truthfulness with value maximizing bidders on the limits of approximation in combinatorial markets abstract in some markets bidders want to maximize value subject to a budget constraint rather than payoff this is different to the quasilinear utility functions typically assumed in auction theory and leads to different strategies and outcomes we refer to bidders who maximize value as value bidders while simple single object auction formats are truthful standard multi object auction formats allow for manipulation it is straightforward to show that there cannot be a truthful and revenue maximizing deterministic auction mechanism with value bidders and general valuations approximation has been used as remedy to achieve truthfulness on other mechanism design problems and we study which approximation ratios we can get from truthful mechanisms we show that the approximation ratio that can be achieved with a deterministic and truthful approximation mechanism with n bidders cannot be higher than 1 n for general valuations for randomized approximation mechanisms there is a framework with a ratio that is tight

the new role for the world bank the world bank was founded to address what we would today call imperfections in international capital markets its founders thought that countries would borrow from the bank temporarily until they grew enough to borrow commercially nac 1946 p 312 black 1952 some critiques and analyses of the bank are based on the assumption that this continues to be its role for example some argue that the growth of private capital flows to the developing world has rendered the bank irrelevant however we will argue that modern analyses should proceed from the premise that the world bank s central goal is and should be to reduce extreme poverty and that addressing failures in global capital markets is now of subsidiary importance the bank s stated goal is reducing poverty the overwhelming majority of bank subsidies from its shareholder countries go to the international development association ida its arm for making grants and highly concessional loans to the lowest income countries the bank s greatest impact comes from its role in the dramatic policy changes many developing countries have undertaken in multiple sectors that most economists would consider likely to reduce poverty either by increasing growth or promoting equity why might donor countries choose to work through an international organization to advance the goal of reducing poverty effective aid often involves

estimating elasticities with pims data methodological issues and substantive implications though the pims data have been used extensively to relate profitability both to specific firm marketing actions and to market conditions no attempt has been made to estimate directly the magnitudes of marketing mix elasticities the authors propose and evaluate a simple cross sectional time series regression method that recovers unbiased estimates of the elasticities despite the presence of firm specific disguise factors in the database though measurement error creates instability for certain variables the recovered elasticities compare favorably with those found in previous research and have predictable relationships with market characteristics

eisenberg gale markets algorithms and game theoretic properties abstract we define a new class of markets the eisenberg gale markets this class contains fisher s linear market markets from the resource allocation framework of kelly kelly f p 1997 charging and rate control for elastic traffic europ transactions telecommunications 8 33 37 as well as numerous interesting new markets we obtain combinatorial strongly polynomial algorithms for several markets in this class our algorithms have a simple description as ascending price auctions our algorithms lead to insights into game theoretic properties of these markets such as efficiency fairness and competition monotonicity they also help determine if these markets always have rational equilibria a classification of eisenberg gale markets w r t these properties reveals a surprisingly rich set of possibilities

determining the optimal return on investment for an advertising campaign abstract in this this paper we adopt the point of view that advertising is an investment and propose a simple formula for calculating the level of media spending which maximizes the return on investment the information which must be supplied for the calculation is commonly available and we express the optimal expenditure level in terms which are meaningful to media planners we show that when maximizing return on investment not all of the allocated media budget should be spent

optimal advertising with stochastic demand a stochastic sequential model is developed to determine optimal advertising expenditures as a function of product maturity and past advertising random demand for the product depends upon an aggregate measure of current and past advertising called goodwill and the position of the product in its life cycle measured by sales to date conditions on the parameters of the model are established that insure that it is optimal to advertise less as the product matures additional characteristics of the optimal advertising policy are also established

bundling equilibrium in combinatorial auctions this paper analyzes ex post equilibria in the vcg combinatorial auctions if is a family of bundles of goods the organizer may restrict the bundles on which the participants submit bids and the bundles allocated to them to be in t he vcg combinatorial auctions obtained in this way are known to be truth telling mechanisms in contrast this paper deals with non restricted vcg auctions in which the buyers choose strategies that involve bidding only on bundles in and these strategies form an equilibrium we fully characterize those that induce an equilibrium in every vcg auction and we refer to the associated equilibrium as a bundling equilibrium the main motivation for studying all these equilibria and not just the domination equilibrium is that they afford a reduction of the communication complexity we analyze the tradeoff between communication complexity and economic efficiency of bundling equilibrium

an analysis of optimal advertising under uncertainty we examine the firm s optimal advertising behavior under conditions of uncertainty for the static one period model we show that the firm s attitude toward risk may be responsible for the potential divergence between advertising decisions under uncertainty and those under deterministic conditions for the dynamic multi period model the ultimate impact of uncertainty on advertising is further complicated when the sales response function contains an unknown parameter and the firm wishes to gain more information about it through experimentation we demonstrate that whether it is optimal for the firm to experiment at an advertising rate higher equal to or lower than the myopic one period level would depend on the specification of the response function finally we offer some empirical evidence for our assumption of a quadratic sales response function using time series data of twelve major brands of cigarettes

truthful approximation mechanisms for restricted combinatorial auctions when attempting to design a truthful mechanism for a computationally hard problem such as combinatorial auctions one is faced with the problem that most efficiently computable heuristics can not be embedded in any truthful mechanism e g vcg like payment rules will not ensure truthfulness we develop a set of techniques that allow constructing efficiently computable truthful mechanisms for combinatorial auctions in the special case where each bidder desires a specific known subset of items and only the valuation is unknown by the mechanism the single parameter case for this case we extend the work of lehmann o callaghan and shoham who presented greedy heuristics we show how to use if then else constructs perform a partial search and use the lp relaxation we apply these techniques for several canonical types of combinatorial auctions obtaining truthful mechanisms with provable approximation ratios

convergence of incentive driven dynamics in fisher markets abstract we study out of equilibrium price dynamics in fisher markets we develop a general framework in which sellers have a a set of atomic price update rules apu which are simple responses to a price vector b a belief formation procedure that simulates actions of other sellers themselves using the apu to some finite horizon in the future sellers use an apu to respond to a price vector they generate with the belief formation procedure the framework allows sellers to have inconsistent and time varying beliefs about each other under mild and natural assumptions on the apu we show that despite the inconsistent and time varying nature of beliefs the market converges to a unique equilibrium at a linear rate distance to equilibrium decreases exponentially in time if the apu are driven by weak gross substitutes demands the equilibrium point is the same as predicted by those demands

the flypaper effect what happens to a state s spending when it receives an unconditional grant from the federal government the standard theoretical analysis predicts that the increase in spending will be the same as that generated by an equivalent increase in local incomes or roughly 5 10 percent for most states in contrast numerous empirical analyses have found that spending increases by much more with some estimates near 100 percent this result is known as the flypaper effect since the money appears to stick where it hits the authors review this evidence as well as other studies that find similar behavior in firms

environmental and gender impacts of land tenure regularization in africa pilot evidence from rwanda although increased global demand for land has led to renewed interest in african land tenure few models to address these issues quickly and at the required scale have been identified or evaluated the case of rwanda s nation wide and relatively low cost land tenure regularization program is thus of great interest this paper evaluates the short term impact some 2 5 years after completion of the pilots undertaken to fine tune the approach using a geographic discontinuity design with spatial fixed effects three key findings emerge from the analysis first the program improved land access for legally married women about 76 percent of married couples and prompted better recordation of inheritance rights without gender bias second the analysis finds a very large impact on investment and maintenance of soil conservation measures this effect was particularly pronounced for female headed households suggesting that this group had suffered from high levels of tenure insecurity which the program managed to reduce third land market activity declined allowing rejection of the hypothesis that the program caused a wave of distress sales or widespread landlessness by vulnerable people implications for program design and policy are discussed

grants versus loans for development banks in recent years economists have increasingly debated whether multilateral development banks such as the world bank should switch from making subsidized loans to giving outright grants it is no small question the combined loans of the world bank group and brethren regional entities such as the asian and inter american development banks approach 300 billion their funds constitute a main channel through which rich country governments provide assistance to developing country governments in bulow and rogoff 1990 we first developed the case for a shift to outright grants we argued that under the status quo a vastly disproportionate share of aid goes to middle income countries via disguised interest subsidies rather than to the poorest countries we also argued that a shift to grants would protect donor banks from sometimes having to play a bad cop role when trying to collect net repayments rather than fully rolling over loans the meltzer commission international financial institution advisory commission 2000 report on government sponsored international lending institutions famously took a similar view supporters of the status quo often argue that development bank loans to middle income countries are in fact highly profitable and are essential for allowing institutions like the world bank to subsidize aid to poor countries we shall argue that the bank s profitability is an accounting artifice that greatly underestimates the risks of the bank s portfolio another argument for loans is that multilateral development banks have a superior enforcement technology that helps international debt markets to function more efficiently thus loans allow financially strapped governments including in middle income countries to borrow more than they could otherwise we will argue that this benefit too is an illusion in those cases when official lending does expand a developing country government s borrowing capacity it effectively enables the government to commit the country to repayment levels beyond that supported by domestic political consensus creating moral hazard for shortsighted rulers in theory better credit access to finance say public infrastructure projects can be highly beneficial in practice however the increased risk of debt crisis all too often outweighs any gain ordinary citizens might enjoy from the loans furthermore moral hazard on the part of lenders who may be able to induce rich countries into subsidizing the bailout of troubled middle income borrowers may mean that aggregate lending is excessive even if multilaterals merely displace equivalent private debt we do not argue for eliminating assistance to middle income countries on the contrary we would favor expanding aid in general albeit in far greater proportion to the world s poorest countries note that in principle any country with market access could use grant flows to help defray interest rate costs on loans if it so chose but development banks would never need to assume a bad cop role in enforcing debt

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

the hard challenge of aid coordination aid coordination is a constant theme of discussion among national and international aid agencies in their search for more effectiveness and efficiency in delivering development assistance this paper seeks to clarify some of the arguments currently made in support of aid coordination and to precise unavoidable trade offs born of the existence of political costs it is anchored in the available literature on aid delivery while focusing on the implementation problems of aid coordination among donor countries in particular it deals with a the issue of consistently and collectively handling possible governance failures in recipient countries and b the impact of heterogeneity of donor countries on the effectiveness of aid coordination

modeling response to advertising and pricing changes for v 8 cocktail vegetable juice this paper is based on a series of studies undertaken for v 8 cocktail vegetable juice over a five year period the studies were a consequence of management questions regarding the effectiveness of a new advertising campaign the best media mix for this campaign and the apparent wear out of the advertising copy the studies included controlled experimentation estimation of advertising response functions and exploration of price sensitivity following major price increases by v 8 it was found that the short term response to advertising was s shaped and that the new creative approach rather than expenditure levels alone accounted for by far the largest component of the impact of advertising on sales it was also found that for a short period following the major price increases v 8 became extremely price sensitive however after about six months the marginal impact of price returned to historical levels the application of results at campbell soup company their relationship to the literature and their implications for both researchers and practitioners are discussed

the world bank at the millennium in the aftermath of world war ii and in the wake of the great depression surely one of the underlying causes of the war itself the countries of the world created three international institutions designed to facilitate economic cooperation the general agreement on tariffs and trade gatt the international monetary fund imf and the international bank for reconstruction and development ibrd gatt which has since evolved into the world trade organisation was to work on lowering trade barriers among nations and on preventing the beggar thy neighbour trade policies that were seen as a contributing factor to the breadth and depth of the great depression the imf was to provide liquidity and to sustain the international payments system the gold standard that was reinstituted after the war and the ibrd known more generally as the world bank was primarily to facilitate the reconstruction of war damaged europe and then to reach beyond that to aid in the development of what later became known as the third world it is now more than fifty years since the creation of these institutions over that half century they have evolved enormously especially in response to changing economic circumstances and changing needs the 1971 abandonment of the gold standard by the united states and subsequently by the rest of the world clearly necessitated a change in the functioning and perhaps in the very role of the imf the collapse of the soviet union posed a new set of challenges to the international institutions namely facilitating the transition of the former communist countries to a market economy the fiftieth anniversary of the bretton woods institutions imf and world bank was marked by criticism from a vocal international group dedicated to the notion that fifty years is enough reflecting a view among certain groups that these institutions had done as least as much or more harm than good as the world bank has the views presented here are solely those of the author and not those of any institution with which he is or has heen affiliated the author would like to acknowledge the helpful comments and assistance

the price elasticity of selective demand a meta analysis of econometric models of sales the author describes a meta analysis of econometric studies that estimated the elasticity of selective sales or market share to price the literature review yielded 367 suitable price elasticities

positioning the world bank this article examines the rationale for the world bank and explores whether its objective is best served by its current mix of activities we are critical of the bank s reliance on conditionality and advocate evolution into a knowledge bank which would lend with few conditions to countries with good policies and good institutions and would concentrate on the provision of knowledge and technical assistance rather than lending in countries where the policy framework is poor we also advocate an expansion in the bank s role as a provider of global public goods we critically examine the banks role in relation to financial crises

the illusion of sustainability this brief summarizes the results of a gender impact evaluation study entitled the illusion of sustainability conducted during the time period 1998 to 2001 in kenya the study observed that deworming is a public good since much of its social benefit comes through reduced disease transmission people were less likely to take deworming if their direct first order or indirect second order social contacts were exposed to deworming the introduction of a small fee for deworming drugs led to an 80 percent reduction in treatment rates take up was not sensitive to the exact price level suggesting that it is particularly counter productive to charge small positive prices for the treatment of infectious diseases an intensive school health education had no impact on worm prevention funding for the study derived from world bank nih fogarty international center berkeley center for health research

law regulation and the business climate the nature and influence of the world bank doing business project the importance of a well functioning legal and regulatory system in creating an effective market economy is now widely accepted one flagship project that tries to measure the environment in which businesses operate in countries across the world is the world bank s doing business project which was launched in 2002 this project gathers quantitative data to compare regulations faced by small and medium size enterprises across economies and over time the centerpiece of the project is the annual doing business report it was first published in 2003 with five sets of indicators for 133 economies and currently includes 11 sets of indicators for 189 economies the report includes a table that ranks each country in the world according to its scores across the indicators the doing business project has become a major resource for academics journalists and policymakers the project also enjoys a high public profile with close to ten million hits on its website each year with such interest it s no surprise that the doing business report has come under intense scrutiny in 2012 following discussions by its board the world bank commissioned an independent review panel to evaluate the project on which i served as a member in this paper i first describe how the doing business project works and illustrate with some of the key findings of the 2015 report next i address what is valuable about the project the criticisms of it and some wider political economy issues illustrated by the report

in search of the holy grail policy convergence experimentation and economic performance we consider a model of policy choice in which appropriate policies depend on a country s own circumstances but the presence of a successful leader generates an informational externality and results in too little policy experimentation corrupt governments are reined in while honest governments are disciplined inefficiently our model yields distinct predictions about the patterns of policy imitation corruption and economic performance as a function of a country s location vis aa vis successful leaders in particular it predicts a u shaped pattern in economic performance as we move away from the leader in the relevant space of characteristics close neighbors should do very well distant countries moderately well on average with considerable variance and intermediate countries worst of all an empirical test with the experience of post socialist countries provides supportive results

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

the future of the imf and world bank panel discussion i it undertakes surveillance of the global economy and the economies of its members reporting to its membership most of these reports are published ii it provides technical assistance to its members the fund staff draws on an unparalleled range of experience about what has worked in practice and this assistance is generally regarded as highly valuable iii it serves in the words of the articles of agreement as a permanent institution which provides the machinery for consultation and collaboration on international monetary problems virtually all international monetary problems end up for discussion and often for implementation in the imf iv it lends to its member countries

tatonnement beyond gross substitutes gradient descent to the rescue abstract we identify a class of economies for which tatonnement is equivalent to gradient descent this is the class of economies for which there is a convex potential function whose gradient is always equal to the negative of the excess demand among other consequences we show that a discrete version of tatonnement converges to the equilibrium for the following economies of complementary goods i fisher economies in which all buyers have complementary ces utilities with a linear rate of convergence in fisher economies all agents are either buyers or sellers of non numeraire goods but not both this shows that tatonnement converges for the entire range of fisher economies when buyers have complementary ces utilities in contrast to prior work which could analyze only the substitutes range together with a small portion of the complementary range ii fisher economies in which all buyers have leontief utilities with an o 1 t rate of convergence

do poverty traps exist assessing the evidence why did per capita incomes not increase in burundi haiti and nicaragua countries one possible explanation is a poverty trap which can be understood as a set of self reinforcing mechanisms whereby countries start poor and remain poor poverty begets poverty so that current poverty is itself a direct cause of poverty in the future it implies that much poverty is needless in the sense that a different equilibrium is possible and also that one time policy efforts that break the poverty trap may have lasting effects the concept of a poverty trap at the level of national economies is related to and sometimes based on microeconomic foundations that argue for the existence of poverty traps at the household level the authors discuss behavioral poverty traps as a recent area of research for which the evidence is just starting to accumulate and geographic poverty traps as the most likely form of a trap the policy prescriptions that result are then quite different from the calls for a big push in aid or expansion of microfinance to allow people to overcome credit constraints

analysis of the conditional stock return distribution under incomplete specification abstract the analysis of the distribution of the stock returns plays an important role in financial theory since a distributional assumption is required for mean variance portfolio theory theoretical models of capital asset prices determining the price of derivative products efficient estimation by maximum likelihood procedure and establishing forecasting confidence intervals up to now most of the studies analyze the unconditional distribution of the stock returns using the likelihood ratio test the schwarz information criterion or by graphical analysis however the analysis of the conditional distribution is very important since most of the empirical financial studies use high frequency data and these data present dynamic structure in this paper we focus on the conditional distribution we design different bootstrap mechanisms for comparing the goodness of fit of several functional forms postulated under the null hypothesis for individual spanish stocks and for the general index of the madrid stock market we use the cramer von mises test statistic based on the standardized residuals and assuming that the null distribution can depend on some unknown parameters

the characterization of affine maximizers on restricted domains with two alternatives abstract in the framework of implementable social choice functions we present an axiomatic characterization of affine maximizers for an important missing case in the literature that of two alternatives with restricted domain we use two independent conditions positive association of differences and an independence condition

altruism the samaritan s dilemma and government transfer policy this paper shows that altruism provides an efficiency rationale for public provision of insurance to the poor the framework is one in which there are rich altruists and risk averse poor who face some possibility of loss the government represents the rich and makes transfers on their behalf with unconditional transfers the poor may forgo insurance and rely on private charity to bail them out in the event of loss this reliance on private charity has adverse efficiency effects these may be avoided if the government makes in kind transfers of insurance copyright 1995 by american economic association

where do the poor live this paper argues that the distribution of global poverty has changed and that most of the world s poor no longer live in countries officially classified as low income countries lics it is estimated that the majority of the world s poor or up to a billion people live in middle income countries mics this pattern is largely as a result of the recent graduation into the mic category of a number of populous countries the paper discusses the trends in the distribution of global poverty and opens a wider discussion on the potential implications for aid and development cooperation

the future of the imf and the world bank the bretton woods sisters the international bank for reconstruction and development henceforth the world bank and the inter national monetary fund imf were set up in 1944 the original purpose of the former was to help post world war ii reconstruction the purpose of the latter was to help revive global trade while averting the beggar thy neighbor exchange rate policies that characterized the interwar years over the years the world bank has refocused on helping poor countries grow while the fund broadly attempts to foster coun try policies that ensure macroeconomic stabil ity and limit adverse spillovers to the rest of the world it still is in the world s self interest to reduce

the political economy of conditionality an empirical analysis of world bank loan disbursements abstract traditional aid conditionality has been attacked as ineffective in part because aid agencies notably the world bank often fail to enforce conditions this pattern undermines the credibility of conditionality weakening incentives to implement policy reforms the standard critique attributes this time inconsistency to bureaucratic factors within the aid agency such as pressure to lend defensive lending or short sighted altruism pressure from powerful donors provides another potential explanation for lax enforcement this paper presents an empirical analysis of the political economy of conditionality in international organizations using the case of the world bank and the united states the analysis examines panel data on world bank disbursements to 97 countries receiving structural adjustment loans between 1984 and 2005 using un voting as an indicator of alignment with the u s the paper presents evidence that world bank structural adjustment loan disbursements are less dependent on macroeconomic performance in countries aligned with the united states

project evaluation and control in decentralized firms is capital rationing always optimal when capital investments are made in an agency setting we show that even without risk considerations capital rationing need not be the only rational outcome we analyze a principal agent model with risk neutrality and with two productive inputs the agent s efforts and capital investment the two inputs can be either economic complements or substitutes the agent has pre contract private information about his own type the output is measured with an additive noise we show that when the two inputs are substitutes the optimal solution entails a marginal capital rationing but when the two inputs are complements then either a marginal capital rationing or a marginal leniency could be the optimal response our results therefore provide an explanation for why firms may employ a capital rationing for a project that may increase manufacturing complexity and hence may reduce managerial labor productivity yet employ a less strict criterion for evaluating a productivity enhancing project this result contrasts with earlier results where only a capital rationing is shown to be optimal

multi item auctions a collection of items is to be distributed among several bidders and each bidder is to receive at most one item assuming that the bidders place some monetary value on each of the items it has been shown that there is a unique vector of equilibrium prices that is optimal in a suitable sense for the bidders in this paper we describe two dynamic auction mechanisms one achieves this equilibrium and the other approximates it to any desired degree of accuracy

multistage multiproduct advertising budgeting abstract we propose and analyze an effective model for the multistage multiproduct advertising budgeting problem this model optimizes the advertising investment for several products by considering cross elasticities different sales drivers and the whole planning horizon we derive a simple procedure to compute the optimal advertising budget and its optimal allocation the model was tested to plan a realistic advertising campaign we observed that the multistage approach may significantly increase the advertising profit compared to the successive application of the single stage approach

compact bidding languages and supplier selection for markets with economies of scale and scope preference elicitation is a fundamental problem in single unit combinatorial auctions but it becomes prohibitive even for small instances of multi unit combinatorial auctions the bidders cannot express their preferences exactly as this would take a huge number of bids typically leading to inefficient allocations hence markets with economies of scale and scope require more compact and yet expressive bidding languages in this thesis we propose an expressive bidding language allowing bidders to describe the characteristics of their cost functions bidders in these auctions can specify various discounts and markups and specify pricing rules as logical functions finding the optimal allocation given these pricing rules is a strongly np hard optimization problem and we propose a mixed integer program to solve it based on field data we introduce a multi item cost function and provide extensive computational experiments to explore the computational burden and the impact of different language features on the computational effort and total spend of the auctioneer in addition we explore characteristics of the knowledge representation of the bidding language

how not to run auctions the european 3g telecom auctions abstract there were enormous differences in the revenues from the european third generation 3g or umts mobile phone license auctions from 20 euros per capita in switzerland to 650 euros per capita in the uk though the values of the licenses sold were similar poor auction designs in some countries facilitated collusion between firms and failed to attract entrants the sequencing of the auctions was also crucial we discuss the auctions in the uk netherlands germany italy austria switzerland belgium greece and denmark

the world bank of the future even in today s world of burgeoning private capital markets there is much that an organization like the world bank can contribute toward realizing the dream of a world without poverty first of course there is emergency relief at any point of time there are people in the world who are in the middle of an acute crisis and need emergency relief while delivering relief effectively is not easy there is broad agreement that it is a worthwhile goal however the world bank believes rightly that this is not enough as we see it there are at least three important ways it can contribute to the broader project

foreign aid and the question of fungibility this paper analyzes whether the foreign assistance provided for specific categories of expenditure is shifted among them contrary to the wishes of donors it also considers whether aid reduces the tax effort of recipient governments econometric results are presented for the dominican republic that show that the fungibility of aid has resulted in a thwarting of the intentions of donors an attempt is made to account for the observed differences in behavior of individual countries in altering expenditures copyright 1993 by mit press

contracting for aid abstract foreign aid is analyzed as a contract where the north gives a transfer to the south in return for poverty reduction regarded as an international public good the issue of conditionality is first discussed in a moral hazard framework and then under asymmetric information about the degree of altruism of the government of the south additional actors like local ngos and multilateral aid institutions are then added to the model the optimal contracts to avoid free riding or collusion are then presented