on the undesirability of commodity taxation even when income taxation is not optimal abstract an important result due to atkinson and stiglitz 1976 atkinson a b stiglitz j e 1976 the design of tax structure direct versus indirect taxation journal of public economics 6 55 75 is that differential commodity taxation is not optimal in the presence of an optimal nonlinear income tax given weak separability of utility between labor and all consumption goods this article demonstrates that this conclusion holds regardless of whether the income tax is optimal in particular given any commodity tax and income tax system differential commodity taxation can be eliminated in a manner that results in a pareto improvement also differential commodity taxation can be proportionally reduced so as to generate a pareto improvement in addition for commodity tax reforms that neither eliminate nor proportionally reduce differential taxation a simple efficiency condition is offered for determining whether a pareto improvement is possible

optimal nonparametric estimation of first price auctions this paper proposes a general approach and a computationally convenient estimation procedure for the structural analysis of auctioni data considering first price sealed bid auction models within the independent private value paradigm we show that the underlying distribution of bidders private values is identified from observed bids and the number of actual bidders without any parametric assumptions using the theoiy of minimax we establish the best rate of uniform convergence at which the latent density of private values can be estimated nonparametrically from available data we then propose a two step kernel based estimator that converges at the optimal rate

a qualitative study of managerial challenges facing small business geographic expansion abstract geographic expansion is a common growth strategy used by small entrepreneurial firms yet despite the importance of geographic expansion as a growth strategy it is a neglected area of small business research to date research in the area of small business growth has focused on broad issues such as the common obstacles to firm growth and the relationship between firm growth and firm profitability whereas this literature is suggestive it does not provide specific prescriptive advice to small business managers pursuing geographic expansion as a growth strategy as a first step in generating prescriptive advice in this area this study examined the managerial challenges that faced one small firm during the early stages of its efforts to expand geographically the subject organization referred to as the local advertising company lac operated in a single location from 1968 to 1990 as a means to initiate firm growth the owners of the company opened eight new locations in 1991 and eight more in 1992 however problems ensued this study used a qualitative research methodology to conduct an assessment of the managerial challenges facing the lac during its geographic expansion effort seventeen key employees of lac were interviewed for the study the qualitative case study methodology used provided an opportunity to gather in depth information from informants regarding their individual assessment of the managerial challenges encountered by lac during its geographic expansion collectively the respondents identified a number of specific management issues that became problematic during lac s geographic expansion effort through a content analysis technique these issues were organized into 15 thematic categories including training recruitment and selection the relationship between the field staff and the original owners and 12 others each of these categories represents the separate managerial challenges faced by the company during its geographic expansion the study provides a descriptive analysis of each of the 15 categories of managerial challenges that emerged the research results suggest that the successful management of a geographic expansion growth strategy requires managers to deal with a unique set of issues for example the training of new employees may become problematic when the most experienced personnel in the firm reside in the home office and the new trainees are located in widely dispersed geographic locations in addition the results of the study provide an extension to both practical and theoretical knowledge in three distinct areas planning for growth managing growth and the reasons for growth first the results of the study support the importance of planning for growth but suggest that planning must be complemented by learning and a willingness to evolve one s plan as growth progresses in terms of the management of growth the case shows that running a small business and growing a small business do not include the same skill set the owners of lac had been quite successful managing their single location for 22 years however this ability to run a business did not complement the need to anticipate start up problems in new remote sites which is inherent in a strategy of geographic expansion in addition the case demonstrated that the management of growth requires a cognizance on the part of the original owners of a firm to delegate control finally with regard to the reasons for growth researchers generally characterize firm growth as being motivated by either economic e g economies of scale or emotional reasons e g employing family members the owners of lac initiated firm growth for the purpose of wealth creation to fund their retirements this illustrates that firm growth can be motivated by a combination of both economic e g wealth creation and personal e g retirement security reasons

e ztax tax salience and tax rates this paper examines whether the salience of a tax system affects equilibrium tax rates i analyze how tolls change after toll facilities adopt electronic toll collection etc drivers are substantially less aware of tolls paid electronically i estimate that in steady state tolls are 20 to 40 percent higher than they would have been without etc consistent with a salience based explanation for this toll increase i find that under etc driving becomes less elastic with respect to the toll and toll setting becomes less sensitive to the electoral calendar alternative explanations appear unlikely to be able to explain the findings

repeated auctions with impatient bidders and externalities author affiliation ki eun rhee krhee kdischool ac kr acknowledgment i am grateful to kyle bagwell for providing invaluable advice and support throughout the research process i also thank michael riordan eiichi miyagawa and two anonymous referees for helpful comments 1 introductioncollusive bidding behavior has been conventionally studied in a static setup often relying on some unspecified repeated interaction story for the enforcement of a cartel 1 it is not clear however whether the results from static auctions immediately carry over to a repeated setup when bidders are impatient and the enforcement or the participation constraint is binding moreover many empirical analyses for detecting collusion rely on an explicitly repeated structure rendering a theoretical analysis of collusion in a repeated setup necessary 2 several recent theoretical developments in repeated auctions have been made by aoyagi 2003 2007 skrzypacz and hopenhayn 2004 and blume and heidhues 2006 taking standard auctions as stage games these articles present various collusive bidding schemes with asymmetric punishments that outperform the bid rotation scheme which is known to be optimal in static auctions mcafee and mcmillan 1992 this article studies collusive bidding behavior in repeated auctions among both patient and impatient bidders when the outside option of the participation constraint is endogenized because of externalities a stage game involves negative externalities among the bidders when any losing bidder is worse off if a rival wins the good than if no one wins it auctions with externalities have been introduced most notably by jehiel and moldovanu 1996 and jehiel moldovanu and stacchetti 1996 these auctions describe environments in which the outcomes of auctions affect the nature of ensuing market interactions among potential bidders a wide variety of situations in which bidders are a set of oligopoly firms competing in the same market apply to this setting for example procurement auctions for highway construction contracts studied empirically by porter and zona 1993 may qualify as repeated independent private value auctions with negative externalities except that the lowest bidder wins 3 consecutive highway lettings were distributed by the department of transportation dot to a set of oligopoly firms competing in the same industry negative externalities may arise because a firm that wins the auction may experience learning by doing which provides the winning firm with a comparative cost advantage or because the winning firm may gain a reputation that gives the firm an advantage in future private sector competition as jehiel and moldovanu 1996 and jehiel moldovanu and stacchetti 1996 discuss the issue of participation is nontrivial in auctions with externalities because the ex ante payoff a bidder expects by not participating is no longer zero as in standard auctions but is rather endogenously determined by the actions of the other bidders thus an analysis of collusive bidding behavior under both nonbinding and binding participation constraints seems especially worth studying for these auctions the main findings of this article are that i there are no bidding wars along the equilibrium path and bidders expect to receive the maximal continuation values when they are both patient and impatient when bidders are impatient the optimal collusive bidding scheme involves ii a lower threshold type above whom bidding starts when externalities are small or iii more frequent jumps i e more sorting of bidders types when externalities are large in both cases seller s ex ante profit is higher when bidders are impatient if we consider patient bidders to be the ones that are interacting in a stable market 4 results carry an empirical implication either less frequent sales or fewer bid levels in auctions that are let out in stable markets will be observed

an empirical analysis of entrant and incumbent bidding in road construction auctions this paper explores differences in the bidding patterns of entrants and incumbents in road construction auctions we find that entrants bid more aggressively and win auctions with significantly lower bids than incumbents the differences in their bidding patterns are consistent with a model of auctions in which the distribution of an entrant s costs exhibits greater dispersion than that of an incumbent s and relations of stochastic dominance in the distributions do not persist for the entire range of estimated costs we also find that more efficient firms bid on average more aggressively and firms with greater backlogs bid less aggressively

the hyperbolic consumption model calibration simulation and empirical evaluation ur preferences for the long run tend to conflict with our short run behavior when planning for the long run we intend to meet our deadlines exercise regularly and eat healthfully but in the short run we have little interest in revising manuscripts jogging on the stairmaster and skipping the chocolate souffleala mode delay of gratification is a nice long term goal but instant gratification is disconcertingly tempting this gap between long run intentions and short run actions is apparent across a wide range of behaviors including saving choices a 1997 survey found that 76 percent of respondents believe they should be saving more for retirement looking only at respondents who believed they were at an age where you should be seriously saving already the survey found that 55 percent reported being behind in their savings and only 6 percent reported being ahead farkas and johnson 1997 the report on the survey concluded t he gaps between people s atti tudes intentions and behavior are troubling and threaten increased insecurity and dissatisfaction for people when they retire americans are simply not doing what logic and their own reasoning suggests they should be doing a 1993 luntz webber merrill lynch survey found similar answers when baby boomers were asked what percentage of your annual household income do you think you should save for retirement and what percentage of your annual

investment incentives in procurement auctions this paper investigates firms incentives to invest in cost reduction in the first price sealed bid auction a format largely used for procurement two central features of the model are that we allow firms to be heterogeneous and that investment is observable we find that firms will tend to underinvest in cost reduction because they anticipate fiercer head on competition using the second price auction as a benchmark we also find that the first price auction will elicit less investment from market participants and that this is socially inefficient these results have implications for market design when investment is important different market institutions provide different incentives for firms to reduce costs acquire information expand and so on in short to undertake any activity that affects their competitive positions accordingly the performance of these market institutions should be judged not only from a static perspective taking firms competitive positions as given but also from a dynamic perspective auction markets are a natural competitive environment to study because there is a clear sense in which we can design such markets by choosing appropriate rules for competition in this paper we study how the first price auction fpa a format commonly used for procurement affects firms incentives to invest in cost reduction many procurement markets are characterized by a small number of participants heterogeneity among firms and low rates of turnover therefore it is interesting to investigate to what extent the format used for the auction contributes to these characteristics the basic ingredients of our model are as follows there are n firms and one of them has the opportunity prior to the auction to make an investment we model this investment as an improvement in the ex ante distribution of costs for this firm the main question we ask is what are the firm s incentives to invest given that this investment is observed by its competitors clearly the benefits of such investment depend on how the firm s competitors react in other words to determine the firm s incentive to invest we need to compare the equilibrium at the procurement stage if it makes this investment and if it does not in section 3 we derive new comparative statics results for the fpa we find that after the investment the investor s opponents will bid collectively more aggressively this result holds generally when there are only two bidders or when the investor s opponents are symmetric proposition 1 otherwise a sufficient condition is that investment changes market leadership proposition 2 in the language of industrial organization investment has a negative strategic effect in the fpa this erodes 1

tax aversion in labor supply abstract in a real effort laboratory experiment labor supply decreases more with the introduction of a tax than with a financially equivalent drop in wages this tax aversion is large in magnitude when we decompose the productivity decrease that arises from taxation we estimate that 40 is due to the lower net wage and the remaining 60 to tax aversion this tax aversion affects labor supply more on the extensive margin working less than on the intensive margin being less productive while working the aversion is equally strong whether tax revenue goes to the u s government or back to the experimenter a laboratory tax we discuss the implications of our results for the relationship between labor supply and taxation

bidding behavior in a repeated procurement auction a summary abstract this paper considers bidding behavior in a repeated procurement auction setting we study highway procurement data for the state of california between december 1994 and october 1998 we consider a dynamic bidding model that takes into account the presence of intertemporal constraints such as capacity constraints we estimate the model non parametrically and assess the presence of dynamic constraints in bidding

labor flexibility and innovation in new ventures the study investigates how labor flexibility affects innovation in new ventures more specifically drawing upon a sample of 143 greek ventures less than 8 years old it examines empirically the individual and interactive effects of functional and numerical flexibility on product innovation it also considers how these effects are moderated by the entrepreneur s political skill results suggest that functional flexibility has a positive direct effect on incremental innovation whereas numerical flexibility has a positive direct effect on radical innovation the interactions between numerical and functional flexibility affect both types of innovation the results also suggest that the labor flexibility innovation relationship is positively moderated by the entrepreneur s political skill these findings point toward aspects of knowledge related with flexible labor engagement and entrepreneurial relational capital that affect innovation

are income and consumption taxes ever really equivalent evidence from a real effort experiment with real goods abstract the public finance literature demonstrates the equivalence between consumption and labor income wage taxes we introduce an experimental paradigm in which individuals make real labor leisure choices and spend their earned income on real goods we use this paradigm to test whether a labor income tax and an equivalent consumption tax lead to identical labor leisure allocations despite controlling for subjects work ability and inherent labor leisure preferences and disallowing saving subjects reduce their labor supply significantly more in response to an income tax than to an equivalent consumption tax we discuss the economic implications of a policy shift to a consumption tax

business and technology strategies and new venture performance a study of the telecommunications equipment industry in this paper a set of hypotheses relating competitive and cooperative business strategies and technology strategies to new venture performance are developed these hypotheses are tested using data collected from the initial public offering ipo documents of a sample of 52 new ventures in the telecommunications equipment industry this industry has experienced a great deal of technological change as computer and telephone technologies have merged allowing a variety of new ventures to successfully enter the industry the results suggest that new ventures pursuing broad cost leadership strategies were more successful investments in innovation in terms of relative r d expenditures were also related to higher performance finally significant interaction effects between investments in innovation and competitive strategies and performance were found

dynamic entry reverse auctions and the purchase of environmental services this research uses economic experiments to examine the effectiveness of reverse auction institutions in an endogenous dynamic entry setting induced values are used to compare behavior in dynamic and static auction structures past research on this topic has understudied dynamic elements such as strategic entry and endogenous bidder selection that arise in a dynamic environment the results suggest complex behavioral patterns in which some sellers overenter early and others strategically wait this affects the owners abilities to extract rents in a dynamic setting this result impacts policy effectiveness because previous work overlooking these dynamic elements likely understates auction cost effectiveness

time delay complexity and support for taxation people often experience the benefits of taxation over time we design an intertemporal market experiment with negative externalities to examine how delaying the benefits of taxation affects support for taxes we find that when negative externalities occur immediately people learn to adopt pigouvian taxes which are aimed at reducing negative externalities and restoring market efficiency by contrast when negative externalities are delayed people are less receptive to taxation this effect persists over time our data reveal that the strong negative delay effect can be explained in large part by narrow bracketing and the increased perceived complexity of the environment rather than by time discounting per se we argue and demonstrate that increasing the transparency of intertemporal tradeoffs can effectively promote support for taxation

businesses without glamour an analysis of resources on performance by size and age in small service and retail firms abstract research on factors influencing performance in new and small companies is extensive earlier work found that strategies e g cost quality differentiation etc affected performance contingent on industry conditions the environment and the entrepreneur s background although this work provides a solid basis for understanding differences in entrepreneurial performance some firms are limited in their choices of strategy due to size age or industry often these firms are in industries where entry barriers are low and competitive advantages are easily imitated small service and retail businesses operate in sectors where these conditions are apparent comprising more than 50 of all small firms they require minimal start up investments but face intense competition lacking the glamour of high innovation high growth firms service and retail companies are at the end of the value chain their fortunes rising and falling as a result of the direct influence of the owner founder hence performance variation may be better explained by the capabilities of the firm or individual competencies of the owner founder that is the resource base and resource combinations rather than strategy the strategic importance of an organization s resources and capabilities is the foundation of resource based theory resources are tangible and intangible assets tied to the firm in a relatively permanent fashion their combinations are heterogeneous and form the basis for product market strategies studies of resources strategies and performance are emerging in the entrepreneurial area research shows that various resources in concert with different strategy types can lead to above average performance over the business life cycle and that combinations of resources are related to survival yet the vast majority of work focuses on high growth high tech or manufacturing businesses less is known about the relationships of resources to performance in less glamorous sectors in these small service and retail businesses we speculate that resources in particular human and organizational resources may play a greater role in explaining performance than strategy further as other authors have suggested it is expected that the combinations of these resources will vary across age and size this study examines the influence of human and organizational resources on performance in a sample of 195 service and retail firms operating in central new jersey using a structured questionnaire all companies utilized a focus strategy either focused cost or focused differentiation and employed a minimum of 3 to a maximum of 100 employees all measures had theoretical and or empirical precedent and were tested statistically for reliability we used factor analysis to reduce the independent variables to two human resource variables owner resources and commitment one organizational resource variable comprised of planning systems and staff skills and one strategy variable focused cost and focused differentiation control variables were business age business size environmental benignness and industry growth the dependent variable performance was measured in two ways net cash flow and log of growth in employees over 3 years the study first examined whether strategy or resources had a greater influence on performance results showed that strategy influenced performance less than human and organizational resources both individually and interactively the influence of owner resources background and attitudes on net cash flow was stronger than on growth where the only significant variable was industry market growth to analyze effects of resources on performance by size we divided the sample by size groupings selecting the smallest maximum five employees and largest quartiles minimum 16 employees which were comprised of 55 and 50 companies respectively these analyses showed that owner resources commitment and organizational resources contributed positively to net cash flow in very small firms however interactive effects of these resource combinations were negative for instance owner resources and organizational resources together and organizational resources and commitment together resulted in less positive cash flow than when analyzed separately this implies that different resource combinations can have negative influences in these very small firms we examined age effects in the same manner as size dividing the sample into age group quartiles and conducting an analysis only for very young fewer than 5 years and very old minimum 19 years groups which comprised 54 and 52 companies respectively these analyses showed that although growth was more rapid among the youngest firms there were no distinctive resource based correlates to growth in either age group substantive increases in formalized systems and procedures were not apparent among the oldest of these companies compared with the youngest contrary to previous work showing the evolution of these over business life cycles results of this study are applicable only in the context of service and retail firms and readers should note this sample was nonrandom and geographically concentrated our purpose was not to predict but describe associations between resources and performance this study shows that for firms in competitive industries at the end of the value chain type of strategy is less important than resource combinations for certain types of performance human and organizational resources are associated with more positive cash flow whereas industry and market factors are related to growth these results imply that firms seeking growth are best served by selecting and entering growth markets and industries on the other hand if strong positive cash flows are the primary objective attention to combinations of resources is more important for instance owner founders having a strong business and managerial background and industry experience will need less formalized systems whereas those owner founders with weaker managerial resources might benefit from more formalized procedures and skilled staff

charity donations and the euro introduction some quasi experimental evidence on money illusion we compare the revenues of a house to house collection for a charity before and after the introduction of the euro in a ceteris paribus setting we find strong evidence of money illusion supplementing earlier econometric experimental and survey evidence on its existence

the economic performance of innovative small firms in the south east region and elsewhere in the uk thwaites a and wynarczyk p 1996 the economic performance of innovative small firms in the south east region and elsewhere in the uk reg studies 30 135 149 the paper explores the contribution of innovative small firms to local economic performance in different regional environments in the uk the empirical analysis is based on a sample of small independent firms listed on the spru innovation database 1975 83 it uses detailed financial and other data on each firm to examine their performance in different operational environments the results suggest that the average innovative sme exhibits many of the characteristics of a fast growth firm however the modus operandi of enterprise appears to differ between firms located in the south east region and other parts of the uk and these differences lead to variable outcomes in terms of employment asset and export growth thwaites a et wynarczyk p 1996 la performance economique des petites entreprises innovatrices situees dans la region sud est et d

efficiency and competition in the long run the survival of the unfit abstract in a dynamic contest the current incumbent competes against a randomly assigned entrant in a private value all pay auction each period we focus on equilibria where the beliefs about the incumbent s type and the employed strategies are stationary we show that inefficient types survive even if the entrants arrive very frequently because the entrant plays more aggressively than the incumbent allowing a low type entrant to win against a high type incumbent in an example we show that if the incumbent is challenged more often then the equilibrium type of the incumbent is higher on average when the value of the prize is the same for all players the case studied in the public choice literature the equilibrium rent of the bidders is fully dissipated as the incumbent is challenged infinitely often the technical contribution lies in showing the existence of stationary equilibrium in an incomplete information game

predicting bid prices by using machine learning methods abstractit is well known that empirical analysis suffers from multicollinearity and high dimensionality in particular this is much more severe in an empirical study of itemized bids in highway pr

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

small business growth through geographic expansion abstract although the small business sector as a whole is achieving phenomenal growth an important concern in the field has been identifying the problems challenges and success characteristics associated with the prudent growth of individual firms a strategy utilized by many small firms to achieve their growth objectives is one of geographic expansion this approach involves expanding a firm s business from its original location to one or more additional geographic sites and is particularly well suited for firms that cannot expand in their present location but believe that their products or services may be appealing to consumers in other markets surprisingly despite the prevalence of geographic expansion as a means of small firm growth this is a neglected area of small business research although researchers have examined the common challenges associated with small firm growth a small business that expands from one location to several locations is subject to a number of potentially unique challenges for example during the course of opening a new geographic site a small business manager will be confronted with the task of managing an existing business and a start up at the same time the challenge created by this undertaking along with the other challenges associated with geographic expansion have not been specifically identified an improved understanding of these challenges may help small firm managers maximize their changes of leading successful expansion efforts as a result of the lack of research in this area this study used a comparative case study methodology to develop a theoretical model of the antecedents of effective small business geographic expansion the model was developed in two steps first a preliminary model of the antecedents of effective small business geographic expansion was developed from the existing small business growth literature second using analytic induction the preliminary model was compared with the experiences of five small businesses that have engaged in a growth strategy of geographic expansion for the purpose of developing a more thorough and more valid theoretical model a unique attribute of the sample is that not all of the businesses have been successful in their expansion efforts two of the five small businesses included in the study have had failed expansions providing us the rare opportunity to contrast failed expansion efforts against successful ones the model that emerged from this approach supports the notion that geographic expansion involves a unique set of managerial challenges the consistent evidence across the five case studies indicated that effective small business geographic expansion involves the following six major areas of concern planning for growth managing growth reasons for growth expansion site characteristics a set of moderator variables and expansion performance among the implications of the study is that the unique nature of the geographic expansion process adds a layer of complexity to firm growth that exacerbates the need for planning along with the normal challenges involved with adding structure to accommodate growth a firm that engages in geographic expansion must do this in an unfamiliar location where the market potential and legitimacy of the firm s business concept is untested the consistent evidence that emerged from the cases is that planning helps attenuate these challenges in addition the recruitment and selection of qualified personnel to staff expansion sites is a critical activity along with networking in the expansion site locations to establish organizational legitimacy three variables were found to moderate the relationship between managing growth and expansion performance learning and flexibility were found to have a positive influence on the managing growth expansion performance relationship whereas environmental turbulence was found to have the opposite impact finally a complex set of relationships emerged from the study pertaining to expansion site characteristics for instance the evidence generated across the cases suggested that planning helps a firm develop a set of heuristics for expansion site selection which helps a firm avoid placing a site in an undesirable location

welfare and optimum dynamic taxation of consumption and income abstract this paper estimates that the us could attain large welfare gains by implementing an optimal ramsey tax policy that taxes consumption and income it is also found that the welfare implications associated with taxing consumption are quantitatively more important than those associated with dynamically taxing income indeed replacing income taxes with a constant consumption tax leads to a welfare gain that is only slightly lower than that attained by a dynamic policy that taxes consumption and income in computing these welfare gains careful attention is given to the dynamic path of tax rates and the transitional dynamics associated with how the economy responds to a new tax policy

do retirement savings increase in response to information about retirement and expected pensions how can retirement savings be increased we explore a unique policy change in the context of the german pension system to study this question as of 2005 with a phase in period between 2002 and 2004 the german pension administration started to send out annual letters providing detailed and comprehensible information about the pension system and individual expected public pension payments this reform did not change the level of pensions but only provided information to individuals about their expected pension payments using german tax return data we exploit an age discontinuity to identify the effect of these letters on the behavior of individuals we find an increase in tax deductible private retirement savings and provide evidence that this is not due to a crowding out of other forms of savings we also show that labor earnings i e the most direct way to increase public pensions increase after receiving the letter

the non equivalence of labour market taxes a real effort experiment under full rationality a labour market tax levied on employers and a corresponding income tax levied on employees are equivalent with boundedly rational agents this equivalence is no longer obvious in a real effort experiment we study the effects of these taxes on preferences concerning the size of the public sector subjective well being labour supply and on the job performance our findings suggest that employer side taxes induce preferences for a larger public sector subjective well being is higher under employer side taxes while labour supply is lower at least at the extensive margin we discuss three mechanisms that may underlie these results

reprint of do retirement savings increase in response to information about retirement and expected pensions abstract how can retirement savings be increased we explore a unique policy change in the context of the german pension system to study this question as of 2005 with a phase in period between 2002 and 2004 the german pension administration started to send out annual letters providing detailed and comprehensible information about the pension system and individual expected public pension payments this reform did not change the level of pensions but only provided information to individuals about their expected pension payments using german tax return data we exploit an age discontinuity to identify the effect of these letters on the behavior of individuals we find an increase in tax deductible private retirement savings and provide evidence that this is not due to a crowding out of other forms of savings we also show that labor earnings i e the most direct way to increase public pensions increase after receiving the letter

wage subsidies and fair wages abstract wage subsidies can be provided directly to the worker or indirectly by subsidizing the employer with reduced cost of labor employers offer higher wages the standard literature stipulates that this statutory incidence bears no implications for the economic incidence we propose and test a mechanism by which indirect subsidies lead to higher social welfare studies show that workers reciprocate higher wages with higher effort indirect subsidies are shifted to the workers as higher wages leading workers to reciprocate with higher effort and productivity a controlled laboratory experiment supports our behavioral hypotheses and confirms the behavioral and welfare implications

entry decisions and bidding behavior in sequential first price procurement auctions an experimental study abstract though many real life auctions are run independently of each other from the bidders point of view they often form sequences of auctions we investigate how behavior responds to the additional incentives that are present in such auction sequences comparing subjects decisions in single first price procurement auctions with their decisions in a game consisting of two subsequent first price procurement auctions we find that in line with the theoretical prediction entry and bidding behavior is crucially affected by the opportunity cost of early bid submission though entry decisions and average bids in the auction sequence systematically deviate from the perfect bayesian equilibrium prediction while the nature of the opponent human being or computer has no significant effect on these findings giving subjects additional feedback on winners and prices seems to reduce the deviations from the equilibrium prediction

entrepreneurial orientation and small business performance a configurational approach the strategy and entrepreneurship literatures suggest that an entrepreneurial orientation eo improves firm performance but the empirical results are mixed in this article we investigate the eo of small businesses and find that a main effects only analysis provides an incomplete picture of performance access to capital and the dynamism of the environment are important to small businesses and we find that when combined with eo a three way interaction model the configurational approach explains variance in performance over and above a contingency model two way interactions and a main effects only model

content and performance of growth seeking strategies a comparison of small firms in high and low technology industries abstract the question of how to grow and gain market share is repeatedly asked by small firm managers yet little help exists in the academic literature in terms of identification of specific business practices and competitive tactics associated with the pursuit of market share growth rather most discussion of appropriate strategies for small firm growth centers around the prescription of broad strategy types e g the often recommended niche strat egy furthermore the environment s potential effects on the viability of growth strategies seldom receive adequate treatment in the small firm strategy literature despite the long acknowledged influence of environmental conditions on strategy content this paper describes a study of the business strategies used by small growth seeking firms in high and low technology industries the construct of strategy was examined from both a micro level focusing on individual strategy dimensions and a macro level focusing on the firms overall strategic postures and patterns of strategy related variables data were collected from the senior executives of 57 small manufacturing firms whose mission strategies were to aggressively increase sales and market share the data indicate that growth seeking firms in high technology industries relative to those in low technology industries 1 rely more heavily on advertising 2 place more emphasis on product related issues e g new product development superior product warranties as a basis for building market share 3 rely more heavily on formal planning activities 4 place more emphasis on customer service support 5 rely more heavily on external financing 6 rely more heavily on premium pricing strategies and 7 have more entrepreneurial strategic postures the data also indicate that an entrepreneurial strategic posture is more positively associated with firm performance among growth seeking firms in low tech industries than among those in high tech industries although there are exceptions to this finding cluster analysis was used to identify the content and performance of various strategies operationally defined as patterns of strategic variables associated with growth seeking firms in high and low technology industries four strategies were identified through this technique two of which are most common among firms in low tech industries one of which is most common among firms in high tech industries and one of which is equally prevalent in both industry types these results corroborate several of the aforementioned findings regarding the effects of industry technological sophistication on dimensions of firm strategy for example they demonstrate the general aversion among growth seeking firms in low tech industries to premium pricing furthermore they suggest that overall growth seeking firms in low tech industries may be somewhat more disposed to pursuing cost leadership strategies and less disposed to pursuing differentiation strategies than growth seeking firms in high tech industries there were no overall performance differences across the four strategy types identified through the cluster analysis however the data suggest that an entrepreneurial strategic posture is most strongly associated with high performance among firms that have a cohesive and focused strategic mix or pattern of strategic decisions this finding holds for growth seeking firms in both industry types

piecewise procurement of a large scale project this paper studies the optimal piecewise procurement of a large scale project in the unique markov perfect equilibrium mpe of the dynamic procurement game it is found that 1 unlike the static setting the procurer s optimal strategy depends on the number of suppliers and more importantly it is nonmonotonic as one more supplier participates in the procurement auction the procurer softens competition in the initial stages by including more cost btypesq while increasing competition in the mature stages 2 this in turn implies that existing suppliers might favor participation of additional suppliers 3 absent scheduling and or resource constraints the procurer prefers to procure the project as one piece if the suppliers technology exhibits constant or increasing returns and no additional suppliers are enticed to bid and 4 the optimal dynamic mechanism can be easily implemented via a sequence of dominant strategy auctions of the vickrey type d 2004 elsevier b v all rights reserved

synergies in recurring procurement auctions an empirical investigation this article examines the impact of synergies on bidder behavior in recurring road construction procurement auctions the study reveals that projects are spatially correlated when bidders with potential synergies participate the results indicate that their probability of bidding and winning increases and they bid more aggressively finally the study shows that a firm that is capacity unconstrained will bid more aggressively than one that is capacity constrained

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

does price framing affect the consumer price sensitivity of health plan choice this paper provides field evidence on how price framing affects consumers decision to switch health plans in 2009 german federal regulation required insurers to express premium differences between standardized health plans in absolute euro values relative to a federal reference price rather than in percentage point payroll tax differences representative individual level panel data and aggregated health plan level panel data on the universe of health plans show that the reform strongly increased enrollees willingness to switch plans with demand elasticities increasing fourfold the salience of premium differences and the default premium are obviously key driving forces in the decision to switch insurers

early growth decisions of entrepreneurs the influence of competency and prior performance under changing market conditions the transition between the founding of firms and their first steps toward growth represents a critical juncture in the life cycle of new firms an experimental study was conducted among a sample of 103 owner operators of independent hardware stores in order to examine the effects of their competency and their store s prior performance on their decisions to grow their business under changing market conditions the results of the study indicate that prompt and vigorous actions to grow the business in response to market changes are more likely under the following conditions a high level of competence in the firm combined with poor prior performance a low level of competence in the firm combined with good prior performance these findings attest to the critical importance of competency building in new and small firms as competency appears to facilitate responsive behavior to changing market conditions when the firm s performance has not been favorable such competencies may go beyond technical competencies and may include the ability of firms to build relationships with current and prospective customers which may help the firm anticipate and better understand customer needs the results also indicate that the folklore about the vigorous responsiveness of entrepreneurs across all kinds of situations and in the face of all sorts of adversity may be misplaced or inaccurate the varying patterns of responsiveness found in our study should provide food for thought particularly for entrepreneurs who are fortunate to find themselves in positions in which the firm s competencies are high and its prior performance good under such circumstances our results show that a fat cat syndrome is likely to set in and undermine the responsiveness of the firm to changing market conditions for public policy makers our results suggest that programs which support competence building among entrepreneurs whose firms are struggling may play an important role in assisting them to respond to the changes they so frequently face in today s markets such programs which may enhance survival rates of firms already in existence as well as encourage them to grow may aid in job creation and in maintaining a robust economic environment

the empirical analysis of fiscal illusion this paper examines the empirical analysis of the five main hypotheses subsumed under the generic term fiscal illusion after placing these hypotheses within a common theoretical framework the paper attempts to evaluate empirical research into the revenue complexity hypothesis the revenue elasticity hypothesis the flypaper effect renter illusion and debt illusion

technology based adolescent firm configurations abstract managers and stakeholders of entrepreneurial firms have an obvious vested interest in understanding those factors that contribute to the success or failure of such firms insight into strategic and contextual factors related to success for 162 adolescent 5 12 years old firms competing within a variety of rapidly changing technology based industries results from this study analyses focus on pinpointing patterns of strategy context and performance in the first stage of analysis six nonmutually exclusive dimensions of strategy were identified 1 technology product leader 2 product market breadth 3 marketing sales expertise 4 quality service 5 customer alliances and 6 specialization second cluster analysis was conducted to group the firms on their overall pattern of strategic emphasis six groups clusters were identified each group corresponded with one of the following four strategy quadrants 1 defenders k specialists 2 entrepreneurs r specialists 3 analyzers k generalists and 4 prospectors r generalists subsequent analysis of variance demonstrates significant differences across the six clusters on three contextual variables environmental instability stage of product development and firm age and on six outcomes rd direct sales and support these firms compete on their reputation in their targeted market segment their ability to find and sell to a narrow range of customers and customer service this strategy occurred in relatively stable and mature industries and resulted in high performance in operating efficiency market development financial stability and overall performance sales growth was average cluster 2 n 12 spin offs reliant on contracts with original employers these firms represent an outsourcing opportunity for larger companies not desiring to develop in house expertise in a product area they are the youngest and the smallest and have products in the earliest stage of development their environment is relatively stable given the dependence of their large customers for their product they are average performers except for having relatively high operating efficiency they trade high performance for the security of long term arrangements with major clients cluster 3 n 39 marketing and sales expertise targeted at narrow market these firms likely assemble and package others technological products or if they manufacture follow the technological developments of their competitors they create value through their marketing and sales expertise and effort and through customer service support they face average environmental instability and stage of product development this strategy however creates insufficient value added for the long term viability of the firms they have low performance on sales growth market development operating efficiency and financial stability and also have low expectations for their future prospects cluster 4 n 23 technology leaders with a high degree of specialization quality and service these firms differentiate their products based on technology leadership in a specialized product domain where high quality and service are emphasized they compete in relatively unstable environments attributable to rapid technological change and are in an early stage of product development they are relatively small consistent with their narrow product domain they have the highest performance on r d results sales growth and future prospects and are very high on overall performance cluster 5 n 24 lacking in a clear strategic profile these firms lack any clear pattern of strategic activity although faced with average environmental instability these firms compete in the most mature product areas therefore while other firms are becoming more entrenched in their competitive positions advantages these firms are floundering they are poor performers and lack long term viability they score low on sales growth market development r d results operating efficiency and overall performance cluster 6 n 46 broad and aggressive product market reach with relatively high quality and service these firms pursue a full line of products sold through a wide variety of methods this approach evolved in a highly unstable environment due to rapid change and growth yet has a large number of growth opportunities they are highly successful in market development sales growth and financial stability they are also highly optimistic about their future prospects this identification of firm configurations can help managers and stakeholders recognize the relationships among strategy context and performance for young technological firms this should lead to more effective managerial decisions on strategic and contextual issues leading to better performance

the desirability of commodity taxation under non linear income taxation and heterogeneous tastes abstract this paper revisits the atkinson stiglitz result on uselessness of commodity taxation in the presence of optimal non linear income taxation in a more general setup namely when tastes are heterogeneous this general analysis displays the key economic assumptions under which the atkinson stiglitz result is robust a small tax on a given commodity is desirable if high income earners have a relatively higher taste for this commodity or if consumption of this commodity increases with leisure an application to the case of savings suggests that even in the presence of optimal non linear earnings taxation there is a role for a supplemental capital income tax in the standard overlapping generation model

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

tax and subsidy incidence equivalence theories experimental evidence from competitive markets abstract a basic tenet in microeconomics is tax incidence equivalence which holds that the burden of a unit tax on buyers and sellers is independent of who actually pays the tax by contrast policymakers and the public often mistake statutory incidence for economic incidence using competitive laboratory markets i test both tax incidence equivalence and an analogous theorem for subsidies for sufficiently large markets the results show strong support for both theories there is little to no evidence even in the short run of the popular misperception that statutory incidence equals economic incidence in smaller markets in which competitive forces are weaker and relative bargaining strengths may play a role the evidence for tax incidence equivalence is weaker as minor price discrepancies may persist between markets

taxpayer confusion evidence from the child tax credit we develop an empirical test for whether households understand or misperceive their marginal tax rate our identifying variation comes from the loss of the child tax credit when a child turns 17 using this age discontinuity we find that despite this tax liability increase being lump sum and predictable households reduce their reported wage income upon discovering they have lost the credit this finding suggests that households misinterpret at least part of this tax liability change as an increase in their marginal tax rate this evidence supports the hypothesis that tax complexity can cause confusion and leads to unintended behavioral responses jel d12 d14 h24 h31

behavioral effects of withholding taxes on labor supply in most advanced economies income tax collection uses third party withholding for wage income because withholding taxes do not necessarily reflect true effective taxes these may give false signals of net of tax pay we test labor supply responses to such misconceptions using laboratory experiments withholding taxes and the resulting tax refunds should be behaviorally neutral but our results show that tax adjustments lead to effort adjustments which suggests that withholding blurs tax incentives while there is no statistically significant response in the overall sample the participants in the subgroup who self assess to be motivated by monetary incentives about half of the total sample reduce their effort in response to withholding taxes and increase their effort after receiving tax refunds

technology strategy and new venture performance a study of corporate sponsored and independent biotechnology ventures abstract new ventures companies eight years or younger play a major role in the development of an emerging high technology industry corporate sponsored new ventures those supported by an established corporation and independent ventures those founded by independent entrepreneurs frequently battle for industry leadership and financial success whereas both venture types use technology to achieve financial and market success little is known about the differences in their technology strategies technology strategy is the plan that guides a new venture s decisions on the development and use of technological capabilities this strategy covers six major areas the first is selecting the pioneering posture where a venture decides whether or not be among the industry s first companies to introduce new products technologies to the market the second is determining the number of products to be introduced to the market the third is choosing the extent of a venture s use of internal and external r d sources internal sources usually refer to in house r d activities external sources may include purchasing or licensing of technology from other companies or joining strategic alliances to acquire that technology the fourth is deciding the level of r d spending the fifth is selecting the combination portfolio of applied and basic research projects whereas basic r d advances science applied r d leads to new products and technologies the sixth and final dimension is the venture s use of patenting to protect any competitive advantages it might gain from its r d activities this article reports the results of a study that explored the differences in the technology strategies and performance of corporate and independent ventures the biotechnology industry was chosen to test the study s hypotheses using 112 ventures seven of the study s hypotheses focused on the potential variations in technology strategy between corporate and independent ventures independent ventures ivs were expected to surpass corporate ventures cvs in pioneering new products technologies using internal r d and emphasizing applied r d cvs were expected to surpass ivs in introducing new products using external r d sources spending on r d and patenting the study s remaining three hypotheses covered possible variations in new venture performance nvp and their sources the results showed that ivs focused more on pioneering pursued a more applied r d portfolio and emphasized internal r d more than cvs cvs utilized external technology sources spent more heavily on r d stressed basic r d and used patenting more intensively than ivs these results were consistent with the hypotheses however contrary to expectations there were no significant differences between cvs and ivs in the frequency of new product introductions probably because most ventures were at the invention rather than the commercialization stage the results on the nvp of cvs and ivs were counter to expectations ivs outperformed cvs probably because of the high motivation of the iv owners who reaped the rewards of growth and profitability also whereas cvs may have greater access to the resources of their sponsors political conflicts and rigid corporate controls might have reduced their ability to achieve competitive advantages the results also indicated that cvs and ivs appeared to gain competitive advantages from different technological choices pioneering a focus on applied r d and extensive use of the internal r d sources were also positively associated with the performance of ivs heavy r d spending the use of both internal and external r d sources frequent product introductions and patenting were positively associated with the performance of cvs finding that technology strategies significantly impacted nvp should encourage executives to consider pursuing a formal technology strategy likewise the finding that different dimensions of technology strategy influenced the performance of cvs and ivs in different ways has practical implications cv managers can learn from their higher performing iv rivals also because established companies frequently acquire ivs information about their technology strategies can be valuable in assimilating the acquired ventures overall the results show that technology strategy is an important factor in enhancing new venture performance

the importance of focus to market entrants abstract one of the most difficult questions facing entrepreneurs is how broadly to serve a heterogeneous market that is whether it is better to serve a narrow segment of the market hoping to flourish by gaining a relatively high and increasing market share within that segment or whether it is better to attempt to appeal to a broader cross section of the market thereby allowing the firm to succeed with a lower market share among the customers whom it is targeting a narrower focus permits more concentrated use of fixed resources facilitates the building of customer loyalty and lowers the threat of retaliation from generalist incumbents but requires a much higher market share within the firms target market to succeed porter 1980 has identified three generic strategies available to firms low cost differentiation and focus by focus he means that the firm should develop the ability to serve a particular target customer group very well often at the expense of other potential customer groups implicit in the firm s choice to adopt a focus strategy is that it must address the question of how broadly to focus in terms of any given product attribute given its resources and opportunities a fundamental element of the firm s choice of focus is that it is affected by and in turn affects that of its rivals that is focus is a strategic variable in the sense of the word strategic meant by game theorists each firm s optimal choice of action depends on the actions taken by other firms the literature on the optimal degree of focus for new ventures has reached very mixed conclusions the early authors looking at the question were fairly consistent in their recommendation that a highly focused or niche strategy was generally most appropriate later authors recommended that new ventures should enter markets aggressively facing larger incumbents head on the latest studies develop what we describe as a contingency approach arguing that the best approach depends on industry conditions we think that this literature is now at a point where we can advance our understanding by looking at specific industries in some detail as our understanding expands broader empirical work is becoming increasingly difficult because of the number of factors that must be built into any cross sectional model of new venture performance we hope then to develop an understanding of one industry that is generally similar in nature to many other industries from this understanding conclusions of interest to both researchers and practitioners can be drawn future studies of other industries with different fundamental structures will provide similar benefits more specifically this paper is an empirical inquiry into the microbrewery segment of the u s brewing industry designed to investigate the relative merits of specialist firms different degrees of focus the question addressed is whether focus affects specialist firms short run performance in an industry where there are entrenched generalists as well as many new entrpreneurial specialist entrants the analysis confirms several widely held beliefs of industry participants and observers that microbreweries are far more likely to attempt to serve too broad a market segment than to focus too narrowly that microbreweries are in direct competition with imports and that microbreweries benefit from having many microbrewery rivals within the same state furthermore there appear to be some small learning and or reputation effects in the operation of microbreweries as well as a minor novelty factor that benefits recently opened establishments we must note however that the majority of the variation in the performance of microbreweries stems from differences in the management organization or market of individual breweries not captured explicitly by other variables included in the study this finding perhaps should not be surprising given the huge variation in the backgrounds skills and outlooks of microbrewery owners during the segment s early days the lessons learned from this research are of obvious importance to entrepreneurs in many industries it is a very common situation for an entrepreneur to enter a stable industry in which established firms are already in place serving a broad cross section of the market our findings show that in such circumstances a narrowly focused approach to the market is best we can think of numerous examples of where entrepreneurs have either succeeded by focussing on a particular segment of the market or failed by not doing so in fact there are many cases in which firms have done first one and then the other for example and people express airlines at first flourished by focussing on the needs of budget conscious leisure travellers and then collapsed in part because it began to try to serve business travelers and others who are less price sensitive on certain routes one of the hallmarks of an entrepreneurial business is that it suffers severe resource constraints because the entrepreneur s choice of breadth of focus will have profound effects on the resource requirements of the business it is clear that the choice of which segment or segments of the market on which to focus is a fundamental decision made by all entrepreneurs this paper serves to illustrate the importance of this focus decision and to provide some guidance for entrepreneurs concerning the appropriate degree of focus to adopt in entering an established market

firm networks and firm development the role of the relational mix abstract this study examines the role of different networks called the relational mix on the development of the entrepreneurial firm our regression analysis of survey data from 60 venture capital financed firms questions the importance of network size on firm development rather our results suggest that different types of networks are more important for firm development in particular we found a significant positive relationship for reputational networks and a weak significant negative relationship for cooperative technology networks at founding with time to break even social networks at founding have no direct effect on time to break even and a significant negative relationship with sales in the years after foundation furthermore our findings show the important role of marketing information and co opetition networks relationships with direct competitors on firm development in the years after foundation these results suggest that the relational mix is a more appropriate construct for explaining network development than network size alone

price discontinuities in an online market for used cars we study the price setting behavior in a competitive market for used cars and provide empirical evidence for coarse information processing based on detailed field data from one of europe s largest online marketplaces for automotive vehicles we document systematic and sizable price discontinuities at salient car age and mileage thresholds the price difference between two otherwise identical cars across registration years where one was first registered in january and the other in december of the previous year is up to five times larger than that between two cars first registered in any two subsequent months within a registration year a similar pattern can be observed in the mileage dimension at 10 000 km odometer marks which is in line with earlier findings in the literature being able to study discontinuities along two dimensions of the same good allows us to further our understanding toward a more general notion of inattentive behavior while our results are compatible with a behavioral model of l

the correlates of entrepreneurship in three types of firms the objective of the research was to discover the chief determinants of entrepreneurship the process by which organizations renew themselves and their markets by pioneering innovation and risk taking some authors have argued that personality factors of the leader are what determine entrepreneurship others have highlighted the role played by the structure of the organization while a final group have pointed to the importance of strategy making we believed that the manner and extent to which entrepreneurship would be influenced by all of these factors would in large measure depend upon the nature of the organization based upon the work of a number of authors we derived a crude typology of firms simple firms are small and their power is centralized at the top planning firms are bigger their goal being smooth and efficient operation through the use of formal controls and plans organic firms strive to be adaptive to their environments emphasizing expertise based power and open communications the predictiveness of the typology was established upon a sample of 52 firms using hypothesis testing and analysis of variance techniques we conjectured that in simple firms entrepreneurship would be determined by the characteristics of the leader in planning firms it would be facilitated by explicit and well integrated product market strategies and in organic firms it would be a function of environment and structure these hypotheses were largely borne out by correlational and multiple regression analyses any programs which aim to stimulate entrepreneurship would benefit greatly from tailoring recommendations to the nature of the target firms

experimental evidence on the relationship between tax evasion opportunities and labor supply abstract motivated by the observation that access to evasion opportunities is distributed heterogeneously across the labor market this paper examines the extent to which labor supply elasticities with respect to tax rates depend on such evasion opportunities we first discuss the channels through which access to evasion affects labor supply responses and then set up a laboratory experiment n 205 in which all participants undertake a real effort task over several rounds subjects face a tax rate that varies across rounds and are required to pay taxes on earned income the treatment group is given the opportunity to underreport income while the control group is not we find evidence that participants in the treatment group respond differently to changes in the net of tax rate than participants in the control group the effect is more prevalent when tax rates fall additionally the direction of the treatment effect is dependent on the evolution of tax rates across rounds

effects of payment mechanism on spending behavior the role of rehearsal and immediacy of payments past expenses have been shown to influence future spending behavior by depleting available budgets however a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them this article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending specifically past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid rehearsal and when the consumer s wealth is depleted immediately rather than with a delay immediacy two experiments show support for the proposed theoretical framework

dynamic corrective taxes with time varying salience abstract economies across the globe are becoming increasingly cashless and many payment systems have become automated driving a temporal wedge between consumption and payment and generally making the costs of consumption intermittently salient since this inconsistent price salience alters demand elasticities it is a particular concern for goods that generate externalities and the price based policies deployed to address them this paper derives optimal dynamic corrective taxes for suboptimal and persistent consumption decisions these taxes depend on the agent s ability to commit to a future consumption path we also characterize a second best constant tax and the excess burden from time invariant tax rates when calibrated to u s residential electricity consumption the model shows that the second best constant tax is more than twice the marginal external cost of carbon emissions

is tomorrow another day the labor supply of new york city cabdrivers the labor supply of taxi drivers is consistent with the existence of intertemporal substitution my analysis of the stopping behavior of new york city cabdrivers shows that daily income effects are small and that the decision to stop work at a particular point on a given day is primarily related to cumulative daily hours to that point this is in contrast to the analysis of camerer et al who find that the daily wage elasticity of labor supply of new york city cabdrivers is substantially negative implying large daily income effects this difference in findings is due to important differences in empirical methods and to problems with the conception and measurement of the daily wage rate used by camerer et al

the dark side of sunshine regulatory oversight and status quo bias abstract as the mortgage foreclosure crisis accelerated in the u s in the late 2000s state level policymakers implemented measures designed to protect consumers and stem the tide of foreclosures one form of policy was simply to require lenders to report on foreclosure prevention activities such policies represented a shift from the status quo for mortgage loan servicing firms operating under incomplete information doing nothing with non paying loans while waiting for more information to be revealed to either foreclosing on the borrower or offering the borrower a modification of loan terms using a difference in difference in differences empirical strategy we exploit one policy implemented in maryland for a subset of mortgage servicers and find evidence that firms perform more loan modifications as well as file more foreclosures increasing foreclosure filings was contrary to the intent of the policy suggesting that policymakers should be aware of how firms exhibit systematic biases much like individuals

failure to refinance households that fail to refinance their mortgage when interest rates decline can lose out on substantial savings based on a large random sample of outstanding u s mortgages in december of 2010 we estimate that approximately 20 of households for whom refinancing would be optimal and who appeared unconstrained to do so had not taken advantage of the lower rates we estimate the present discounted cost to the median household who fails to refinance to be approximately 11 500

are we taxing ourselves how deliberation and experience shape voting on taxes abstract we let consumers vote on tax regimes in experimental markets we test if taxes on sellers are more popular than taxes on consumers i e on voters themselves even if taxes on sellers are inefficiently high taxes on sellers are more popular if voters underestimate the extent of tax shifting in the market we show that inexperienced voters are prone to such a tax shifting bias that experience is an effective de biasing mechanism but that pre vote deliberation about tax regimes makes initially held opinions more extreme rather than correct our results suggest that voting on taxes is prone to bias and that easy to interpret facts are needed to de bias voters

measuring the dynamic efficiency costs of regulators preferences municipal water utilities in the arid west evidence suggests that municipal water utility administrators in the western us price water significantly below its marginal cost and in so doing inefficiently exploit aquifer stocks and induce social surplus losses this paper empirically identifies the objective function of those managers measures the deadweight losses resulting from their price discounting decisions and recovers the efficient water pricing policy function from counterfactual experiments in doing so the estimation uses a continuous butconstrained control version of a nested fixed point algorithm in order to measure the important intertemporal consequences of groundwater pricing decisions

the effect of federal davis bacon and disadvantaged business enterprise regulations on highway maintenance costs the author compares winning bids on state and federal highway maintenance projects in colorado between 2000 and 2011 to determine whether federal prevailing wage and disadvantaged business enterprise regulations are associated with increased construction costs the effect of the davis bacon act is evaluated when average wage rates prevail for almost all workers involved in highway maintenance for most of the period of the study the federal minimum for work completed by disadvantaged businesses is 10 the goal for colorado exceeds this minimum by two to three percentage points summary data indicate that federal projects are more expensive than state projects but projects funded by the federal government are also larger and more complex regression results indicate that with controls for project size and complexity no statistically significant difference is found in the cost of federal and state projects results also indicate that federal regulations are not associated with reduced bid competition a

experimental labor markets and policy considerations incomplete contracts and macroeconomic aspects this survey focuses on experimental labor markets investigating two aspects that are important for a better understanding of labor market relations and their consequences for labor market policies the first part of the survey is dedicated to papers that assess the prevalence of reciprocal considerations in incomplete labor contracts the second part summarizes the relatively small but growing experimental literature exploring labor market issues in macroeconomics and public finance studying the interaction between taxation and labor market outcomes

consumption taxes and redistribution this study considers replacing the current us tax system with only aflat tax con sumption tax showing in contrast to the literature that such a reform leads to a decline in inequality and increase in welfare for the welfare poor the results are obtained from a simple model that identifies the main channels through which the reform affects the economy it is shown also that these novel results depend on the distribution of wealth and earnings and that they hold for the relevant

labor supply of new york city cabdrivers one day at a time life cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life cycle wealth previous attempts to test this hypothesis empirically with time series data have not been supportive estimated elasticities are typically negative or nonsignificant such analyses however are vulnerable to measurement error and other estimation problems we use data on daily observations of wages and hours for new york city cab drivers to estimate the supply response to transitory fluctuations in wages cab drivers decide daily how many hours to supply and face wages that are positively correlated within days but largely uncorrelated between days using these data our central finding is that wage elasticities are persistently negative from 5 to 1 in three different samples even after correcting for measurement error using instrumental variables these negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life cycle formulations of labor supply

moral hazard in repeated procurement of services this paper analyzes repeated procurement of services as a two period model with a potential repeated agency relationship in the first period there is an incumbent who provides a service in the second period there is a contest stage in which the principal selects the next service provider the agents effort is non contractible and the contest stage is the mechanism to mitigate potential moral hazard problems the principal takes account of the past service effort in the contest stage by choosing the weight of past effort and the degree of substitutability between past and current efforts the results show that when the principal does not value contest effort considering past effort as the relevant effort in the contest is optimal when the principal values contest effort and effort cost increases decreasing substitutability between efforts is optimal

asymmetric information and collusive behavior in auction markets we present a theoretical and empirical analysis of the behavior of a bidder s cartel in a multiperiod auction market in which the purchaser is relatively uninformed our work establishes a tentative connection between the economics of information and collusion by concentrating on the cartel s informational monopoly and its ability to both increase profits and mask its presence by passing misinformation to the purchaser in the models we develop costs are assumed to be stochastic and projects awarded in adjacent periods to be substitutes for one another as a result the purchaser will have incentive to intertemporally reallocate his demand buying more or less of the current period s project depending upon whether the current market price is lower or higher than the price which he expects to prevail in the future a purchaser who needs to form such price expectations yet is ignorant about production costs and market structure will be particularly attracted to the auction mechanism because the data contained in past auctions bids can apparently be incorporated into an explicit structural model of expected future price in fact such a purchaser may hold auctions frequently merely to acquire information such pleasant appearances are deceiving once the auction s bidders become aware of the informational use to which their bids are being put they will have incentive to form a cartel thereby extracting a premium for their knowledge by misinforming the purchaser and skewing his intertemporal decision making to their advantage in some respects the mechanics of our model resemble the case of a multiproduct monopolist selling goods that are substitutes for one another what is unique to our analysis is the dependence of one of the goods future demand on price expectations which are an information resource we are suggesting that information that is distributed asymmetrically among market participants is susceptible to the inefficiencies of collusion in some ways the implications of our work are considerably stronger than this because our cartel never reveals its true knowledge and thus our market may be more inefficient than more standard monopolies in which the good is always traded albeit at noncompetitive prices furthermore by explicitly modeling the purchaser s rational structural approach to price forecasting we point out that complete rational expectations models may be more susceptible to exploitation by informational cartels than simpler forecasting techniques we have tested the implications of our model in a case study of north carolina highway construction cartels the highway construction industry is an auction market characterized by government procurement agencies who are uninformed relative to suppliers and comes complete with a substantial record of known collusion in recent years thus it seems an ideal hunting ground for verification of our theoretical findings our paper proceeds as follows in section i we model a multiperiod competitive auction market and describe a bayesian mechanism through which the purchaser uses past data to improve the accuracy of his price expectations section ii establishes theoretical results for the bidders cartel which has incentive to form in this market we describe massachusetts institute of technology cambridge ma 02109 and university of arizona tucson az 85721 respectively nold was formerly of rhodes associates and is now deceased we thank richard schmalensee and the participants of the economic and legal organization workshop at the university of chicago for valuable suggestions part of this research was supported under research grant 81 ij cr0062 from the national institute of justice

an experimental study on sequential auctions with privately known capacities abstract we experimentally study sequential procurement auctions where bidders capacity constraints are private information our experiment involves two first price auctions with a belief elicitation stage at the end of the first our results show that i observed behavior in the second auction is overall consistent with sequential rationality ii first auction bids are decreasing in the capacity of the bidder but iii stated beliefs are inconsistent with the actual play hence subjects seem to be aware of the opportunity cost of early bids which leads capacity constrained bidders to bid more cautiously than unconstrained ones on the other hand since they do not recognize the informative content of bids the potential signaling cost associated with early bids does not come into play

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

consumption vs wage taxation and the capital levy abstract based on a representative consumer framework it has been argued that wage taxation is inferior to consumption taxation this note shows that the opposite result may emerge in a model where households are heterogeneous and where a uniform poll tax or subsidy is available

repeated common value auctions with asymmetric bidders abstract this paper considers a first price common value auction with one sided private information among bidders an object is rented each period to the highest bidder without revealing the bids made in previous periods the paper extends single crossing arguments used in static games to show the existence of equilibrium in this repeated auction the model predicts that bidders bid more aggressively in a repeated auction than in a static auction because a higher bid increases the amount of information learned through bidding the aggressive bidding behavior also implies that the per period revenue of the repeated auction is higher than that of the one period counterpart this bidding behavior leads to a theoretical explanation for the winner s curse in repeated auctions in addition the model yields predictions like an increasing wage schedule over time and the institution of a signing bonus that are consistent with labor market observations