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

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

productivity comparison of european airlines bootstrapping malmquist indices abstractthe study explored the operating efficiency and variability of productivity estimates of european airlines we applied malmquist productivity indices mpi with a bootstrap method to assess the productivities of european airlines in four regions in europe the productivity of small sized airlines lagged further behind that of large sized airlines because of their inferior technological change tc effects derived from inefficient resource allocation to sustain a competitive advantage this study also indicated that the western european airlines were more efficient on average than those in other areas of europe the applications of malmquist productivity techniques in assessing the performance of european airlines are highlighted in their effective resource allocation sustained competitive advantage and optimized operating performance

ex ante incentive efficient trading mechanisms without the private valuation restriction abstract the private valuation assumption found in most trading mechanism design papers rules out markets whose valuation structure generates externalities between traders this paper characterizes the set of ex ante incentive efficient trading mechanisms for a large class of markets that do admit such externalities and for bilateral trade markets establishes the impossibility of a first best solution across a class of trading problems employing uniform priors and linear valuation structures this paper also compares levels of market efficiency for varying numbers of traders

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

dynamic matching two sided incomplete information and participation costs existence and convergence to perfect competition consider a decentralized dynamic market with an infinite horizon and participation costs in which both buyers and sellers have private information concerning their values for the indivisible traded good time is discrete each period has length and each unit of time continuums of new buyers and sellers consider entry traders whose expected utility is negative choose not to enter within a period each buyer is matched anonymously with a seller and each seller is matched with zero one or more buyers every seller runs a first price auction with a reservation price and if trade occurs both the seller and the winning buyer exit the market with their realized utility traders who fail to trade continue in the market to be rematched we characterize the steady state equilibria that are perfect bayesian we show that as converges to zero equilibrium prices at which trades occur converge to the walrasian price and the realized allocations converge to the competitive allocation we also show the existence of equilibria for sufficiently small provided the discount rate is small relative to the participation

a fresh look at the productivity and efficiency changes of uk airlines this article uses the bootstrapped malmquist index methodology to measure and test the extent of efficiency and productivity changes in the uk airline sector the aim of the bootstrap method is to overcome the statistical limitations of the data envelopment analysis dea method generally used to measure the distance functions of the malmquist index in applying the method we use input output data on a sample of major uk airlines for the period 2004 2007 results showed that most airlines have witnessed significant decrease in their productivity efficiency scale and technology measures using a second stage tobit regression this article attributed the sources of productivity and efficiency changes to factors such as stage length load factor and airline size this article also discussed the negative impacts of oil price using illustrations from the uk and other international airlines

asymptotic efficiency in large exchange economies with asymmetric information the authors provide conditions on an exchange economy with asymmetric information that guarantee that when the economy is replicated sufficiently often there will be an allocation that is incentive compatible individually rational and nearly efficient the main theorem covers both the case in which aggregate uncertainty remains when the economy is replicated and the case in which replication eliminates aggregate uncertainty in addition the authors demonstrate how their theorem does or does not apply to standard asymmetric information problems such as the buyer s bid double auction problem akerlof s lemons problem and insurance with asymmetric information copyright 1992 by the econometric society

the reeded edge and the phillips curve money neutrality common knowledge and subjective beliefs abstract i present a simple two person auction model in which a seller and a buyer make bids in terms of money however the value of a unit of money is uncertain i show 1 a monetary revaluation has purely nominal effects if and only if it is common knowledge 2 if seller and buyer have identical beliefs making the value of money common knowledge maximizes total gains from trade 3 if seller and buyer are equally well informed and have identical beliefs then monetary revaluations have no net effect 4 when the seller knows the value of money but the buyer does not the expected utilities of both seller and buyer are proportional to 1 1 2 where is the standard deviation of the value of money expressed as a fraction of the mean and 5 when beliefs are subjective monetary policy can improve total gains from trade as in friedman s explanation of the phillips curve and an optimal level of inflation can be determined journal of economic literature classification numbers c78 e52

bargaining under incomplete information this paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty under the bargaining rule proposed the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price the nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent s reservation price issues of relative bargaining advantage and efficiency are examined for a number of special cases finally we discuss the appropriateness of the nash solution concept

impact of input substitution and output transformation on data envelopment analysis decisions abstractdata envelopment analysis dea can aid managerial decision making because it offers an opportunity to measure organizational performance in a holistic manner aggregating data from partial indicators into a single comprehensive measure however there are some methodological hazards associated with the use of dea that are especially relevant to managerial decisions but which have been largely ignored in the literature herein we identify and show the impact of a ubiquitous methodological hazard in dea modelling the economic assumptions regarding input substitutions and output transformations

bilateral trade with the sealed bid k double auction existence and efficiency for k in the unit interval the k double auction determines the terms of trade when a buyer and a seller negotiate transfer of an item the buyer submits a bid b and the seller submits an offer s trade occurs if b exceeds s at price kb 1 k s we model trade as a bayesian game in which each trader privately knows his reservation value but only has beliefs about the other trader s value existence of a multiplicity of equilibria is proven for a class of trader s beliefs for generic beliefs however these equilibria are shown to be ex ante inefficient

equilibria of the sealed bid mechanism for bargaining with incomplete information we study the nash equilibria of the sealed bid bargaining mechanism with incomplete information a nonzero sum game for the case of uniform priors we describe two uncountably numerous families of equilibria the first has differentiable strategies in the second the strategies are step functions the efficiencies of these equilibria range from second best to zero for independent nonuniform priors we show that a similar situation obtains these results seem discouraging with regard to using the sealed bid mechanism in practice the mechanism might be salvaged however if bargainers turn out to confine themselves to linear strategy equilibria

the rate at which a simple market converges to efficiency as the number of traders increases an asymptotic result for optimal trading mechanisms private information in an independent private values market provides incentives to traders to manipulate equilibrium prices strategically this strategic behavior precludes ex post efficient market performance increasing the number of traders improves the efficiency of some trading mechanisms by enabling them to better utilize the private information traders bids and offers reveal this paper shows that the expected inefficiency of optimally designed mechanisms relative to ex post efficient allocations decreases almost quadratically as the number of traders increases

the rate of convergence to efficiency in the buyer s bid double auction as the market becomes large a trader who privately knows his preferences may misrepresent them in order to influence the market price this strategic behaviour may prevent realization of all gains from trade in this paper trade in a simple market with an explicit rule for price formation is modelled as a bayesian game we show that the difference between a trader s bid and his reservation value is maximally 0 1 m where m is the number of traders on each side of the market competitive pressure as m increases thus quickly overcomes the inefficiency private information causes and f ces the market towards an efficient allocation

the common scaling social cost of living index if preferences or budgets are heterogeneous across people as they clearly are then individual cost of living indexes are also heterogeneous thus any social cost of living index faces an aggregation problem in this article we provide a solution to this problem that we call a common scaling social cost of living index cs scoli in addition we describe nonparametric methods for estimating such social cost of living indexes as an application we consider changes in the social cost of living in the u s between 1988 and 2000

efficiency of large double auctions we consider large double auctions with private values values need be neither symmetric nor independent multiple units may be owned or desired participation may be stochastic we introduce a very mild notion of a little independence we prove that all nontrivial equilibria of auctions that satisfy this notion are asymptotically efficient for any alpha 0 inefficiency disappears at rate 1 n 2 alpha