folk theorem for the prisoners dilemma with conditional independence we also investigate more general games where players private signals are correlated only through an unobservable macro shock we show that efficiency is sustainable for generic private signal structures when the size of the set of private signals is sufficiently large finally we show that cartel collusion is sustainable in price setting duopoly

auctions and corruption an analysis of bid rigging by a corrupt auctioneer in many auctions the auctioneer is an agent of the seller this invites corruption we analyze a model in which the auctioneer orchestrates bid rigging by inviting a bidder to either lower or raise his bid whichever is more profitable the interplay between these two types of corruption gives rise to a complex bidding problem that we tackle with numerical methods our results indicate that corruption does not only redistribute surplus away from the seller but also distorts efficiency we furthermore explain why both the auctioneer and bidders have a vested interest in maintaining corruption

first price auctions in the asymmetric n bidder case i consider the first price auction when the bidders valuations may be differently distributed i show that every bayesian equilibrium is an essentially pure equilibrium formed by bid functions whose inverses are solutions of a system of differential equations with boundary conditions i then prove the existence of an equilibrium i prove its uniqueness when the valuation distributions have a mass point at the lower extremity of the support i give sufficient conditions for uniqueness when every valuation distribution is one of two atomless distributions i establish inequalities between equilibrium strategies when relations of stochastic dominance exist between valuation distributions

the stochastic behavior of durable and nondurable consumption the life cycle permanent income hypothesis suggests that optimization by consumers should cause marginal utility to approximate a random walk as a consequence purchases of nondurable goods should also approximately follow a random walk and purchases of durable goods should approximately follow a white noise process the univariate processes for nondurables and durables both appear to be random walks which would confirm the lc pih for nondurables and reject it for durables adjustment costs and nonseparability between durables and nondurables are then added to the specification of utility the resulting more general stochastic process is estimated and the data tend to support the existence of nonseparabilty but not adjustment costs while forecasts of durables are not fully informationally efficient they do about as well as do forecasts of nondurables the behavior of durable consumption purchases is shown to be consistent with the life cycle permanent income hypothesis copyright 1989 by mit press

goethe s second price auction in 1797 johann wolfgang von goethe sold a manuscript through a second price auction we investigate goethe s motivation in the context of the late eighteenth century s book market and relate it to modern auction theory

the permanent income hypothesis and consumption durability analysis based on japanese panel data the permanent income hypothesis with durability of commodities is tested on a panel of about 2 000 japanese households for several commodity groups under static expectations about real interest rates and for some class of utility functions consumption which is a distributed lag function of current and past expenditure follows a martingale main empirical results are i the durability of commodities usually classified as services is substantial ii the hypothesis applies to about 85 percent of the population consisting of wage earners and iii income changes explain only a small fraction of the movements in expenditure

the bidder exclusion effect we introduce a new simple to compute test of independence of valuations and the number of bidders for ascending button auctions with symmetric conditionally independent private values the test involves estimating the expected revenue drop from excluding a bidder at random which can be computed as a scaled sample average of a difference of order statistics this object also provides a bound on counterfactual revenue changes from optimal reserve pricing or bidder mergers we illustrate the approach using data from timber auctions where we find some evidence that bidder valuations and the number of participants are not independent

vickrey auctions in practice from nineteenth century philately to twenty first century e commerce william vickrey 1961 proposed an auction mechanism in which bidders submit sealed bids and the highest bidder wins the good in return for payment of the second highest bid amount for decades economists have credited vickrey with inventing this auction format and have believed that the vickrey auction is rarely used in practice this paper presents evidence that vickrey auctions have long been the predominant auction format for mail sales of collectible postage stamps stamp auctioneers developed this auction format on their own as early as 1893 even before vickrey was born

information returns and bidding behavior in ocs auctions 1954 1969 this paper examines federal auctions for leases on the outer continental shelf in the light of the predictions of the first price sealed bid common values model of auctions the authors find that the data strongly support the model for auctions in which one bidder is better informed than the other bidders the evidence for auctions in which bidders have noisy but qualitatively similar information is less conclusive but is consistent with a model in which each bidder does not know either the actual or potential number of bidders on a lease copyright 1987 by blackwell publishing ltd

the expectational stability of underemployment equilibria i introduction one of the most important recent developments in macroeconomic theory has been the demonstration of how external economies of scale may generate multiple perfect foresight equilibria a positive externality such as that studied by diamond 1982 may generate two saddle path equilibria one converging to a high employment steady state and the other converging to an inferior low employment steady state for given initial conditions there are therefore two equilibrium choices of employment in howitt and mcafee s 1988 model which has both a positive and a negative externality any one of a continuum of employment choices will satisfy optimality conditions and converge to the low employment steady state thus the literature on externalities demonstrates that there may exist a stable or saddle path stable pareto inferior low employment equilibrium in a perfect foresight model with market clearing and flexible prices 1 an intriguing feature of these models is the possibility that economic fluctuations might be driven by waves of optimism or pessimism that move the economy from one equilibrium to another along with the possibility of multiple equilibria there is however a problem of indeterminacy how do we say which equilibrium will be chosen the idea that waves of optimism or pessimism move the economy is provocative and intuitively appealing but a more explicit account of how individuals come to focus on a particular equilibrium a selection criterion is needed one criterion that has been used successfully to limit the multiplicity of equilibria in rational expectations and perfect foresight models is the stability of an adaptive learning procedure 2 under adaptive learning the agents in the model learn about the economy in much the same way as an econometrician they have a perfect foresight equilibrium model of the economy and they use the available macroeconomic data to infer the value of that model s parameters their parameter estimates determine their forecasts and these forecasts determine their choice of labor inputs if a given steady state equilibrium is unstable under a broad class of plausible learning rules it is unlikely that the economy will converge to that equilibrium even if it is stable under perfect foresight if a steady state is stable under learning then we are more confident that it may be observed in an actual economy in this paper i apply the concept of expectational stability to howitt and mcafee s 1988 model of aggregate employment in the presence of externalities 3 expectational stability is a simple and therefore highly tractable iterative learning scheme that has been used by evans 1985 and by bray 1982 proposition 4 to study the convergence of learning to rational expectations in addition to being tractable the procedure is general indeed the local stability conditions of the procedure used in this paper are the same as the conditions for local stability of least squares learning as derived by marcet and sargent 1989a 1989b these same conditions are necessary for the stability of a broad class of learning algorithms including least squares estimation kalman filtering and iterative gauss newton procedures as is shown in ljung and soderstrum 1983 i study learning in howitt and mcafee s 1988 model because it is also highly general it incorporates both thick market positive and congestion negative externalities it allows for multiple perfect foresight steady states that are alternately stable and saddle path stable 4 further i show that the widely cited model of diamond 1981 1982 is a special case of the howitt and mcafee model in this paper i show that the learning rule eliminates the problem of indeterminacy it will however also rule out those steady states that are unambiguously pareto inferior stable low employment steady states may exist but they cannot be ranked

on the durability of non durable goods abstract using both monthly and quarterly data this paper shows that the durability rates of non durable goods and services are significantly greater than zero and in line with the prediction of the theory the common practice of testing consumption and consumption related models with the national income and product account category of non durables and services under the assumption of zero durability may thus be inappropriate

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