information spillovers gains from trade and interventions in frozen markets we study government interventions in markets suffering from adverse selection importantly asymmetric information prevents both the realization of gains from trade and the production of information that is valuable to other market participants we find a fundamental tension in maximizing welfare while some intervention is required to restore trading too much intervention depletes trade of its informational content we characterize the optimal policy that balances these two considerations and explore how it depends on features of the environment our model can be used to study a program introduced in 2009 to restore information production in the market for legacy assets

decentralized trade mitigates the lemons problem in markets with adverse selection only low quality units trade in the competitive equilibrium when the average quality of the good held by sellers is low we show that under decentralized trade however both high and low quality units trade although with delay moreover when frictions are small the surplus realized is greater than the static competitive surplus thus decentralized trade mitigates the lemons problem remarkably payoffs are competitive as frictions vanish even though both high and low quality units continue to trade and there is trade at several prices markets differ in the degree to which trade is centralized call markets used to set opening prices on the nyse are highly centralized and all trade takes place at a single price the market clearing price in contrast in housing labor or used car markets trade is highly decentralized and prices are determined by bilateral bargaining between buyers and sellers and may differ between trades the competitive model abstracts away from these institutional aspects thus providing a model suitable in principle for the study of both centralized and decentralized markets our results suggest that decentralized markets with adverse selection may perform better than anticipated by the static competitive model and therefore that these institutional features cannot be ignored it is known that in markets for homogenous goods decentralized trade tends to yield competitive outcomes when trading frictions are small because competitive equilibrium is efficient in these markets this implies that decentralized trade generates nearly efficient outcomes in markets with adverse selection however competitive equilibria ce need not be efficient which raises the possibility that alternative market structures perform better in this article we study a version of akerlof s 1970 market for lemons in which trade is decentralized each period an equal measure of buyers and sellers enters the market every seller is endowed with a unit of either high or low quality at each period every agent in the market has a positive probability of meeting an agent of the opposite type once matched a buyer without observing the quality of the seller s unit makes a take it or leave it price offer if the seller accepts then they trade at the offered price and both agents exit the market if the seller rejects the offer then both agents remain in the market at the next period discounting of future gains and the possible delay in matching with a trading partner constitute trading frictions when the average quality of the good held by entering sellers is low the market has a unique competitive equilibrium ce in which the price equals the buyers value of a low quality unit

a bayesian model of voting in juries abstract we model voting in juries as a game of incomplete information allowing jurors to receive a continuum of signals we characterize the unique symmetric equilibrium of the game and give a condition under which no asymmetric equilibria exist under unanimity rule we offer a condition under which unanimity rule exhibits a bias toward convicting the innocent regardless of the size of the jury and give an example showing that this bias can be reversed we prove a jury theorem for our general model as the size of the jury increases the probability of a mistaken judgment goes to zero for every voting rule except unanimity rule for unanimity rule the probability of making a mistake is bounded strictly above zero if and only if there do not exist arbitrarily strong signals of innocence our results explain the asymptotic inefficiency of unanimity rule in finite models and establishes the possibility of asymptotic efficiency a property that could emerge only in a continuous model journal of economic literature classification numbers c72 d72

efficiency in decentralised markets with aggregate uncertainty we study efficiency in decentralized markets with aggregate uncertainty and one sided private information there is a continuum of mass one of uninformed buyers and a continuum of mass one of informed sellers buyers and sellers are randomly and anonymously matched in pairs over time and buyers make the offers we show that all equilibria become efficient as trading frictions vanish

information aggregation in common value auctions a key question in information economics and finance is whether prices aggregate information in a competitive environment that is when agents are endowed with private information does competition lead in the limit to prices which would occur if all information were public this paper examines the asymptotic properties of prices in common value auctions when the number of bidders becomes large the main idea in this paper is to separate the issue of information aggregation from the issue of revenue efficiency we also distinguish between the amount of information prices contain and the degree to which prices approximate the asset s value using this approach we get a simple characterization of the limiting distribution of prices we are not only able to answer whether prices converge to the asset s value but also get an explicit form for the limiting distribution prices converge to the expected value of the asset conditional on the information possessed by what we call the pivotal bidder this provides insights on how the auction format and the information structure influence the limiting behavior of prices it shows that the limiting distribution of prices can be derived from the statistical properties of certain order statistics this lets us abstract from the specific equilibrium bidding strategies for example we show that while the first and second price auction have different equilibrium strategies they share a similar limiting distribution of prices these auctions yield different limiting distributions from auctions such as the english auction or kn auction our

limit theorems for markets with sequential bargaining this paper models trade as a non coopertative strategic game played at an inlinite sequence of dates a single indivisible commodity is traded buyers and sellers have transferable utility and are characterized by their reservation utilities they meet at random and bargain over the price at which a single unit of the good will be exchanged under a variety of circumstances it is shown that as the costs of search and bargaining become negligible the outcome of the game converges to the competitve flow equilibrium even when there is complete information journal of economic literature classification numbers 022 19x7

efficiency and information aggregation in large uniform price auctions abstract we prove that the equilibria of a large interdependent value uniform price auction model where bidders have arbitrary preferences for multiple units can be approximated by a nonatomic exchange economy we show that the uniform price auction is approximately efficient with a large number of participants and asymptotically aggregates idiosyncratic bidder information into the market price more generally our analysis framework provides conditions justifying the use of nonatomic limit model approximations to analyze the large market behavior of game theoretic models we demonstrate continuity requirements on the economic primitives sufficient for the equilibrium strategies of the two models to converge as the number of participants in the finite game approaches infinity

smooth trading with overconfidence and market power we describe a symmetric continuous time model of trading among relatively overconfident oligopolistic informed traders with exponential utility traders agree to disagree about the precisions of their continuous flows of gaussian private information with enough disagreement an equilibrium exists in which prices reveal the average of all traders signals immediately but traders continue to trade gradually towards target inventories the price is a linear function of a trader s inventory the derivative of a trader s inventory and the average other traders valuations prices reflect a keynesian beauty contest faster than equilibrium trading generates flash crashes jel d8 d43 d47 g02 g14

signalling in a dynamic labour market this paper analyzes a multiperiod version of the spence job market signalling model in which workers cannot commit to an education choice and firms make wage offers at any point in time the dynamic competition combined with the incomplete information yield a multiplicity of sequential equilibria including ones that sustain implicit collusion even though the length of the game is finite emphasis is placed on equilibria that satisfy the independence of never weak best response criterion of kohlberg and mertens 1986 it is shown that in the limit as the time between offers tends to zero any such equilibrium results in expectation in the unique stable outcome of the static spence model

auctions actions and the failure of information aggregation we study a market where k identical and indivisible objects are allocated using a uniform price auction where n k bidders each demand one object before the auction each bidder receives an informative but imperfect signal about the state of the world the good that is auctioned is a common value object for the bidders and a bidder s valuation for the object is determined jointly by the state of the world and an action that he chooses after winning the object but before he observes the state we show that there are equilibria where the auction price is completely uninformative about the state of the world and aggregates no information even in an arbitrarily large auction in the equilibrium that we construct because prices do not aggregate information agents have strict incentives to acquire costly information before they participate in the market also market statistics other than price such as the amount of rationing and bid distributions contain extra information about the state our findings sharply contrast with past work which shows that large auctions aggregate information when there is no ex post action

dynamic signaling and market breakdown we consider the effects a public revelation of information e g rating grade has on trading in a dynamic signaling model competing buyers offer prices to a privately informed seller who can reject them and delay trade delay is costly and the seller has no commitment to its duration the external public information allows for signaling in equilibrium more interestingly we characterize the dynamics of trade and prices if signals are noisy no trade takes place just before the revelation of external information if signals are fully revealing then trade occurs even close to revelation however transaction prices are discontinuous

matching markets with adverse selection abstract this paper considers a market with adverse selection in the spirit of rothschild and stiglitz quart j econ 90 1976 629 the major departure from existing approaches is that we model a decentralized market that is open ended and constantly refilled by new participants e g by new workers and firms in the case of a labor market the major novelty of this approach is that the distribution of types in the market becomes an endogenous variable which is jointly determined with equilibrium contracts as frictions become small we show that the least cost separating contracts are always supported as an equilibrium outcome regardless of the distribution of types among entrants moreover we derive conditions under which this outcome is also unique

herd behavior the penguin effect and the suppression of informational diffusion an analysis of informational externalities and payoff interdependency this article analyzes a technology adoption process in which the effect of informational spillover interacts with network externalities the interplay of informational externalities and payoff interdependency induces risk averse and clustering behavior in the technology adoption process the analysis differs from the herd behavior literature in focusing on how the herd behavior of subsequent users influences the initial adoption decision moreover herd behavior in this article stems from each agent s desire to inhibit the revelation of new information that can be used in a way detrimental to her rather than from each agent s effort to free ride on information contained in the decisions made by predecessors

price inference in small markets this paper investigates the effects of market size on the ability of price to aggregate traders private information to account for heterogeneity in correlation of trader values a gaussian model of double auction is introduced that departs from the standard information structure based on a common fundamental shock the paper shows that markets are informationally efficient only if correlations of values coincide across all bidder pairs as a result with heterogeneously interdependent values price informativeness may not increase monotonically with market size as a necessary and sufficient condition for the monotonicity price informativeness increases with the number of traders if the implied reduction in the absolute value of an average correlation statistic of an information structure is sufficiently small

information aggregation in dynamic markets with strategic traders this paper studies information aggregation in dynamic markets with a finite number of partially informed strategic traders it shows that for a broad class of securities information in such markets always gets aggregated trading takes place in a bounded time interval and in every equilibrium as time approaches the end of the interval the market price of a separable security converges in probability to its expected value conditional on the traders pooled information if the security is non separable then there exists a common prior over the states of the world and an equilibrium such that information does not get aggregated the class of separable securities includes among others arrow debreu securities whose value is 1 in one state of the world and 0 in all others and additive securities whose value can be interpreted as the sum of traders signals

market structure uncertainty and intrafirm diffusion the case of optical scanners in grocery stores this study uses monthly data on the adoption of optical scanners by sixty three grocery chains in thirty two large u s cities to identify the determinants of the rate of intrafirm diffusion the methodology involves a two stage approach that relates market environment characteristics to the estimated rate of intrafirm diffusion the results indicate that firms with larger market shares adopt a new innovation scanners more quickly initially but diffuse the innovation through their stores more slowly than firms with smaller market shares in addition firms that lag competitors in the initial adoption of scanners tend to diffuse the innovation more quickly copyright 1992 by mit press

innovation diversity and diffusion a self organisation model a number of features of innovation diffusion are identified appropriability diversity expectations selection learning and spillover externalities a dynamic model is formul ated to embed the diffusion question into a more general framework of disequilibrium competition the model incorporates distinct vintage structures reflecting a change in technological trajectory learning by using a nd expectations driven investment rules of thumb simulation studies reveal robust quasi logistic curves but a complicated pattern of net market share gains and losses uncertainty regarding the rationality of early or late adoption it is argued ensures that the requisite behavioral variety is present to generate these diffusion patterns copyright 1988 by royal economic society

integrating demand side options in electric utility planning a multiobjective approach this paper proposes simultaneous integration of dsm options in a multiobjective framework using a compromise programming technique for electric utility planning the two distinct advantages of this method are i explicit consideration of all associated benefits of dsm options viz cost reduction emissions reduction and improvement of supply system reliability and ii consideration of the integration method s specific characteristics of various types of dsm options depending upon the control of the utility on their application the methodology is applied to an indian electric utility maharashtra state electricity system mses for its integrated resource planning for the period 1990 2000 to illustrate the methodological issues various methodological issues related to the specific nature of dsm options and multiobjective framework are also discussed in the context of mses

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

the determinants of technology adoption the case of the banking firm using data on the adoption of automatic teller machines by firms in the banking industry this study examines the relationship between the decision to adopt new technology and its determinants since banking firms differ considerably in terms of the competitive environments in which they operate focusing on this one innovation in this industry allows a stronger test of the relationship between market structure and the adoption of new technology than has been previously conducted using a failure time estimation procedure we find that larger banks and banks operating in more concentrated local banking markets register a higher conditional probability of adopting this new technology all else equal we also find that other results are consistent with the underlying model and that the bank s regulatory environment shapes its adoption decision in plausible ways

information spillovers in asset markets with correlated values we study information spillovers in a dynamic setting with privately informed traders and correlated asset values a trade of one asset or lack thereof can provide information about the value of other assets the information content of trading behavior is endogenously determined in equilibrium we show that this endogeneity leads to multiple equilibria when the correlation between asset values is suciently high the

electricity generation from renewables in madagascar opportunities and projections climate change is the greatest challenge of our time for development adaptation to this change combined with the reduction of greenhouse gas emissions can help to boost the economic transformation which stimulates growth fills the energy gap and reduces poverty this paper focuses on the potential of renewable energy sources res for electricity generation in madagascar which is a lower income country a large accessibility to electricity could be a driving force for the economic development of this fourth worldwide island the electricity mix is currently heavily dependent to fossil fuel imports indeed most of the electric demands are fulfilled by diesel power plants an overview of the power situation and renewable energy potential of madagascar is first presented then different scenarios for the evolution its electricity mix are proposed

education signalling with preemptive offers offers before workers complete their education workers cannot commit to turning down such offers offers are private so that workers are unable to use one firm s offer in an attempt to elicit better offers from other firms in the unique sequential equilibrium outcome of the model with unproductive education there is no wasteful education when education is productive the standard model predicts that more able individuals become overeducated to separate themselves from less able workers in our model less able workers become overeducated to partially pool with more able workers the pooling mutes the incentives of high ability workers who in consequence actually choose to become undereducated we examine the robustness of our result to modifications to the basic model

investment planning for hydro thermal power system expansion stochastic programming employing the dantzig wolfe decomposition principle this paper presents an application of the dantzig wolfe decomposition principle to the problem of investment planning in the electric power sector the formulation of the capacity planning problem incorporates uncertainties in long term load growth and in fuel supply availability in addition the formulation permits the inclusion of such demand side investment decisions as conservation as well as conventional and renewable supply investments and it allows flexibility in modeling system reliability reliability targets can be incorporated as constraints or reliability can be optimized by minimizing customer outage costs in addition to investment costs and operating costs results of an application to the pacific northwest involving problem sizes up to 30 000 rows and 54 000 columns are reported

the loser s curse and information aggregation in common value auctions we consider an auction in which k identical objects of unknown value are auctioned off to n bidders the k highest bidders get an object and pay the k 1st bid bidders receive a signal that provides information about the value of the object we characterize the unique symmetric equilibrium of this auction we then consider a sequence of auctions a r with n r bidders and k r objects we show that price converges in probability to the true value of the object if and only if both k r and n r k r i e both the number of objects and the number of bidders who do not receive an object go to infinity

public vs private offers in the market for lemons we study the role of observability in bargaining with correlated values short run buyers sequentially submit offers to one seller when previous offers are observable bargaining is likely to end up in an impasse in contrast when offers are hidden agreement is always reached although with delay

search adverse selection and market clearing we examine a dynamic decentralized trading model with infinitesimal sellers and buyers to investigate whether or not the market fails to clear in the limit of search friction vanishing a seller who has private information about product quality and a buyer are matched to bargain over price they form a long term relationship if they reach agreement they return to the matching pool if they fail to agree or the existing relationship is dissolved the market fails to clear if and only if the ratio of agents patience over the dissolution rate exceeds a threshold

bidder solicitation adverse selection and the failure of competition we study a common value first price auction in which the number of bidders is endogenous the seller auctioneer knows the value and solicits bidders at a cost the number of bidders which is unobservable may thus depend on the true value therefore being solicited conveys information this solicitation effect may soften competition and impede information aggregation under certain conditions there is an equilibrium in which the seller solicits many bidders yet the resulting price is not competitive and fails to aggregate any information more broadly these ideas are relevant for markets with adverse selection in which informed traders initiate contacts

the dynamics of technological change in uk retail banking services an evolutionary perspective abstract the purpose of this paper is to elaborate an evolutionary perspective on the process of structural change that has characterized the banking industry in the united kingdom uk for this purpose the evolution of retail financial services is contrasted against the backdrop of the implementation and development of information and communication technologies icts the paper delves into the sources and the effects of technological change in banking over a long term perspective 1840s 1990s to point out the significance of the opportunities and the constraints that have shaped the growth and development of this industry this is interpreted as a three stage evolutionary process driven by intertemporal coordination across several complementary domains including activities of production business organization consumption and the underlying regulatory setting it is concluded that the evolution of uk retail banking displays the characteristics of a distributed process of innovation in which developers of technologies service suppliers and customers contribute to the process of structural change of the industry

information aggregation and allocative efficiency in smooth markets recent years have seen extensive investigation of the information aggregation properties of markets however relatively little is known about conditions under which a market will aggregate the private information of rational risk averse traders who optimize their portfolios over time in particular what features of a market encourage traders to ultimately reveal their private information through trades we consider a market model involving finitely many informed risk averse traders interacting with a market maker our main result identifies a basic asymptotic smoothness condition on prices in the market that ensures information is aggregated as long as portfolios converge furthermore under this assumption the allocation achieved is ex post pareto efficient asymptotic smoothness is fairly mild it requires that eventually infinitesimal purchases or sales should see the same per unit price notably we demonstrate that under some mild conditions algorithmic markets based on cost functions or equ

undefeated equilibria of the shi trejos wright model under adverse selection abstract decentralized markets where assets are useful as media of exchange are also usually subject to private information to analyze the liquidity and prices of such assets i adapt the shi 1995 trejos and wright 1995 model with lucas trees under adverse selection while most studies focus on either a pooling or separating equilibrium i apply the undefeated equilibrium refinement by mailath et al 1993 to make the selection based on fundamentals under pooling the high quality asset holder accepts a pooled price and under separating signals quality through asset retention applying the refinement results in a regime switch from no information pooling to information revelation separating following a negative shock to the quality or quantity of lemons this change leads to a discontinuous fall in aggregate welfare

a model of search with price discrimination abstract we introduce observable heterogeneity across buyers into a model of simultaneous search buyers differences are informative about their willingness to search giving rise to price discrimination even if they all have the same willingness to pay we analyze and compare equilibrium outcomes when price discrimination is allowed and when it is not we find that the price comparison across consumers as well as the effects of banning price discrimination critically depend on the elasticity of the search cost distribution interestingly for normally distributed search costs there is an inverted u shape relationship between prices and buyers size similarly a ban on price discrimination hurts small and large buyers to the benefit of the medium size ones

a search model of rental markets who should pay the commission abstract we develop a dynamic search equilibrium model of rental markets with brokerage fees an endogenous mass of landlords and tenants is active in the search market while the mass of entering tenants is exogenous the mass of entering landlords is endogenously determined by the rate at which apartments become vacant brokerage fees paid by tenants are used as a device to screen short term and long term tenants we analyze a policy that requires fees to be paid by landlords such a policy decreases efficiency by preventing efficient screening but also increases turnover and hence efficiency in the search market we further provide empirically testable implications of our theory

markets transparency and the corporate bond market for decades corporate bonds primarily traded in an opaque environment quotations which indicate prices at which dealers are willing to transact were available only to market professionals most often by telephone prices at which bond transactions were completed were not made public the u s corporate bond market became much more transparent with the introduction of the transaction reporting and compliance engine trace in july 2002 beginning that date bond dealers were required to report all trades in publicly issued corporate bonds to the national association of security dealers which in turn made transaction data available to the public in this paper we describe trading protocols in the corporate bond market and assess the impact of the increase in transparency on the market we review how trace has affected the costs that corporate bond investors paid to bond dealers for their transactions we canvass the opinions of a variety of finance professionals and consider articles in the trade press to obtain a broader view of the impact of transparency on the corporate bond market

selling a lemon under demand uncertainty we consider a seller who has private information about the quality of her good but is uncertain about buyer arrivals assuming that the high quality seller insists on a price we show that the low quality seller s surplus and pricing strategy crucially depend on buyers knowledge about the demand state if they are also uncertain about demand then demand uncertainty increases the low quality seller s expected payoff and her optimal strategy is to lower the price after some time if buyers know the demand state then demand uncertainty does not affect the low quality seller s payoff but she must employ a sophisticated pricing strategy

clean and secure power supply a system dynamics based appraisal abstract across the world the electricity industry is changing with the advent of renewable energy sources such as solar and wind power as these are exposed to intermittency seasonality and global climate variation policy makers concerns are now shifting towards security of supply in fact the industry confronts three conflicting goals security of supply competitive prices to customers and environmental protection in this context and given the multiple uncertainties of technology transformation this paper uses modelling based scenario analysis to investigate different extreme and plausible futures simulation is used to analyse policies aimed at increasing the penetration of renewables and to explore how these energy sources may affect system reliability this paper explores the effect of incorporating renewables in colombia where a large hydroelectric component has led to insufficient electricity being available during droughts and to high electricity price volatility though not intuitive at first glance this paper shows that renewables may contribute to i increased security of supply through complementarity e g it does not rain when the sun shines ii reduced price volatility in the medium term and iii increased industry sustainability

interdependences in the intrafirm diffusion of technological innovations confronting the rational and social accounts of diffusion this article investigates the intrafirm diffusion of technological innovations and the interdependences that exist among rival firms in this process previous research has offered two potential explanations for these interdependences social accounts in which they result from institutional pressures and rational accounts in which firms are interdependent as a result of how adoption by rivals affects expectations about the profitability of the technology the article offers two contributions first we propose a competitive interaction mechanism that is consistent with the fundamentals of rational accounts of diffusion second the empirical analysis shows the dominance of the proposed rational mechanism over social accounts of innovation diffusion in the generation of interdependences in the process of intrafirm diffusion

reputation and survival learning in a dynamic signalling model we consider the impact of reputation on the survival of a monopolist selling single units in discrete time periods whose quality is learned slowly if the seller learns her own quality at the same rate as customers a sufficiently bad run of luck could induce her to stop selling when she knows her quality a good seller never stops selling though at low reputations a bad seller does with some probability furthermore a seller with positive though imperfect information sells for the same number of periods whether her information is private or public we further consider the robustness of the central result when the seller s opportunities for strategic behaviour are limited

costly search with adverse selection solicitation curse versus acceleration blessing we analyze a dynamic trading model of adverse selection where a seller can increase the frequency of strategic price quotes a low quality seller benefits more from trade and therefore searches more intensively than a high quality seller this makes a seller s contact carry negative information but a seller s availability become a stronger indicator of high quality in the stationary environment the two effects exactly offset each other and reducing search costs is weakly beneficial to the seller in the nonstationary environment the relative strengths of the two effects vary over time and reducing search costs can be detrimental to the seller

mixed strategy equilibrium in a market with asymmetric information in the mid 1970s several authors studied models of markets with asymmetric information in which equilibria do not exist although those authors focused on models of insurance and education it was recognized that similar nonexistence problems arise in a wide class of models with asymmetric information recently dasgupta and maskin have demonstrated that for a game theoretic version of at least one of those models although no equilibria may exist in pure strategies equilibria exist in mixed strategies in the present paper we construct a mixed strategy equilibrium for one member of the class spence s signalling model of education qualitative features of the equilibrium are explored

dynamic trading with developing adverse selection abstract we study a dynamic trading game in which the information asymmetry between the agents develops over time a seller and potential buyers start out symmetrically uninformed about the quality of a good but the seller becomes informed after the game begins we show that this developing adverse selection gives rise to novel trading dynamics in particular if the seller s learning speed is high the equilibrium features collapse and recovery behavior both the equilibrium price and the trade probability first drop and then increase over time while the trade surplus monotonically decreases as the learning speed increases the seller s surplus may change non monotonically

bargaining and reputation in search markets in a two sided search market agents are paired to bargain over a unit surplus the matching market serves as an endogenous outside option for a bargaining agent behavioral agents are commitment types that demand a constant portion of the surplus the frequency of behavioral types is determined in equilibrium even if the frequency of behavioral types is negligible they aect the terms of trade and eciency in an unbalanced market where the entering

learning and price discovery in a search market we introduce learning into an otherwise standard two sided search and bargaining market there is uncertainty about the price distribution due to uncertainty about an underlying exogenous state of relative demand in the high state buyers are on the long side otherwise they are on the short side in equilibrium prices are on average higher in the high state individual agents learn about the distribution while searching agents typically start out by experimenting with a tough bargaining position buyers may initially insist on a low price and sellers on a high price after successive failures to trade agents become increasingly pessimistic about the market conditions and soften their bargaining stance when frictions are small equilibrium transaction prices are approximately market clearing despite aggregate demand being unknown thus the search and bargaining procedure enables price discovery in a decentralized market

use of multicriteria decision analysis methods for energy planning problems most decision making requires the consideration of several conflicting objectives the term multiple criteria decision analysis mcda describes various methods developed for aiding decision makers in reaching better decisions energy planning problems are complex problems with multiple decision makers and multiple criteria therefore these problems are quite suited to the use of mcda a multitude of mcda methods exists these methods can be divided in three main groups value measurement models goal aspiration and reference level models and outranking models methods from all of these groups have been applied to energy planning problems particularly in the evaluation of alternative electricity supply strategies each of the methods has its advantages and drawbacks however we cannot conclude that one method generally is better suited than the others for energy planning problems a good alternative might be to apply more than one method either in combination to make use of the strengths of both methods or in parallel to get a broader decision basis for the decision maker until now studies of mcda in energy planning have most often considered energy networks with only one energy carrier more advanced energy systems with multiple energy carriers have been neglected even though this field ought to be suitable for use of mcda due to its high complexity many decision makers and many conflicting criteria

technological regimes and innovation in services the case of the italian banking industry abstract in this paper we propose a conceptual model to analyse innovations originating from the diffusion of information technologies in the banking sector we argue that technical change in this industry exhibits a revolutionary character a distinction is made between the mass automation regime focusing mainly on the mechanization of back office procedures in the 1960s and 1970s and the smart automation regime originating from the introduction of distributed data processing and network technologies and centered around the supply of electronic banking services a theoretical model is developed which emphasizes the crucial role played by demand pull variables in stimulating innovative behaviour under the smart automation regime in contrast limited importance is attributed to cumulative and learning by doing effects relating to back office automation at least for banks endowed with sufficient absorptive capacity the theoretical hypotheses are tested through an econometric analysis of the determinants of the innovative behaviour in electronic payment systems of a sample of italian commercial banks

assessing long term energy security the case of electricity in the united kingdom there is a growing body of research into the potential security risks and trade offs which may emerge over the long term development of energy systems as part of this body of research this paper aims to develop and demonstrate a set of indicators for assessing the security of long term national electricity scenarios this paper extends the empirical work of existing frameworks by including reliability and cost parameters alongside a range of other important aspects of energy security such as diversity trade and acceptability and by using both qualitative and quantitative indicators without aggregation in order to identify trade offs this paper uses the indicators to assess the energy security implications of three plausible long term scenarios for the uk electricity system the results indicate that a major risk may be experienced by a lack of flexible responsive supply capacity in low carbon electricity pathways reducing overall energy demand is found to be the most beneficial policy for improving energy security in terms of generating benefits in multiple dimensions the paper finds that energy security is often conceptualised as the avoidance of causes of insecurity such as insecure fuel imports but that an equally important aspect of security lies in maximising responses to insecurity for example by increasing the flexibility and responsiveness of both supply and demand

rival precedence and the dynamics of technology adoption an empirical analysis this study employs information on the adoption of automatic teller machines by banking firms to examine the nature of firm reactions to rival precedence in the adoption process using a failure time estimation procedure it is found that the ado ption of this innovation by rivals increases the conditional probabil ity that a decision to adopt will be made the effect of spillovers f rom technology adoption and the interaction of market concentration a nd rival precedence are also investigated finally the study shows w ith an example how the estimation procedure may be used to test the u nderpinnings of diffusion processes copyright 1987 by the review of economic studies limited

sequential bargaining with correlated values the paper analyzes an infinite horizon sequential bargaining game with one sided offers between a buyer and a seller when the buyer s valuation depends on the seller s the seller knows the value of the object and the buyer does not the influence of relative discount factors on the solution is studied it is shown for example that an impasse may result if the buyer offeror is too impatient relative to the seller the buyer makes a single take it or leave it offer

how much information is incorporated in financial asset prices experimental evidence we propose a new estimation method and use experimental data from multiple double auction experiments in the literature to directly estimate how much information is incorporated in financial market prices we find that public information is almost completely reflected in prices but that surprisingly little private information less than 50 is incorporated in prices our estimates therefore suggest that while semi strong informational efficiency is consistent with the data financial market prices may be very far from strong form efficiency we compare our estimates with beliefs of economists surveyed at the econometric society meetings and find that economists and finance researchers alike expect market prices to reflect considerably more private information than what we estimated

search with adverse selection this paper analyzes a sequential search model with adverse selection we study information aggregation by the price how close the equilibrium prices are to the full information prices when search frictions are small we identify circumstances under which prices fail to aggregate information well even when search frictions are small we trace this to a strong form of the winner s curse that is present in the sequential search model the failure of information aggregation may result in inefficient allocations

external costs of energy do the answers match the questions looking back at 10 years of externe abstract while the claim for getting prices right is quite popular in conceptual policy papers the implementation of appropriate internalisation strategies is still hampered by a lack of reliable external cost data great expectations were set into the externe project a major research programme launched by the european commission at the beginning of the 1990s to provide a scientific basis for the quantification of energy related externalities and to give guidance supporting the design of internalisation measures after more than a decade of research the externe label became a well recognised standard source for external cost data looking back into the externe history the paper pursues how emerging new scientific insights and changing background assumptions affected external cost estimates and related recommendations to policy over time based on externe results the usefulness and inherent limitations of external cost estimates for impact categories like climate change or nuclear waste disposal is discussed the paper also gives examples on how external costs in spite of remaining uncertainties are successfully used to support environmental policy

waiting for news in the market for lemons econometrica vol 80 no 4 july 2012 1433 1504 waiting for news in the market for lemons b y b rendan d aley and b rett g reen 1 we study a dynamic setting in which stochastic information news about the value of a privately informed seller s asset is gradually revealed to a market of buyers we con struct an equilibrium that involves periods of no trade or market failure the no trade period ends in one of two ways either enough good news arrives restoring confidence and markets reopen or bad news arrives making buyers more pessimistic and forcing capitulation that is a partial sell off of low value assets conditions under which the equilibrium is unique are provided we analyze welfare and efficiency as they depend on the quality of the news higher quality news can lead to more inefficient outcomes our model encompasses settings with or without a standard static adverse selection problem in a dynamic setting with sufficiently informative news reservation values arise endogenously from the option to sell in the future and the two environments have the same equilibrium structure k eywords dynamic games adverse selection information economics signaling 1 introduction c onsider an entrepreneur who is interested in selling her company due to liquidity constraints naturally she is better informed than the market about her company s fundamentals she would like to sell yet there is no reason she is forced to do so on any given day nor can she commit to delaying trade with every passing day that she retains ownership she gains or loses the day s profit and maintains the option to sell the next day if trade is in fact delayed then the market may learn about the value of the firm by observing cash flows investments customer base and so forth herein lies the key innovation of this paper we introduce an exogenous public information process news into a model of such settings we then study the implications for trading behavior efficiency and welfare we model the environment as a game played in continuous time where a risk neutral seller faces a competitive market there is common knowledge of gains from trade but the seller is privately informed about the asset s value i e her type which may be either high or low at each point in time prior to trade the seller receives offers from the market if an offer is accepted then the trade is consummated and the game ends if all offers are rejected then the seller consumes the type dependent flow payoff endowed by the asset contemporaneously information about the seller s type is publicly revealed we are grateful to a co editor and three anonymous referees for helpful comments and sug gestions we are greatly indebted to jeremy bulow michael harrison and andrzej skrzypacz for useful conversations comments and encouragement special thanks also to peter demarzo johannes horner ilan kremer jon levin paul milgrom yuliy sannikov bob wilson and sem inar participants at chicago chicago gsb duke mit kellogg nyu penn stanford olin wharton unc yale and the 7th annual duke northwestern texas io theory conference 2012 the econometric society doi 10 3982 ecta9278

bargaining with common values this paper examines a bargaining model with asymmetric information in which the private valuations of the two bargaining agents are correlated it shows that equilibria in such models typically exhibit a significant probability of a significant delay to agreement the paper characterizes the unique perfect bayesian equilibrium to the game in which an uninformed buyer makes offers to a privately informed seller it also shows by example that in this framework bargainers may rationally break off negotiations even in the presence of commonly known gains from trade

reflex an adapted production simulation methodology for flexible capacity planning as intermittent energy resources become more significant in power production traditional capacity planning may be insufficient to ensure reliable system operation a system planner must ensure that flexibility solutions are available to respond to large and uncertain ramping events these solutions may be operational such as improved unit commitment and dispatch curtailment of renewables or demand response procurement based such as new fast ramping resources or batteries or involve market reform this paper outlines a new methodology for modeling the economic tradeoffs in implementing flexibility solutions for integrating renewables the proposed model includes both a stochastic treatment of system states to account for a wide range of operating conditions and an adapted production simulation methodology that weighs the cost of reliability and subhourly flexibility violations against the cost of the operational flexibility solutions available to mitigate them the model s functionality is demonstrated with a case study of california at a 50 rps in 2030 the model tests the value of 1088 mw of generic flexible units relative to the same capacity of must run resources finding an expected annual value of 347 pm 42 million yr potential applications of the model for resource planning and procurement are also discussed

the diffusion of new technology and the market for an innovation this article shows that the diffusion of a capital embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions strategic behavior is inessential to this finding we develop a method for comparing diffusion rates for different market structures in the capital equipment market we consider cases with market power on the seller s side of the market and on the buyers side of the market a case with no market power and the welfare optimal case we find that a joint venture adopts an innovation more slowly than other market regimes to protect existing capital investments and that the adoption rate is slower than is socially optimal a monopoly supplier on the other hand adopts at a rate faster than is socially optimal this result is usually also the case when there is no market power finally we show that the monopoly supplier accelerates adoptions faster than in the case where there is no market power but retards later adoptions market power thus makes a difference in diffusion rates and on which side of the market that power lies makes a considerable difference

a decentralized market with common values uncertainty non steady states we analyse a market where i trade proceeds by random and anonymous pairwise meetings with bargaining ii agents are asymmetrically informed about the value of the traded good and iii no new entrants are allowed once the market is open we show that information revelation and efficiency never obtain in equilibrium even as discounting is removed this holds whether the asymmetry is two sided or one sided in some cases there exist equilibria where a substantial amount goes untraded this contrasts with the earlier literature which was based on the steadystate equilibria of a model where agents enter the market every period

models of technology diffusion abstract the literature on new technology diffusion is vast and it spills over many conventional disciplinary boundaries this paper surveys the literature by focusing on alternative explanations of the dominant stylized fact that the usage of new technologies over time typically follows an s curve the most commonly found model which is used to account for this model is the so called epidemic model which builds on the premise that what limits the speed of usage is the lack of information available about the new technology how to use it and what it does the leading alternate model is often called the probit model which follows from the premise that different firms with different goals and abilities are likely to want to adopt the new technology at different times in this model diffusion occurs as firms of different types gradually adopt it there are actually many ways to generate an s curve and the third class of models which we examine are models of density dependence popularized by population ecologists in these models the twin forces of legitimation and competition help to establish new technologies and then ultimately limit their take up finally we look at models in which the initial choice between different variants of the new technology affect the subsequent diffusion speed of the chosen technology such models often rely on information cascades which drive herd like adoption behaviour when a particular variant is finally selected

power system expansion planning under uncertainty a methodology is described for expansion planning of power systems under uncertainty in factors such as demand growth fuel cost delay in project completion and financial constraints the approach draws upon three classes of techniques decomposition and stochastic optimization provide the basic framework and allow an implicit representation of alternative investment strategies decision analysis is used to represent the dynamic aspects of decision making as uncertainties are resolved over time and hedging objectives from tradeoff analysis help select flexible and resilient expansion strategies case studies within the brazilian system are presented and discussed

investing to access an adverse selection market abstract i analyse a market with asymmetric information and interdependent values accessing the market is costly and stochastic e g requires lobbying licences or r d for a range of parameter values interventions that raise production or entry costs for all seller types increase trade investment and payoff for all types this effect is driven by a novel feedback loop between the market composition and the investment in access

information revelation in a market with pairwise meetings the paper presents a simple pairwise meetings model of trade the new feature is that agents have asymmetric information about the true state of the world the focus is on the transmission of the information through the process of trade the qualitative question is to what extent is the information revealed to uninformed agents through the trading process when the market is in some sense frictionless in particular does the decentralized process give rise to full revelation results as derived by the literature on rational expectations for centralized and competitive environments in the context of the model of this paper it turns out that the information is not fully revealed to uninformed agents even when the market is in some sense approximately frictionless

intrafirm diffusion of new technologies an empirical application research on the diffusion of new technologies has centred on the study of the interfirm rate of diffusion paying much less attention to intrafirm aspects this paper attempts to overcome this gap in the literature by analysing the factors that influence the speed with which a new technology the atm is fully adopted the data over which the hypotheses are tested belongs to the spanish savings banks market the results show that the rate of intrafirm diffusion is explained by innovation firm and market characteristics in testing our hypotheses we make use of both traditional methods and survival analysis techniques

information percolation in large markets we introduce a simple model of the percolation of information of common interest through a large market as agents encounter each other over time and reveal information to each other some of which they may have received earlier from other agents we are particularly interested in the evolution over time of the cross sectional distribution in the population of the posterior probability assignments of the various agents we provide a market example based on privately held auctions and obtain a relatively explicit solution for the cross sectional distribution of posterior beliefs at each time our results contribute to the literature on information transmission in markets hayek 1945 argues that markets allow information that is dispersed in a population to be revealed through prices grossman s 1981 notion of a rational expectations equilibrium formalizes this idea in a setting with price taking agents milgrom 1981 pesendorfer and swinkels 1997 and reny and perry 2006 provide strategic foundations for the rational expectations equilibrium concept in centralized markets a number of important markets however are decentralized these include over the counter markets and private auction markets wolinsky 1990 and blouin and serrano 2002 study information transmission in decentralized markets in contrast to these two papers equilibrium behavior in our market example leads to full revelation of information we happily acknowledge conversations with manuel amador frank kelly jeremy stein and pierre olivier weill and research assistance from sergey lobanov rubinstein and wolinsky 1985 and gale 1986a 1986b study decentralized markets without asymmetric information satterthwaite and shneyerov 2003 study decentralized market with private value asymmetric information amador and weill 2006 study a more abstract setting regarding transmission of common and private i nformation

power generation expansion planning model towards low carbon economy and its application in china climate change poses a huge threat to human welfare hence developing a low carbon economy has become a prevailing and inevitable trend decarbonization of power generation especially converting the current power mix into a low carbon structure will be a critical option for co2 emission mitigation in this paper an integrated power generation expansion pge planning model towards low carbon economy is proposed which properly integrates and formulates the impacts of various low carbon factors on pge models in order to adapt to the characteristics of pge models based on low carbon scenario a compromised modeling approach is presented which reasonably decreases complexities of the model while properly keeping the significant elements and maintaining moderate precision degree in order to illustrate the proposed model and approach a numerical case is studied based on the background of china s power sector making decisions on the optimal pge plans and revealing the prospects and potentials for co2 emission reduction

on delay in bargaining with one sided uncertainty recently attention has been given to a model of two person bargaining in which the parties alternate making offers and there is uncertainty about the valuation of one party the purpose of the analysis has been to identify delay to agreement with a screening process where agents with relatively lower valuations distinguish themselves by waiting longer to settle we point out a fundamental difficulty with this program by demonstrating that the assumptions used in the literature allow for delay only in so far as the time between offers is significant

generation expansion planning optimisation with renewable energy integration a review generation expansion planning consists of finding the optimal long term plan for the construction of new generation capacity subject to various economic and technical constraints it usually involves solving a large scale non linear discrete and dynamic optimisation problem in a highly constrained and uncertain environment traditional approaches to capacity planning have focused on achieving a least cost plan during the last two decades however new paradigms for expansion planning have emerged that are driven by environmental and political factors this has resulted in the formulation of multi criteria approaches that enable power system planners to simultaneously consider multiple and conflicting objectives in the decision making process more recently the increasing integration of intermittent renewable energy sources in the grid to sustain power system decarbonisation and energy security has introduced new challenges such a transition spawns new dynamics pertaining to the variability and uncertainty of these generation resources in determining the best mix in addition to ensuring adequacy of generation capacity it is essential to consider the operational characteristics of the generation sources in the planning process in this paper we first review the evolution of generation expansion planning techniques in the face of more stringent environmental policies and growing uncertainty more importantly we highlight the emerging challenges presented by the intermittent nature of some renewable energy sources in particular we discuss the power supply adequacy and operational flexibility issues introduced by variable renewable sources as well as the attempts made to address them finally we identify important future research directions

information percolation with equilibrium search dynamics we solve for the equilibrium dynamics of information sharing in a large population each agent is endowed with signals regarding the likely outcome of a random variable of common concern individuals choose the effort with which they search for others from whom they can gather additional information when two agents meet they share their information the information gathered is further shared at subsequent meetings and so on equilibria exist in which agents search maximally until they acquire sufficient information precision and then search minimally a tax whose proceeds are used to subsidize the costs of search improves information sharing and can in some cases increase welfare on the other hand endowing agents with public signals reduces information sharing and can in some cases decrease welfare

corporate bond market transaction costs and transparency using a complete record of u s over the counter otc secondary trades in corporate bonds we estimate average transaction costs as a function of trade size for each bond that traded more than nine times between january 2003 and january 2005 we find that transaction costs decrease significantly with trade size highly rated bonds recently issued bonds and bonds close to maturity have lower transaction costs than do other bonds costs are lower for bonds with transparent trade prices and they drop when the trace system starts to publicly disseminate their prices the results suggest that public traders benefit significantly from price transparency

learning from trades i study stationary cut off strategy equilibria of a dynamic market model where buyers sample sellers sequentially from an unknown distribution buyers learn about the distribution from the sampled sellers and a trade signal the trade signal reveals whether a randomly chosen seller traded yesterday observing a trade as opposed to no trade is good news about the distribution buyers who observe a trade use a higher cut off than buyers who observe no trade despite buyers learning from sampled sellers that puts a countervailing pressure on the cut offs the trade signal may reduce market efficiency while an appropriate exogenous signal increases efficiency

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small

the inclusion of spinning reserves in investmetn and simulation models for electricity generation abstract the demand for electricity varies substantially from hour to hour from day to day and from season to season because electricity is a highly perishable commodity which can be stored only at great expense and because the penalty for failing to meet demand is severe the fluctuations of demand over time are crucial in determining an optimal investment strategy for generating equipment traditionally demand is represented by a load duration curve which neglects the time of day when peaks and troughs occur by incorporating a load distribution curve into the model in a computationally tractable manner this paper demonstrates that the results of the traditional models may be sensitive to changes in the assumptions implied by the load duration curve