optimal incentive schemes with many agents the grossman hart principal agent model of moral hazard is extended to the multiple agent case to explore the use of relative performance in optimal incentive contracting under the assumption that the principal chooses incentive schemes to implement agent actions as nash equilibria necessary and sufficient conditions are derived for the optimality of independent contracts of rank order tournaments and for attainability of the first best in this context the relation of the principal s welfare to the correlation between the underlying randomness in outputs of different agents is also investigated finally some problems with the nash equilibrium implementation assumption are discussed in this paper we extend the grossman hart analysis of the principal agent problem to a multiple agent setting in this version of the problem a risk neutral principal is assumed to observe the output or a performance index for each risk averse agent the output of any agent depends on a privately observable action chosen by the agent and an exogenous random variable the realization of which is not observed either by the principal or by the agent before choosing its action we especially focus attention on the role of relative performance evaluation in optimal incentive contracts and the way this depends on properties of the underlying production technology and the joint distribution of the random variables affecting the outputs of different agents in section 2 of the paper we consider the principal s problem of finding an optimal incentive scheme and an action tuple for agents subject to the constraint that the latter be implemented as a nash equilibrium between agents by the chosen incentive scheme where agents must attain at least their reservation utilities a characterization of optimal incentive schemes is derived analogous to the grossman hart characterization for the single agent problem this characterization is then utilized to find sufficient and generically necessary conditions for a optimal contracts for any agent to be independent of the performance of other agents and b optimality of rank order tournaments where payments depend solely on ordinal comparisons of output across agents we then describe a necessary and sufficient condition for the principal to extract maximum advantage from relative performance clauses i e achieve the first best level of expected utility in the multiagent situation an implication of this result is that under fairly weak conditions perfect correlation in the underlying production uncertainties for different agents enables the principal to attain the first best if and only if sufficiently heavy penalties can be inflicted on agents we then enquire what happens in intermediate cases of non perfect correlation it turns out that while in general the principal s welfare is a continuous function of the correlation coefficient it is not always nondecreasing in the latter because the correlation coefficient is not a general measure of association between two random variables but rather a measure of linear association between them

a condition guaranteeing that the nash allocation is walrasian abstract consider the set of net trades attainable by an economic agent when he varies his strategy and all other agents stick to their strategies if all attainable sets for all agents are star shaped with respect to the origin then every pareto efficient nash allocation is walrasian this result bears upon the question whether it is possible to implement redistributive goals without impairing efficiency

smart grid investments regulation and organization worldwide but in particular in north america and europe the grid infrastructure managers are facing demands for reinvestments in new assets with higher on grid and off grid functionality in order to promote energy efficiency and low carbon conversion of the energy sector to meet societal policy objectives in terms of carbon dioxide emissions both the composition of the generators in favor of distributed energy resources der and the load promoting integration with downstream energy useage will change in this paper we chararcterize some of the effects of new asset investments policy on the network tasks assets and costs and contrast this with the assumptions implicit or explicit in current economic network regulation the resulting challenge is identified as the change in the direction of higher asymmetry of information and higher capital intensity combined with ambiguities in terms of task separation to provide guidance we present a model of investment provision under regulation between a distribution system operator dso and a potential investor generation the results from the model confirm the hypothesis that network regulation should find a focal point should integrate externalities in the performance assessment and should avoid wide delegation of contracting billing for smart grid investments

stopping agents from cheating abstract when a principal hires two or more agents to work in a correlated environment each agent s reward will depend on the other s performance unfortunately with just the usual optimal incentive constrained contracts being offered the agents strictly prefer to play equilibrium strategies other than those desired by the principal they cheat however the principal can use a more subtle contractual mechanism to stop them from cheating at no extra cost this mechanism uses one agent to police the other and exploits certain properties of the optimal contracts

an experimental investigation of the hahn noll revenue neutral auction for emissions licenses abstract this paper reports on three series of laboratory experiments designed to test the performance of the hahn noll revenue neutral auction rna an alternative institution a no rebate uniform price auction upa is also examined as a benchmark in these experiments the rna markets were little different from upa markets in terms of either prices or market efficiencies the two institutions did differ in terms of the distribution of the gains from exchange and of the propensity of bidders to engage in a certain type of overbidding

resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

liberalisation and r d in network industries the case of the electricity industry abstract electricity sector liberalisation has coincided with a significant decline in r d spending this paper reviews the industrial organisation literature on r d and innovation to explore the likely causes of the decline in r d spending in the electricity sector meanwhile r d productivity and innovative outputs in utilities and equipment suppliers appear to have improved however a lasting decline in r d expenditure can have a negative long term effect on technological progress and innovation in the sector we conclude that the decline in r d could have been predicted from the literature we also discuss the need to reorient the post liberalisation technology policy

values in the smart grid the co evolving political economy of smart distribution investing in smart grid infrastructure is a key enabler for the transition to low carbon energy systems recent work has characterised the costs and benefits of individual smart investments the political economy of the uk electricity system however has co evolved such that there is a mismatch between where benefits accrue and where costs are incurred leading to a problem of value capture and redeployment further some benefits of smart grids are less easy to price directly and can be classified as public goods such as energy security and decarbonisation this paper builds on systemic treatments of energy system transitions to characterise the co evolution of value capture and structural incentives in the electricity distribution system drawing on semi structured interviews and focus groups undertaken with smart grid stakeholders in the uk this leads to an identification of municipal scale values that may be important for business models for the delivery of smart infrastructure municipalities may thus pursue specific economic opportunities through smart grid investment this supports recent practical interest in an expanded role for municipalities as partners and investors in smart grid infrastructures 2014 the authors published by elsevier ltd this is an open access article under the cc by license

equilibria and efficiency in the fixprice setting abstract the aim of this paper is to study efficiency under fixed price constraints and to define an equilibrium concept that extends to some degree the standard welfare analysis of general equilibrium theory this paper contains a description of the fixprice setting a study of the set of relatively pareto efficient allocations a definition of coupon equilibria the proof of their existence and an investigation into the structure of the set of coupon equilibria and of the set of economies admitting efficient coupon equilibria

moral hazard with several agents abstract we consider a situation in which a principal hires two agents whose cooperation is technically profitable and study three models that incorporate different assumptions about the agents cooperative behavior we find a close relationship between the agents commitment capacity and the characteristics of the optimal contract a greater capacity to cooperate leads to more efficient outcomes we also show that unless agents form a team the efficient level of mutual help is not achieved in equilibrium

cooperation in ongoing organizations this paper argues that overlapping games can provide a natural theory of long lived organizations it shows that participation in organizations of infinite duration changes the incentives of agents with finite lives and will induce more cooperation than a static model would predict after developing the general theory we apply it to the description of career paths in organizations and show that it can be optimal to give the youngest workers the most arduous tasks

competitive equilibrium as a bargaining solution an axiomatic approach abstract the paper introduces an axiomatic characterization of a solution to bargaining problems bargaining problems are specified by a the preference relations of the bargaining parties b resources that are the subject of bargaining and c a pre specified disagreement bundle for each party that would result if bargaining fails the approach is ordinal in that parties preferences are over bundles of goods and do not imply any risk attitudes the resulting solution is accordingly independent of the specific utilities chosen to represent parties preferences we propose axioms that characterize a solution matching each bargaining problem with an exchange economy and assigning the set of equilibrium allocations corresponding to one equilibrium price vector of that economy the axioms describe a solution that results from an impartial arbitration process expressing the view that arbitration is a natural method to settle disputes in which agents have conflicting interests but can all gain from compromise

modelling the non market environmental costs and benefits of biodiversity projects using contingent valuation data cv studies rarely ask willingness to accept wta questions yet there are a range of environmentalprojects where there are likely to be potential losersas well as gainers this paper presents evidence fromsix biodiversity projects that the inclusion ofcontingent compensation payments from thoserespondents who preferred the status quo cansubstantially reduce net project benefits even whenthe proportion of losers is relatively small astatistical model for estimating the mean welfaremeasure from dichotomous choice data which allows forboth positive wtp zero wtp and wta is described asmany environmental projects are likely to create bothgainers and losers we recommend that cv analysts giveserious consideration to the collection and analysisof wta data otherwise they risk generating biasedestimates of project benefits

walrasian and constrained walrasian correspondences and nash implementation this paper investigates the following classical question under what conditions are all pareto efficient and individually rational nash allocations of some mechanism walrasian or constrained walrasian allocations the work is largely motivated by hurwicz journal of economic theory 1979 21 140 165

toward an economic model of the japanese firm i owe a great deal to professor moses abramovitz who suggested that i write this article i appreciate his constant encouragement and guidance which aided me throughout its preparation i am also indebted to three anonymous referees of the journal and to professors ryutaro komiya and michael riordan for their critical comments and helpful suggestions needless to say i am solely responsible for the views expressed in this paper

decentralization hierarchies and incentives a mechanism design perspective separation of ownership from management multidivisional firm organizations delegation of production decisions to worker teams delegation of pricing and advertising decisions to retail franchisers reliance on intermediaries in trade or finance and distribution of regulatory authority across different agencies represent examples of organizations that delegate and distribute decision making authority instead of centralizing it this paper reviews literature on costs and benefits of delegated decision making in hierarchical organizations or contracting networks with regard to problems of incentives and coordination it starts by describing incentive and coordination costs of delegation in simple canonical examples of hierarchies where both information and incentives of different decisionmakers differ one class of models pertain to contexts where the classical revelation principle applies i e where costs of contractual complexity information processing or communication are absent agents do not collude and the mechanism designer can commit to the mechanism delegation may conceivably entail a loss of control and coordination arising from the divergence of information and incentives sufficient and necessary conditions for this loss to be mitigated entirely include risk neutrality top down contracting and monitoring of transfers or production assignments between subordinates the next class of models introduces communication costs that restrict the performance of centralized arrangements relative to delegation owing to a resulting loss of flexibility which has to be traded off against possible control losses of delegation finally consequences of collusion among agents is discussed which typically enlarge the range of circumstances under which delegation can attain optimal second best outcomes the paper concludes with a discussion of the relevance of this theoretical literature to recently emerging empirical studies of industrial organizations where delegated decision making plays an important role adoption of innovative human resource management practices new information technologies and retail franchising

modelling winners and losers in contingent valuation of public goods appropriate welfare measures and econometric analysis contingent valuation is now the most widely used method for valuing non marketed goods in cost benefit analysis yet despite the fact that many externalities manifest themselves as costs to some and benefits to others most studies restrict willingness to pay to being non negative this can result in significant errors in policymaking this paper examines the importance of this explores appropriate welfare measures for assessing losses and gains demonstrates how these can be elicited explicitly highlights the sensitivity of the results of such studies to the econometric specification employed and suggests ways of dealing with it finally the implica tions for policy are examined assessment including passive use values this technique has become the most widely used method for placing values on non marketed goods this paper examines some outstanding issues in relation to the validity of the method as a basis for policy making in particular most studies ignore the fact that many externalities manifest themselves as costs to some and benefits to others in addition the results of contingent valuation studies are often quite sensitive to the econometric specification assumed the significance of these issues is examined techniques for their resolution are outlined and the implications for public policy are highlighted the importance for economists of the debate on the validity of contingent valuation was emphasised in a series of papers from a symposium on the contingent valuation method cvm published in the journal of economic perspectives in 1994 in his paper portney 1994 predicted that whether the economics profession liked it or not the cvm would inevitably play a role in public policy formulation and therefore it was important that economists be aware of the controversies and have their say on the topic portney s prediction was correct and contingent valuation has become a routine approach to valuing environmental goods with hundreds of studies being produced each year 1 the cvm places a value on a change in the provision of a public good by asking households in a survey how much they are willing to pay for the change or the minimum compensation they would require if the change were not to happen the role that contingent valuation studies play in public policy is

incentive plans for productive efficiency innovation and learning in many industries where production or sales is delegated to a number of subunits the central management faces the classical problem how to induce continuous efficiency improvements organizational learning and transfer of knowledge with a minimum of control exercised this paper draws on recent results regarding regulatory frameworks to construct simple yet powerful incentive schemes for decentralized production under asymmetric information the theoretical foundation is based on principal agent theory cf laffont and tirole econometrica 56 1986 614 641 and extensions to production theory by bogetoft management science 40 1994 959 968 the proposed incentive system is operational and makes use of available information to provide positive incentives for participation in the dynamic development of the entire organization

voluntariness and efficiency in the provision of public goods abstract this paper presents a characterization of lindahl allocations which makes no reference to personalized prices lindahl equilibria are characterized here by two conditions pareto efficiency and a voluntariness condition voluntariness requires that no consumer may benefit from a reduction in his contribution if this means that the vector of public goods must be reduced in the same proportion the intersection of the large set of voluntary allocations and that of efficient ones turns out to be under differentiability the set of lindahl allocations

bundling decisions in procurement auctions with sequential tasks abstract this paper investigates the principal s bundling decision during a procurement auction for a project consisting of two sequential tasks in which task externality exists and information arrives sequentially we show that although increasing the number of bidders in the market for the second task always tilts the principal s choice toward unbundling increasing the number of consortiums that can perform both tasks tilts the principal s preference toward bundling if the externality is negative

unique implementation of incentive contracts with many agents in this paper we consider the problem of implementation when a principal hires many agents and is not able to monitor their actions we distinguish two cases i when actions are mutually observable among agents ii when actions are not observable at all in i there is a mechanism in which the first best arises as a unique perfect equilibrium in ii we show by two examples that typically there are multiple equilibria if the principal merely offers a set of optimal sharing rules however we prove that the principal can use these optimal sharing rules as a starting point and construct a multi stage mechanism that has a unique second best perfect bayesian equilibrium

explaining the role of incumbent utilities in sustainable energy transitions a case study of the smart grid development in china abstract smart grids sgs have been widely recognized as an enabling technology for delivering sustainable energy transitions such transitions have given rise to more complex government utility consumer relationships however these stakeholder relationships remain largely under researched this paper critically examines and explains the role of incumbent utilities in sustainable energy transitions using sg developments in china as a case study we have three major findings first china has developed an incumbent led model for deploying sgs second two incumbents the major state owned grid companies act as enablers of sg deployment they are strategic first movers and infrastructure builders of sgs they have also developed five types of networks as they increasingly reach out to other state actors businesses and electricity consumers thirdly these two grid companies also act as a fundamental block to structural changes in socio technical regimes disincentives to these large existing grid companies coupled with excessive reliance on them to provide public goods have resulted in major weaknesses in china s incumbent led model our findings have clear policy implications innovation in regulating incumbents is needed in order to provide sufficient regulatory incentives for advancing sg developments in china

to build or not to build normative and positive theories of public private partnerships abstract this paper analyzes whether the two tasks of building infrastructures which are socially useful in providing public services and managing these assets should be bundled or not when performance contracts can be written both tasks should be performed altogether by the same firm if a better design of the infrastructure helps also to save on operating costs otherwise tasks should be kept apart and undertaken by different units in incomplete contracting environments we isolate conditions under which either the traditional form of public provision of services or the more fashionable public private partnership emerges optimally the latter dominates when there is a positive externality and the private benefits from owning assets are small enough finally we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision makers much of the gains from bundling may be lost in this case

a local independence condition for characterization of walrasian allocations rule abstract the purpose of this paper is to characterize walrasian resource allocations in terms of social choice axioms we prove that the walras rule is the only social choice rule satisfying individual rationality pareto principle non discrimination and local independence in the last part of this paper we discuss the relation between our result and nash implementation we introduce a new condition called nash implementation with strong star shapedness around nash equilibria and show that it is equivalent to the local independence

centralized and decentralized contracts in a moral hazard environment we study the optimal allocation of the contracting capacity in a moral hazard environment centralizing is superior when the principal is able to establish all the contracts with the agents simultaneously and she is able to monitor side contracting between the agents otherwise decentralizing can be a superior strategy we apply our results to a firm s decision on which outlets to franchise they suggest that franchising is more likely to occur the further the store is from headquarters the more isolated it is and in those activities where the risk is low this conclusion is consistent with empirical studies

universal health insurance in the clinton plan coverage as a tax financed public good the financing arrangements embodied in the clinton health reform plan involve some important differences in the way in which public goods are usually financed the subsidies to small low wage firms mandated to provide benefits distort markets in both labor and products and offer incentives for the creation of small firms in addition the financing scheme implicitly envisions a head tax on families at modest income levels but offers a possible rationale for it nevertheless the main reason for many of the financing features appears to be an attempt to hold down the apparent budgetary cost of universal coverage

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

myopic versus intertemporal manipulation in decentralized planning procedures manipulation is studied in abstract planning procedures in exchange economies with private goods and a generalization of the results of champsaur laroque 1980 is obtained when the nash equilibrium corresponding to myopic manipulation is unique the outcome of consistent intertemporal manipulation on a time interval 0 t is characterized it is shown that when t goes to infinity the exists a nash equilibrium only when the initial allocation is pareto optimal

undominated prices in the three good model abstract any movement away from walrasian prices will make somebody worse off we ask which other prices share this property the paper characterizes the set of such prices called undominated prices for the three good economy output labor and a nonproduced good that is now well known from the work of barro grossman benassy and malinvaud we consider two groups of consumers workers and shareholders we show that under some conditions there exist prices and wages that generate unemployment and are undominated this requires that a workers be poorly endowed with the nonproduced good b there be little substitution in consumption between the produced and the nonproduced good and c the market for the produced good be balanced i e prices equal marginal costs

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

alarmist decisions with divergent risk information receipt of multiple sources of risk information ideally should foster sounder decisions under uncertainty this paper s original survey results for environmental risks suggest that the learning process is reasonable in many respects bur it does not accord with a rational bayesian learning model divergent risk assessments from different sources produce extreme violations of rationality as there is inordinate weight on the high risk assessment this alarmist reaction holds for both government and industry information sources this phenomenon may account for the commonly observed phenomenon of public overreaction to highly publicised risks

research joint ventures vs cross licensing agreements an agency approach abstract in this paper two broad categories of organizing a cooperative r d project are compared a research joint venture rjv and a cross licensing agreement cla in a non deterministic r d setting including asymmetric information we show that an rjv is more efficient in providing incentives it allows to capture existing synergies and facilitates the dissemination of the partners know how which is socially desirable however contrary to a cla an rjv faces the risk of opportunistic behavior by the partners regarding the provision of their know how to the venture which could lead a cla to perform more efficiently and in some cases this organization turns out to be superior

beyond nash bargaining theory the nash set abstract we extend nash s bargaining theory to non convex and coalitional problems this paper investigates the implications of nash like axioms for bilateral problems and the properties of consistency and converse consistency over multilateral settings the result is a characterization of the nash set of ntu games defined as the solution concept where each pair of players is splitting the gains from trade at a point where the nash product of their utilities subject to efficiency is critical the intersection of the nash set and the core is also characterized with the same axioms for the class of games where the core is non empty journal of economic literatureclassification numbers c71 c78

a theory of yardstick competition in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs this article proposes a mechanism in which the price the regulatedfirm receives depends on the costs of identical firms in equilibrium each firm chooses a socially efficient level of cost reduction the mechanism generalizes to cover heterogeneous firms with observable differences medicare s prospective reimbursement of hospitals by using diagnostically related groups is a scheme very similar to the one outlined here

nash equilibria of over the counter bargaining for insurance risk redistributions the role of a regulator this paper proposes a way to optimally regulate bargaining for risk redistributions we discuss the strategic interaction between two firms who trade risk over the counter in a one period model novel to the literature we focus on an incomplete set of possible risk redistributions this keeps the set of feasible contracts simple we consider catastrophe and longevity risk as two key examples the reason is that the trading of these risks typically occurs over the counter and that there are no given pricing functions if the set of feasible strategies is unconstrained we get that all nash equilibria are such that no firm benefits from trading a way to avoid this is to restrict the strategy space a priori in this way a nash equilibrium that is interesting for both firms may exist the intervention of a regulator is possible by restricting the set of feasible strategies for instance a firm has to keep a deductible on its prior risk we characterize optimal regulation by means of nash bargaining solutions

negative values in vickrey auctions some people assign negative values for new products sold on laboratory auction blocks i e irradiated meat we explore bidding behavior in two vickrey auctions when people have positive and negative induced values for the good aggregate bidding in the second price auction is precise but biased highest value positive bidders tend to overstate benefits whereas lowest negative bidders understate losses in contrast bidding behavior in the random nth price auction is demand revealing irrespective of induced value but it is imprecise examining on and off margin bidding behavior we cannot conclude that any segments of demand are significantly different than the demand revealing regression line

voluntary and efficient allocations are walrasian let f be a private ownership economy call an allocation w voluntary for a price vector p if no agent can benefit by trading less at p we prove that under differentiability and interiority if w is voluntary and pareto efficient it is a competitive equilibrium for w perhaps surprisingly production economies where some agents receive profit income require a stronger voluntariness condition than the one sufficient for exchange economies the stronger condition singles out a commodity as a medium of exchange

instability in the implementation of walrasian allocations abstract the existence of game forms which implement walrasian allocations as cournot nash equilibrium outcomes is well known however if the equilibria are also required to be locally dynamically stable at least for environments with unique walrasian allocations this paper shows that the requisite game forms do not exist our definition of a game form entails certain regularity conditions and requires the cournot equilibrium to be unique when the walrasian equilibrium is unique the main result is that for such a game form there does not exist a continuous time strategy adjustment process which ensures the local stability of cournot equilibria throughout a certain class of environments having unique walrasian equilibria each trader adjusts his strategy in response to his own characteristics and the observed current strategies of others but the direction and magnitude of adjustments are not constrained by any behavioral assumptions the definitions permit the inclusion of an artificial player such as an auctioneer so the well known tatonnement instability emerges as a special case

optimal incentive contracts with multiple agents abstract a setting in which a single principal contracts with two agents who possess perfect private information about their own productivity is considered with correlated productivities each agent s private information also provides a signal about the other agent s productivity in contrast to the setting in which there is only one agent it is shown that such private information may be of no value to the agents it is only if the agents are risk averse that their private information may allow them to command rents moreover when the agents are constrained only to reveal their private information truthfully as a nash equilibrium the pareto optimal incentive scheme may induce the agents to adopt strategies other than truth telling this leads to the consideration of truth telling equilibria that are not pareto dominated in the subgame played by the agents among all such equilibria the one preferred by the principal restricts one agent to tell the truth as a dominant strategy and the other as a nash response to truth

bidding behavior in experimental auctions with positive and negative values abstract we test for consistency between bids from endowment auctions that allow positive or negative bids for an exchange between two items and bids from prior full bidding auctions for the same items results suggest that positive wtp bids in the endowment auction are demand revealing but subjects overbid in absolute value their negative wta values wta bids were lower in a random n th price auction than in a 5th price auction

moral hazard and cooperation abstract we consider a situation in which a principal hires two agents whose cooperation is profitable from a technical point of view the characteristics of the optimal contract are strongly dependent on the agents commitment capacity that allows them to reach more efficient outcomes

addressing negative willingness to pay in dichotomous choice contingent valuation this paper has four purposes first we outline the controversy surroundingthe issue of negative willingness to pay wtp in contingent valuation cv studies second we use monte carlo simulation to examine theperformance of alternative distributionalassumptions in estimating wtp in the presenceof varying proportions of the populationholding negative wtp values we focus ondichotomous choice cv dc cv where negativewtp values may be especially difficult todetect third we extend the simulation toinvestigate the performance of the mixturemodels that have recently been proposed forhandling identifying non positive wtp values fourth we extend the simulation to investigatethe performance of the nonparametric lowerbound turnbull approach results indicate thatthe relative performance of the dc cv modelingalternatives evaluated here which assumepositive wtp varies across the simulationsetting e g proportion of negative wtp butnone can be said to reasonably solve theproblem ex post this underscores theimportance of ex ante efforts to identify ifnegative wtp is likely to be prominent in agiven valuation setting in such cases appropriately handling negative wtp must beaddressed through ex ante survey design andmodeling choices that allow negative wtp

the regulation of privatized monopolies in the united kingdom this article examines the experience in the united kingdom with the regulation of privatized monopolies its conclusions are 1 that there are significant differences between rpi x or price cap and u s rate of return regulation which provides greater scope for bargaining in the former system 2 that u k regulators have taken seriously their duty to promote competition but that the existing economic literature is of limited help in this task 3 that price regulation is likely to be more effective where technology is changing slowly and or where technology is changing rapidly and 4 that the case for rpi x price cap rather than rate of return regulation is strongest in telecommunications gas supply and electricity supply and least strong in gas and electricity transmission grids

using laboratory experimental auctions in marketing research a case study of new packaging for fresh beef this paper illustrates the use of laboratory experimental auctions in a pretest market research program for new products we review the experimental auctions literature discuss the range of auction mechanisms available and present the advantages and disadvantages of using a particular mechanism for a laboratory pretest market we then present a step by step example of how a theoretically incentive compatible auction mechanism fifth price sealed bid was used in a laboratory pretest market for vacuum packaged beef based on the illustration we discuss the potential for using laboratory experimental auctions in pretest market research we present the limitations that may be encountered in such applications and outline research aimed at improving the behavioral properties of the technique

fixprice analysis in productive economies abstract the paper compares the definitions of fixprice equilibrium for productive convex economies due to dreze benassy and malinvaud younes it turns out that dreze s resp malinvaud younes notion is the strictest resp least strict one the three notions are however equivalent under smoothness and absence of intermediate goods they are in particular equivalent for the familiar fixprice model with three goods money labor and output studied among others by barro grossman benassy and malinvaud

preference elicitation under oath eliciting sincere preferences for non market goods remain a challenge due to the discrepency between hypothetical and real behavior and false zeros the gap arises because people either overstate hypothetical values or understate real commitments or a combination of both herein we examine whether the traditional real world institution of the solemn oath can improve preference elicitation applying the social psychology theory on the oath as a truth telling commitment device we ask our bidders to swear on their honour to give honest answers prior to participating in an incentive compatible second price auction the oath is an ancillary mechanism to commit bidders to bid sincerely in a second price auction results from our induced valuation testbed treatments suggest that the oath only auctions outperform all our other auctions real and hypothetical in our homegrown valuation treatments eliciting preferences for dolphin protection the oath only design induced people to treat as binding both their experimental budget constraint i e lower values on the high end of the value distribution and participation constraint i e positive values in place of the zero bids used to opt out of auction based on companion treatments we show the oath works through an increase in the willingness to tell the truth due to a strengthening of the intrinsic motivation to do so

a note on allocations attainable through nash equilibria abstract this note reexamines the issue of attaining efficient resource allocations as noncooperative equilibria of a strategic game contrary to the spirit of earlier work on this subject it is shown that there is an entire class of choice rules aside from the walrasian one which are implementable in nash equilibrium stategies

pareto optimal nash equilibria are competitive in a repeated economy abstract consider a finite exchange economy first as a static 1 period economy and then as a repeated economy over t periods when the utility of each agent is the mean utility over t a family of strategic games is defined via a set of six general properties the most distinct of which is the ability of agents to move commodities forward in time now consider pareto optimal allocations in the t period economy which are also nash equilibria in this family of strategic games we prove that as t becomes large this set converges to the set of competitive utility allocations in the one period economy the key idea is that a repetition of the economy when agents can move commodities forward in the time acts as a convexification of the set of individually feasible outcomes for player i holding all other strategies fixed

national vs european incentive policies bargaining information and coordination abstract we build a hierarchical model of contractual relationships under moral hazard to address issues about subsidiarity i e optimal de centralization of incentive industrial policies at the national level or at the european community level incentive policy is viewed as an incentive contract for producers who take unobservable decisions that have spillover effects across member states a community agency designs contracts for producers and contractual compensatory transfers between states on the basis of its observations then national regulators and their home producers negotiate according to a generalized nash bargaining a national contract that complements the community contracts given that national regulators will have access to more observations on the producers activities in this setting we show that full centralization is never optimal we give sufficient conditions for complete decentralization to be optimal and when both policies are present we characterize how they interact to provide incentives to producers

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis

optimal incentives for teams much of the existing theory of incentives describes a static relationship that lasts for just one transaction this static assumption is not only unrealistic but the resulting predictions appear to be at odds with many work organizations the current paper introduces possible long term interaction among agents and studies how the design of explicit incentives and work organizations can exploit and interact with the implicit incentives generated by the repeated interaction of the agents the optimal incentive scheme is shown to display observed features of the increasingly popular teams such as the use of low powered group incentives