efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

robust trading mechanisms we consider the problem of designing a trading institution for a single buyer and seller when their valuation of the good is private information it is shown that posted price mechanisms are essentially the only mechanisms such that each trader has a dominant strategy a posted price mechanism is one where a price is posted in advance and trade occurs if and only if all traders agree to trade

road pricing lessons from london lessons from london this paper assesses the original london congestion charging scheme lccs and its impacts and it simulates the proposed extension which will include most of kensington and chelsea it also touches upon the political economy of the congestion charge and the increase of the charge from 5 to 8 per day the possibility of transferring the experience to paris rome and new york is also discussed the lccs has had positive impacts this was despite the considerable political influences on the charge level and location it is difficult to assess the impacts of the increase of the charge from 5 to 8 which took place in july 2005 because no data have yet been released by transport for london the proposed extension of the charging zone does not seem to be an efficient change on economic grounds at least for the specific boundaries method of charging and level of charging that is currently planned our benefit cost ratios computed under different assumptions of costs and benefits are all below unity overall the experience shows that simple methods of congestion charging though in no way resembling first best pigouvian taxes can do a remarkably good job of creating benefits from the reduction of congestion nevertheless the magnitude of these benefits can be highly sensitive to the details of the scheme which therefore need to be developed with great care georgina santos and gordon fraser

banking development socioeconomic structure and income inequality abstract using rich unique data from the italian local credit markets provinces this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link exploiting the italian historical banking regulation to instrument for the local presence of bank branches we find that local banking development mitigates income inequality however the finance inequality nexus manifests itself only in relatively advanced areas when we study the structural channels of influence we uncover evidence that banking development can reduce inequality by affecting geographical mobility and urbanization while it has modest effects through the development of material infrastructures and human capital

mechanism design with incomplete information a solution to the implementation problem the main result of this paper is that the multiple equilibrium problem in mechanism design can be avoided in private value models if agents do not use weakly dominated strategies in equilibrium we show that in such settings any incentive compatible allocation can be made the unique equilibrium outcome to a mechanism we derive a general necessary condition for unique implementation which implies that the positive result for private value models applies with considerably less generality to common value settings and to situations in which an agent s information does not index the agent s preferences

note pasinetti s counter factual hypotheses in a recent article in this journal luigi l pasinetti not only reminded us of the role played by the modigliani miller mm theorem in the current crisis but also provided a critique based on examining its underlying assumptions in this note i extend his critique as it applies to one component of the theorem namely the dividend invariance proposition by demonstrating that its conclusions cannot follow from its assumptions there has been a logical slip copyright oxford university press

economic growth in a cross section of cities abstract we examine the relationship between urban characteristics in 1960 and urban growth between 1960 and 1990 income and population growth move together and both types of growth are 1 positively related to initial schooling 2 negatively related to initial unemployment and 3 negatively related to the initial share of employment in manufacturing racial composition and segregation are uncorrelated with urban growth across all cities but in cities with large nonwhite communities segregation is positively correlated with population growth government expenditures except for sanitation are uncorrelated with growth government debt is positively correlated with later growth

implementing just and efficient decision making in an economy with one public good one private good and quasi linear utilities we explore decision making mechanisms to non cooperatively implement an efficient outcome by auctioning the leadership role among agents one implements egalitarianism namely the efficient outcome that distributes equally the surplus available from an a priori given status quo a refinement of this mechanism so called autioning the leadership with differentiated buds allows us to implement an efficient anonymous and neutral outcome it achieves egalitarianism above the vickrey clarke groves decision

a few counter factual hypotheses on the current economic crisis the economic and financial problems of the present devastating crisis are terribly practical sraffa s little book is highly theoretical to relate the two we must avoid stopping at keynes and include the whole group of economists around him in cambridge resuming the discussions that have been pushed into oblivion by the mainstream the capital theory controversy was not the only one here more relevant is the controversy on growth income distribution savings and profits between samuelson modigliani and kaldor pasinetti as a result a theorem associated with modigliani miller was brought to fame and hailed as the core of modern corporate finance its surprisingly wide acceptance is here harshly criticised and indicted of major responsibility for the present crisis inevitably this is argued through counter factual hypotheses yet even with less sophisticated analytical tools a framework does exist much nearer to common sense implying the needed flexibility and openness of mind for the major restructuring of financial institutions which today so clearly emerges as the major task to undertake copyright oxford university press

selection in initial and return migration evidence from moves across spanish cities this paper investigates the sorting of more productive workers into denser cities using administrative data for spain that fol low individuals continuously throughout their working lives migrants who move to denser cities are positively selected in terms of educa tion occupational skills and individual productivity as proxied by pre migration position in the local earnings distribution however not everyone is able to benefit equally from denser cities and this leads to a second round of sorting returnees are not only ex ante less productive than permanent migrants but are also those who following the first move have least boosted up their earnings in denser cities

undominated nash implementation in bounded mechanisms we study implementation in undominated nash equilibrium by bounded mechanisms an undominated nash equilibrium is a nash equilibrium in which no agent uses a weakly dominated strategy a mechanism is bounded if every dominated strategy is dominated by some undominated strategy we identify necessary conditions and sufficient conditions for such implementation these conditions are satisfied in virtually all economic environments and are also satisfied by interesting correspondences from the social choice literature for economic settings we provide a particularly simple implementing mechanism for which the undominated equilibrium outcomes coincide with those obtained from the iterative elimination of weakly dominated strategies

the place of portfolio management in the keynesian canon recent publications such as the two volume oxford handbook of post keynesian economics harcourt and kreisler 2013 and the elgar companion to post keynesian economics king 2012 provide authoritative summaries of the current state of the art on a very wide range of relevant topics in particular the contents pages of these books define the field as seen by adherents the obvious implication being that those topics excluded have not yet acquired the necessary status by passing appropriate academic tests of relevance and coherence inter alia the focus of this article portfolio management is on one of these omitted topics starting from the fundamental recognition of uncertainty we examine the whole range of characteristics of the keynesian approach demonstrating the coherence and applicability of its multidimensional nature in the process pointing by contrast to the one dimensional sterility of the conventional approach our general conclusion is that there is a rightful place in the keynesian canon for portfolio management by which we mean not only investment management but also speculative management where these two qualifiers are used in the keynes graham sense

does traffic congestion reduce employment growth abstract this paper examines the impact of traffic congestion on employment growth in large u s metropolitan areas an historic highway plan and political variables serve as instruments for endogenous congestion the results show that high initial levels of congestion dampen subsequent employment growth this finding suggests that increasing the efficiency of public infrastructure can spur local economies counterfactual estimates show that the employment growth returns from modest capacity expansion or congestion pricing are substantial

a nonparametric efficient public good decision mechanism undominated bayesian implementation abstract it is known that with incomplete information there are bayesian mechanisms that undertake public projects achieving ex post efficiency and budget balance however there are two shortcomings in these mechanisms first the mechanism designer is required to know the agents prior beliefs which is quite demanding second the mechanism may possess multiple equilibria including undesirable ones this paper presents a bayesian mechanism that is nonparametric in that the mechanism designer cannot incorporate any information other than that received from the agents moreover at all undominated bayesian equilibria of the mechanism the public project is undertaken efficiently and budget is balanced journal of economic literature classification numbers c72 d78 d82

roads to prosperity assessing the link between public capital and productivity does the positive correlation between infrastructure and productivity reflect causation if so in which direction the author finds that when growth in roads the largest component of infrastructure changes productivity growth changes disproportionately in u s industries with more vehicles that vehicle intensive industries benefit more from road building suggests that roads are productive at the margin however road investments do not appear unusually productive intuitively the interstate system was highly productive but a second one would not be road building thus explains much of the productivity slowdown through a one time unrepeatable productivity boost in the 1950s and 1960s

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

on equity markets long term decision making and performance metrics the 2012 kay review of uk equity markets and long term decision making confirmed that short termism was a problem identifying asset managers as the dominant players in the investment chain mr kay concluded that their appointment and monitoring was too often based on short term relative performance and recommended an examination of the metrics employed using as conceptual framework the keynes graham schema proposed by woods in 2013 we demonstrate that the most commonly employed measure the time weighted rate of return is inappropriate and inaccurate as a performance metric and should be replaced by the familiar but generally ignored money weighted rate of return hitherto there have been three strands to the economics and finance literature on portfolio management namely with reference to the efficient markets hypothesis the selection of optimal portfolios in a mean variance context using quadratic optimisation techniques and principal agent issues that exist between portfolio managers and their clients in this article we initiate a new strand in the literature by focusing on the metric used to measure the performance of a portfolio manager incidentally showing that our approach has immediate implications for the three existing strands

labour supply and commuting abstract we examine the effect of commuting distance on workers labour supply patterns distinguishing between weekly labour supply number of workdays per week and daily labour supply we account for endogeneity of distance by using employer induced changes in distance in germany distance has a slight positive effect on daily and weekly labour supply but no effect on the number of workdays the effect of distance on labour supply patterns is stronger for female workers but it is still small

implementation in undominated strategies a look at bounded mechanisms this paper examines the impact of placing natural restrictions on the mechanisms considered for implementation problems it is shown that if all mechanisms are considered and preferences satisfy a basic condition then any social choice correspondence can be implemented in undominated strategies an example points out that the strength of this result derives from the use of mechanisms with questionable features in part of the message space the agent who announces the highest integer is rewarded this sort of tail chasing construction common in the constructive proofs of the literature is used to assure that undesired strategy combinations do not form an equilibrium if such mechanisms are ruled out then the social choice correspondences which can be implemented in undominated strategies satisfy an incentive compatibility type condition called strategy resistence for social choice functions this is equivalent to strategy proofness this contrast suggests that this issue should be examined as it applies to other solution concepts used in implementation theory the last portion of the paper begins to explore the issue as it relates to nash implementation and undominated nash implementation

pareto improvements from lexus lanes the effects of pricing a portion of the lanes on congested highways abstract though economists have long advocated road pricing as an efficiency enhancing solution to traffic congestion it has rarely been implemented primarily because it is thought to create losers as well as winners this paper shows that a judiciously designed toll applied to a portion of the lanes of a highway can generate a pareto improvement before using the revenue a sufficient condition being that drivers with a high value of time travel at the peak of rush hour i obtain these new theoretical results by extending a standard dynamic congestion model to reflect an important additional traffic externality extra traffic does not simply increase travel times but also introduces frictions that reduce throughput the analysis draws attention to a practical policy that may help overcome the widespread opposition to road pricing

asymmetric information bargaining problems with many agents a yes or no decision must be made about some issue all agents must agree the coase theorem asserts that the efficient outcome will always result suppose the value positive or negative that an individual attaches to an affirmative decision is privately known to that individual it is proved under very mild conditions that with independent types as the number of agents increases the probability of an affirmative efficient decision goes to zero an example in which it is common knowledge that an affirmative decision is efficient and yet the probability of such a decision goes to zero is given

dominant strategy implementation of bayesian incentive compatible allocation rules abstract a large literature on incentive mechanisms represents incentive constraints by the requirement that truthful reporting be a bayesian equilibrium this paper identifies mechanism design problems for which there is no loss in replacing bayesian incentive compatibility by the stronger requirement of dominant strategies we identify contexts where it is possible to change the transfer payments of an optimal bayesian mechanism so as to create dominant strategies and yet leave every participant s expected utility unchanged we also address the issue of multiple equilibria and unique implementation contexts where these results apply include auctions bilateral bargaining procurement contracting and intrafirm resource allocation

the conditional auction mechanism for sharing a surplus a first bid auction to allocate the leadership role is used to choose a public decision and a balanced set of transfers the mechanism is shown to implement an equal sharing of the surplus above the average utility level at the equilibrium an agent s message reveals the other agent s utility when only two players are involved and the exact value of the joint surplus a variety of other contexts allow for the construction of similar auction like mechanisms displaying the same mirror image effect

amicable divorce dissolving a partnership with simple mechanisms abstract this paper considers mechanisms for allocating the assets of a dissolving partnership that can be specified without information on the distribution of valuations of the asset or the level of risk aversion of the participants for the case of a single asset and risk averse agents three simple mechanisms are considered these mechanisms can be ranked in terms of ex post efficiency and partially ranked in terms of interim expected utility the efficiency of the alternating selection mechanism is considered for environments when there are many items to be allocated agents are risk neutral and transfers are prohibited conditions are given when a myopic strategy of picking the most preferred abailable item forms an equilibrium and these conditions are satisfied under independence under the further assumption of identical distributions of valuations it is shown that the total expected efficiency loss is at most 1 2 of the maximal value of a single item regardless of how many items are to be allocated

nash equilibrium and welfare optimality if is a set of social alternatives a social choice rule scr assigns a subset of a to each potential profile of individuals preferences over a where the subset is interpreted as the set of welfare optima a game form or mechanism implements the social choice rule if for any potential profile of preferences 1 any welfare optimum can arise as a nash equilibrium of the game form implying in particular that a nash equilibrium exists and 2 all nash equilibria are welfare optimal the main result of this paper establishes that any scr that satisfies two properties monotonicity and no veto power can be implemented by a game form if there are three or more individuals the proof is constructive