multiple object auctions with budget constrained bidders in the last few years governments in many parts of the world have aggressively sought to privatize socially held assets this wave of privatization has included the sale of industrial enterprises in the former soviet union and eastern europe the sale of public transportation systems in britain and scandinavia and the sale of radio spectra in the u s both the enormity and the importance of these sales have naturally led to an examination of how best to accomplish this task auctions have been proposed and have frequently been used as time honoured convenient and attractive mechanisms for such sales this in turn has led to a revival of interest in the theory of auctions particularly those involving multiple objects the magnitude of these privatization sales has meant that in many instances it is realistic to consider that buyers may run up against liquidity or borrowing constraints the presence of these financial constraints introduces important differences into traditional auction theory for instance pitchik and schotter 1986 and che and gale 1996 1998 have shown that when bidders are subject to such constraints the conclusion of the celebrated revenue equivalence theorem no longer holds when multiple objects are auctioned in the presence of budget constraints it may be advantageous for a bidder to bid aggressively on one object with a view to raising the price paid by his rival and depleting his budget so that the second object may then be obtained at a lower price in effect a bidder may wish to raise a rival s costs in one market in order to gain advantage in another thus unlike in traditional auction theory a particular bidder s payoff is affected by the price paid by a rival bidder it is important to note that this effect comes into play only when several objects are sold

a near pareto optimal auction with budget constraints abstract in a setup where a divisible good is to be allocated to a set of bidders with budget constraints we introduce a mechanism in the spirit of the vickrey auction in the mechanism we propose understating budgets or values is weakly dominated since the revenue is increasing in budgets and values all kinds of equilibrium deviations from true valuations turn out to be beneficial to the auctioneer we also show that ex post nash equilibrium of our mechanism is near pareto optimal in the sense that all full winners values are above all full losers values

efficiency effect of privatization in the developing countries privatization gained considerable momentum in the developing world in the 1980s the motives were many but the hope for higher economic efficiency underlined the expectations of the implementing governments and agencies in the developing countries while the merits of a market based economic system are well established under certain theoretical conditions far less is known of its empirical relevance in the developing world yet to the best of the author s knowledge no empirical study has examined the macro efficiency effect of privatization in the developing countries studies concerned with this issue often limit themselves to the impact of privatization at the firm level for a small number of companies and countries thus the current study is an attempt to provide a systematic quantitative measure of the magnitude of the macroeconomic effect of privatization in 45 developing countries using the concept of frontier production function efficiency differences between developing countries with differ

auctions development and privatization efficient auctions with liquidity constrained buyers abstract we exhibit an efficient auction an auction for which the winner is the buyer with the highest valuation subject to the constraint that buyers may be budget or liquidity constrained

internet advertising and the generalized second price auction selling billions of dollars worth of keywords we investigate the generalized second price gsp auction a new mechanism used by search engines to sell online advertising although gsp looks similar to the vickrey clarke groves vcg mechanism its properties are very different unlike the vcg mechanism gsp generally does not have an equilibrium in dominant strategies and truth telling is not an equilibrium of gsp to analyze the properties of gsp we describe the generalized english auction that corresponds to gsp and show that it has a unique equilibrium this is an ex post equilibrium with the same payoffs to all players as the dominant strategy equilibrium of vcg

bid costs and endogenous bid caps we study contests where several privately informed agents bid for a price all bidders bear a cost of bidding that is an increasing function of their bids and moreover bids may be capped we show that regardless of the number of bidders if agents have linear or concave cost functions then setting a bid cap is not profitable for a designer who wishes to maximize the average bid on the other hand if agents have convex cost functions i e an increasing marginal cost then affectively capping the bids is profitable for a designer facing a sufficiently large number of bidders

rational choice a survey of contributions from economics and philosophy this paper looks at the philosophical foundations of rational choice theory it is argued that l savage s expected utility axioms cannot be defended as requirements of instrumental rationality in part because of their implications for the description of consequences then it is argued that common knowledge of rationality does not imply that rational game players must be in nash equilibrium and for some games is an incoherent concept finally the suggestion that rational choice theory is self defeating is examined in relation to coordination games where the theory cannot explain the role of salience and the concept of resolute choice copyright 1991 by royal economic society

standard auctions with financially constrained bidders we develop a methodology for analyzing the revenue and efficiency performance of auctions when buyers have private information about their willingness to pay and ability to pay we then apply the framework to scenarios involving standard auction mechanisms in the simplest case where bidders face absolute spending limits first price auctions yield higher expected revenue and social surplus than second price auctions the revenue dominance of first price auctions over secondprice auctions carries over to the case where bidders have access to credit these rankings are explained by differences in the extent to which financial constraints bind in different auction formats

privatization fdi inflow and economic growth evidence from china s provinces 1978 2008 china s economic growth over 1978 2008 is a miracle this article attempts to figure out and quantify the factors leading to this miracle it is generally believed that economic reform and opening up is the key to china s economic success but that is far from being exact and specific this study hypothesizes that privatization and foreign direct investment fdi inflow are the two key factors in this process we focus on identifying the exact specific and detailed mechanisms of privatization and fdi inflow in promoting economic growth especially from the provincial level then using a panel data covering 31 provinces of chinese mainland over 1978 2008 we find statistically significant evidence to support our hypotheses we predict that further economic growth depends on further privatization and opening up that is depends on denationalization of the economy

williamson s the economic institutions of capitalism there can be no doubt this book is a major contribution perhaps the volume is best characterized as a systematic theoretical examination of those portions of society s economic activities that the market mechanism does not automatically run to perfection but here such activities are not simply listed as market failures and forgotten rather they are treated appropriately as normal and widespread economic phenomena whose anatomy urgently requires examination and understanding vertical integration is an archtypical example if the unaided market mechanism did everything perfectly firms would rarely be able to enhance efficiency by integrating vertically it would usually be optimal for intermediate goods to be bought from independent suppliers on the free market i have more than once enjoyed teasing businesspersons bent on defending the vertical integration of their firms by suggesting that they are soviet central planners at heart and that when push comes to shove they have little use for the market mechanism in practice of course the truth generally lies somewhat in between for any given firm there is presumably an optimal degree of vertical integration determined by the requirements of economy in production and economy in the governance process or as williamson puts it of economizing in transactions costs the point is that a variety of institutions and behavior patterns really make sense primarily in terms of their relative efficacy in dealing with transactions costs that renders each in turn best in different circumstances decentralized and hierarchical organization of firms the vast variety of contractual forms franchising tie ins and many others these are the sorts of institutions to which williamson s analysis is devoted it should be said at once that i can find no major point of disagreement with his analysis on the contrary i enthusiastically accept the substance of all his central conclusions this extends also to williamson s characterization of the contestability literature and its relation to his own analysis which i believe he has done completely correctly as will be spelled out presently i have only two substantive reservations about the book the first is a slight tendency by the author to overstatement of claims for the new analysis a manifestation of enthusiasm which is no doubt commendable in a pioneer and in any event i know i am hardly in a

overbidding and inefficiencies in multi unit vickrey auctions for normal goods abstract i examine bid behavior in uniform price auctions and multi unit vickrey auctions without the standard quasilinearity restriction on bidder preferences instead of assuming quasilinearity i assume that bidders have weakly positive wealth effects i e the goods are normal goods my setting nests quasilinearity but also allows for budget constraints financial constraints and risk aversion i show that without the quasilinearity restriction truthful reporting is not a dominant strategy in the vickrey auction instead bidders truthfully demand for their first unit and weakly overreport their demand for later units the incentive to overreport demand means that the vickrey auction is generally inefficient this mirrors the well known demand reduction results in uniform price auctions moreover the efficiency ranking of the two auctions is ambiguous in fact there are cases where the uniform price auction is pareto efficient and the vickrey auction is pareto inefficient even if only one bidder has non quasilinear preferences

markets as institutions versus organizations as markets disentangling some fundamental concepts abstract this paper argues that ambiguities in concepts as important as institutions markets and organizations undermine progress of research programs intending to take these components seriously into account after a short review of some current confusions section i section ii discusses recent literature to arrive at definitions that encapsulate fundamental characteristics into pure categories in section iii exceptions and qualifications are introduced so as to operationalize the concepts in the real world 1 i organizations and markets are embedded in an institutional framework and 2 ii they overlap giving birth to hybrid forms however the conclusion contends that it is essential to maintain distinct concepts in order to understand these complex arrangements

relationships between economic growth foreign direct investment and trade evidence from china this study investigates the causal links between trade economic growth and inward foreign direct investment fdi in china at the aggregate level the integration and cointegration properties of quarterly data are analysed long run relationships between growth exports imports and fdi are identified in a cointegration framework in which this paper finds bi directional causality between economic growth fdi and exports economic development exports and fdi appear to be mutually reinforcing under the open door policy

an efficient ascending bid auction for multiple objects when bidders exhibit multi unit demands standard auction methods generally yield inefficient outcomes this article proposes a new ascending bid auction for homogeneous goods such as treasury bills or telecommunications spectrum the auctioneer announces a price and bidders respond with quantities items are awarded at the current price whenever they are clinched and the price is incremented until the market clears with private values this dynamic auction yields the same outcome as the sealed bid vickrey auction but has advantages of simplicity and privacy preservation with interdependent values this auction may retain efficiency whereas the vickrey auction suffers from a generalized winner s curse

multi unit auctions with budget limits abstract we study multi unit auctions for bidders that have a budget constraint a situation very common in practice that has received relatively little attention in the auction theory literature our main result is an impossibility there is no deterministic auction that 1 is individually rational and dominant strategy incentive compatible 2 makes no positive transfers and 3 always produces a pareto optimal outcome in contrast we show that ausubel s clinching auction satisfies all these properties when the budgets are public knowledge moreover we prove that the clinching auction is the unique auction that satisfies all these properties when there are two players this uniqueness result is the cornerstone of the impossibility result few additional related results are given including some results on the revenue of the clinching auction and on the case where the items are divisible

markets and firms transaction costs versus strategic innovation abstract this paper takes the view that the firm is a way of organizing learning and a source of capabilities for innovative moves this requires seeing the firm s problem as one not only of forming appropriate internal organizing structures but also of competing in an environment where new problems regularly emerge as a result of strategic outcompeting moves by rivals market and firm are shown to interact rather than being independent alternatives this altered perspective is given sharper definition by comparing and contrasting it with the results of transactions cost analysis the newer capabilities approach to the firm and the game theoretic literature on coordination and cooperation

fdi trade and spillover efficiency evidence from china s manufacturing sector using firm data from the 1995 third industrial census of china this paper finds that the presence of foreign ownership has a positive and significant effect on domestic firms productivity moreover trading with more advanced countries helps china gain access to new technology and information which improves its productivity and enables it to compete in international markets it is found that china s imports from oecd and the four asian tigers and exports to oecd have positive effects on domestic firms productivity by dividing industries into high technology gap and low technology gap groups it is found that the spillover effects of fdi are larger for the low technology gap group than for the high technology gap group however the estimation results of the trade induced technology spillover effect support the technology gap learning theory and the significance of importing appropriate technology

sequential second price auctions with private budgets abstract we study an auction game in which two units of a good are sold via two second price auctions sequentially to three or more bidders who have private budgets that limit their spending in the auctions we characterize the unique symmetric equilibrium in equilibrium while bidders bid the minimum of their valuations and budgets in the second auction their aggression in the first round depends on two factors the competition from other bidders as measured by the probability of facing high budget bidders and the option value from participating the second auction as measured by the budget difference between various bidders the former factor makes bidders more aggressive and the latter makes them less aggressive in particular when the competition factor dominates the sequential auctions generate higher revenue in expectation than the uniform price auction

auctions vs fixed pricing competing for budget constrained buyers abstract we investigate price mechanism selection in a setting where sellers compete for budget constrained buyers by adopting either fixed pricing or auctions first or second price we show that first and second price auctions are payoff equivalent when some bidders are financially constrained so sellers are indifferent to adopt either format we characterize possible equilibria and show that if the budget is high then sellers compete via fixed pricing if it is low then they compete via auctions and if it is moderate then they mix so both mechanisms coexist the budget constraint becomes less binding if sellers use entry fees interestingly an improvement of the budget e g letting customers pay in installments may lead to fewer trades and a loss of efficiency

efficient assignment mechanisms for liquidity constrained agents we study alternative methods of assigning scarce resources to individuals who may be liquidity constrained selling the resources via auctions is increasingly popular but that method may produce an inefficient allocation when agents are liquidity constrained a simple non market scheme such as random assignment does better if resale is allowed since individuals with a high valuation but low liquidity are more likely to be assigned initially and recipients with low valuations will resell to those with high valuations similarly a need based assignment scheme favoring those with low liquidity enhances welfare lotteries with entry fees could also be desirable the optimal mechanism displays features of the non market schemes such as in kind and cash subsidies

the causality between fdi and sector specific production in turkey evidence from threshold cointegration with regime shifts abstractthis article considers bidirectional nonlinear cointegration relation between fdi and industrial output in turkey the data cover the monthly period 2005 1 2013 10 for the time series of total industrial production 36 sub industrial sectors production and fdi following nonlinear threshold cointegration and vecms the article yields that i total industrial production and nine sub industrial productions have positive long run impact on fdi with significant error corrections ii six sub industrial productions have short term influence on fdi iii fdi has long run positive impulse on total industrial production and nine sub industrial productions with some significant error corrections and iv fdi affects four sub industrial productions in the short run as well as in the long run the results of vecms from i also reveal that the all short term adjustment parameters are found significant and powerful in 10 typical regimes regime 1s and in 5 extreme regimes regime 2s finally the outcom

privatization and economic growth an empirical investigation from a sample of developing market economies this paper explores the economic determinants of privatization programmes and the macroeconomic impact of this institutional reform on the growth rate of the gdp a sample of thirty five developing market economies is considered over the 1988 92 period probit and tobit models are used to identify the determinants of successful privatization programmes then regressions are run where probabilities probit and expected values tobit are successively included as additional regressors beside the potential influence of other economic policy variables a significant positive effect is highlighted giving evidence of the importance of divestiture the economic effect is found to be stronger when this institutional reform took place in industry or infrastructure