sheepskin effects in the returns to education some previous discussions have dismissed screening theories of education partly on the ground that diploma years of education do not confer especially large earnings gains similarly most empirical research on earnings functions has assumed an absence of sheepskin effects we report evidence however of substantial and statistically significant sheepskin effects although this suggests that the previous dismissals of the screening hypothesis were premature our evidence of sheepskin effects is amenable to nonscreening interpretations also according to screening theories of education individuals with more schooling tend to earn more not because or at least not solely because schooling makes them more productive but rather because it credentiates them as more productive a frequently cited article by layard and psacharopoulos 1974 however dismissed the importance of the screening hypothesis on the grounds that several of its refutable predictions were not supported by available evidence one of these was the sheepskin prediction that wages will rise faster with extra years of education when the extra year also conveys a certificate after surveying a number of studies layard and psacharopoulous henceforth lp concluded that rates of return to dropouts are as high as to those who complete a course which refutes the sheepskin version of the screening hypothesis since publication of the lp paper an undergraduate labor economics textbook has cited lp s analysis of sheepskin effects as telling criticism of the screening hypothesis a prominent proponent of the screening hypothesis riley 1979 has accepted lp s summary of the empirical evidence but responded that some versions of the screening hypothesis do not imply sheepskin effects in the meantime the ongoing flood of empirical research on earnings functions typically has continued to treat the natural logarithm of the wage rate as a linear or occasionally quadratic function of years of education with no allowance for discontinuities in diploma years 2 the estimated rates of return used by lp were based on data that did not disaggregate dropouts earnings by how many years of school they had completed lp acknowledged we would have preferred to show the earnings gain associated with each year of the course including the year when it was successfully completed this note presents a reanalysis of sheepskin effects based on the type of data lp wished they had the results contain very strong evidence of sheepskin effects after all the next section describes our analysis and the following section summarizes and discusses our

competitive pricing and the core with reference to matching abstract lloyd shapley s contributions with respect to the core are interpreted as subdifferentiability characterizations of the pricing of individuals that is similar to the pricing of commodities in economic models of exchange with transferable utility differentiability of the core is interpreted as perfect substitutability with respect to the pricing of individuals differentiability implies but is not implied by equivalence of the core and walrasian equilibria differentiability eliminates opportunities for strategic misrepresentation of utilities the assignment model with transferable utility is framed in the setting of exchange economies and its individual and commodity pricing is extended to non transferable utility

simple strategy proof approximately walrasian mechanisms abstract this note provides an indirect analysis of the incentive properties of the walrasian mechanism it presents mechanisms under which truth telling is a dominant strategy in finite exchange economies in contrast to the walrasian mechanism and whose outcomes generically approximate walrasian ones for large economies these mechanisms provide new insights on the well know trade off between efficiency and incentive compatibility in finite economies journal of economic literature classification numbers d50 d71 d78

games of fair division abstract we consider the problem of fairly allocating an indivisible good to one of several agents equally entitled to it when monetary compensations to the others are possible our primary normative concept is no envy first we show that there is no non manipulable selection from the no envy solution then we study the direct revelation games associated with subsolutions of the no envy solution the set of equilibrium allocations of any one of them coincides with the set of envy free allocations for the true preferences journal of economic literature classification numbers c72 d63 d7l d82

controlling for observed and unobserved site characteristics in rum models of recreation demand hatch act and state of iowa the iowa department of natural resources and the u s environmental protection agency s science to achieve results star program grant r830818

efficient strategy proof exchange and minimum consumption guarantees abstract for exchange economies with classical economic preferences it is shown that any strategy proof social choice function that selects pareto optimal outcomes cannot guarantee everyone a consumption bundle bounded away from the origin this result demonstrates that there is a fundamental conflict between efficiency and distributional goals in exchange economies if the social choice rule is required to be strategy proof

handling unobserved site characteristics in random utility models of recreation demand abstract this paper presents a new random utility model of recreation demand that addresses the unobserved characteristics of recreation sites most random utility recreation demand models implicitly assume that all relevant site characteristics are observed by the researcher or allow for the possibility of unobserved characteristics in a restrictive manner unlike traditional approaches the proposed model avoids the bias unobserved site characteristics can cause in welfare estimates and the travel cost parameter monte carlo simulations motivate the proposed model by showing that it provides more efficient parameter estimates in contrast existing methods yield less efficient estimates and biased standard errors that overstate precision an empirical application to recreational fishing in wisconsin illustrates the potential importance of this modeling innovation in this application controlling for unobserved characteristics is important for a range of model specifications

strategy proof exchange we consider the allocation of goods in exchange economies with a finite number of agents who may have private information about their preferences in such a setting standard allocation rules such as walrasian equilibria or rational expectations equilibria are not compatible with individual incentives we characterize the set of allocation rules which are incentive compatible or in other words the set of strategy proof social choice functions social choice functions which are strategy proof are those which can be obtained from trading according to a finite number of pre specified proportions the number of proportions which can be accommodated is proportional to the number of agents such rules are necessarily inefficient even in the limit as the economy grows

balanced ranking mechanisms abstract in the private values single object auction model we construct a satisfactory mechanism a symmetric dominant strategy incentive compatible and budget balanced mechanism the mechanism converges to efficiency at an exponential rate it allocates the object to the highest valued agent with more than 99 probability provided there are at least 14 agents it is also ex post individually rational we show that our mechanism is optimal in a restricted class of satisfactory ranking mechanisms since achieving efficiency through a dominant strategy incentive compatible and budget balanced mechanism is impossible in this model our results illustrate the limits of this impossibility

a utility consistent combined discrete choice and count data model assessing recreational use losses due to natural resource damage abstract a two stage budgeting approach can often be taken when analyzing consumer choice situations in this paper we examine the particular situation where a consumer makes purchases of a discrete commodity of which there are a number of brands in the first stage the consumer decides how many purchases to make in the second stage the consumer decides how to allocate these purchases across brands our econometric approach to this type of situation uses a utility consistent combined discrete choice and count data model the second stage which is specified as a multinomial choice model produces a price index for the commodity which is used to estimate the first stage which is specified as a count data model we apply the model to recreational demand behavior in alaska in order to estimate the welfare losses suffered by recreational users due to the exxon valdez oil spill these results may provide useful input to government agencies attempting to estimate the appropriate level of taxes fines or regulations for deterring damage to the environment

the role of bounded rationality and imperfect information in subgame perfect implementation an empirical investigation in this paper we conduct a laboratory experiment to test the extent to which moore and repullo s subgame perfect implementation mechanism induces truth telling in practice both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty regarding the good s value we nd that moore repullo mechanisms fail to implement truth telling in a substantial number of cases even under perfect information about the valuation of the good this failure to implement truthtelling is due to beliefs about the irrationality of one s trading partner therefore although the mechanism should in theory provide incentives for truth telling many buyers in fact believe that they can increase their expected monetary payo by lying the deviations from truth telling become signicantly more frequent and more persistent when agents face small amounts of uncertainty regarding the good s value our results thus suggest that both beliefs about irrational play and small amounts of uncertainty about valuations may constitute important reasons for the absence of moore repullo mechanisms in practice

a solomonic solution to the problem of assigning a private indivisible good a benevolent planner wishes to assign an indivisible private good to n claimants each valuing the object differently individuals have quasi linear preferences therefore the possibility of transfers is allowed a second best efficient mechanism is a strategy proof and anonymous mechanism that is not pareto dominated by another strategy proof and anonymous mechanism in this context we identify three conditions that are necessary and together with voluntary participation sufficient for a mechanism to be second best efficient this set includes mechanisms that destroy the good at certain profiles for domains comprising two individuals we provide an explicit characterization of the family of second best efficient mechanisms

a repeated nested logit model of atlantic salmon fishing participation and site choice for atlantic salmon fishing are modeled in the context of a repeated three level nested logit model consumer s surplus measures are derived for different levels of species availability in the penobscot river the most important salmon river in new england for comparison six other travel cost models are estimated these include restrictive cases of the nested logit model a partial demand model and two single site demand models comparisons across these models indicate the importance of modeling the participation decision including income effects and of adopting a nested logit structure rather than a single level logit structure

implementation in differential information economies abstract we consider the problem of implementation of social choice correspondences in differential information economies we provide necessary conditions for implementation and slightly stronger conditions which are sufficient to guarantee implementation

learning dynamics for mechanism design an experimental comparison of public goods mechanisms in a repeated interaction public goods economy incomplete information and dynamic behavior may affect the realized outcomes of mechanisms known to be efficient in a complete information oneshot game an experimental test of five public goods mechanisms indicates that subjects with private information appear to best respond to recent observations this provides predictions about which mechanisms will generate convergence to their efficient equilibrium allocations these predictions match the experimental result that globally stable efficient mechanisms realize the highest efficiency in practice the simplicity of the suggested best response model makes it useful in predicting stability of mechanisms not yet tested

multidimensional incentive compatibility and mechanism design abstract incentive compatibility conditions are characterized in general for problems in which several goods are to be allocated and agents types are multidimensional two questions of monopoly pricing under multidimensional uncertainty are then analyzed first we find the optimal nonlinear pricing scheme when the monopolist knows only the distribution of an arbitrarily parameterized family of demand curves and second we solve for the optimal bundling policy for a multiproduct monopolist

incentive compatibility and individual rationality in public good economies abstract hurwicz s theorem states that pareto optimality individual rationality and incentive compatibility are inconsistent in a class of private goods economies a similar result is obtained by ledyard and roberts in a class of public good economies hurwicz and walker show that generically there are no incentive compatible and pareto optimal mechanisms in a class of both private and public goods economies without imposing pareto optimality this paper explores the possiblity of the existence of incentive compatible and autarkically individually rational mechanisms in a class of public good economies autarkic individual rationality which strengthens individual rationality in a natural way and incentive compatibility are shown to be inconsistent

exploring the scope of neurometrically informed mechanism design a basic goal in mechanism design is to construct mechanisms that simultaneously satisfy efficiency voluntary participation and dominant strategy incentive compatibility previous work has shown that this is impossible unless the agents and planner have sufficient information about each other and common knowledge these results have remained largely theoretical because the required information is generally not available in practical applications however recent work has shown that these limitations can be overcome in simple settings using neurometric technologies that provide noisy signals of subjects preferences that can be used in the mechanism design problem here we build on this work by carrying out two new experiments designed to test the extent to which these neurometrically informed mechanisms nims can be applied to more complicated and realistic environments we find robustness to large type and action space and to the degrees of loss and risk aversion observed in most of our sample

strategy proof house allocation with price restrictions abstract this paper considers a house allocation problem with no initial ownership and where prices are bounded from below and above by exogenously given price restrictions this type of housing market contains e g the assignment market and the student placement problem as special cases a mechanism called the minimal rpe mechanism is defined and two main results are obtained first it is demonstrated that the mechanism is manipulable at some profile in the full preference domain r second it is proved that there is a subset r r of the full domain containing almost all profiles in r such that the minimal rpe mechanism is strategy proof in that subset

out of equilibrium performance of three lindahl mechanisms experimental evidence abstract we describe an experimental comparison of the out of equilibrium performance of three allocation mechanisms designed to achieve lindahl outcomes as nash equilibria the mechanisms due to walker 1981 kim 1993 and chen 2002 we find that chen s mechanism which is supermodular converges closest and most rapidly to its equilibrium however we find that the properties that move subjects toward equilibrium in chen s mechanism typically generate sizeable taxes and subsidies when not in equilibrium and correspondingly large budget surpluses and deficits which typically far outweigh the surplus created by providing the public good the kim mechanism on the other hand converges relatively close to its equilibrium and exhibits much better out of equilibrium efficiency properties

secure implementation experiments do strategy proof mechanisms really work strategy proofness requiring that truth telling is a dominant strategy is a standard concept used in social choice theory saijo et al 2003 argue that this concept has serious drawbacks in particular announcing one s true preference may not be a unique dominant strategy and almost all strategy proof mechanisms have a continuum of nash equilibria for only a subset of strategy proof mechanisms do the set of nash equilibria and the set of dominant strategy equilibria coincide for example this double coincidence occurs in the groves mechanism when preferences are single peaked we report experiments using two strategy proof mechanisms where one of them has a large number of nash equilibria but the other has a unique nash equilibrium we found clear differences in the rate of dominant strategy play between the two

large indivisibles an analysis with respect to price equilibrium and fairness an exchange economy is considered in which there are a finite number of individuals the same number of indivisibles and a fixed amount of a divisible good each individual consumes exactly one of the indivisibles and a certain quantity of the divisible good the existence of prices corresponding to pareto efficient allocations is proved it is also shown that this economy possesses fair allocations income fair allocations coalition fair allocations and pareto efficient egalitarian equivalent allocations in this study the effect of including large indivisibles in an exchange economy will be analyzed the analysis will be carried out with respect to the existence of price equilibrium and with respect to the existence of different forms of fairness the economy consists of a finite number of individuals the same number of indivisibles and a fixed amount of a divisible good it is assumed that each individual consumes exactly one of the indivisibles and some quantity of the divisible good we may interpret the indivisibles as being professions or houses the relationship between price equilibrium and a pareto efficient allocation is well known and proved in a number of cases under different assumptions about preferences and commodities for a standard economy see e g debreu 5 in case of nonconvexities which may also describe a certain type of indivisibility we may have an exact relationship in economies with a continuum of individuals see e g hildenbrand 11 but otherwise an approximate relationship obtains the degree of approximation depends on the degree of nonconvexities in preferences and not on the number of individuals see e g arrow and hahn 1 we will prove the existence of prices characterizing a pareto efficient allocation in a case where the indivisibles play an essential role and where approximate results would be too approximate the indivisibles may be considered large for the individual compared to his total consumption the theory of fairness has developed considerably during the seventies different kinds of concepts of fairness have been introduced and analyzed see daniel 41 foley 81 pazner and schmeidler 121 and schmeidler and vind 141 among others normally these authors have considered models with divisible goods or an infinite number of individuals for exchange economies the existence of fair allocations an envy free and pareto efficient allocation has been proved in

two stage estimation to control for unobservables in a recreation demand model with unvisited sites the role of unobserved site attributes is a growing concern in recreation demand modeling one solution in random utility models rums involves separating estimation into two stages where the rum is estimated with alternative specific constants ascs in the first stage and the estimated ascs are regressed on the observed site attributes in the second stage prior work estimates the second stage with ordinary least squares ols and two stage least squares regression we present an application with censored regression in the second stage we show ols produces inconsistent parameters when there are unvisited sites with no estimable ascs and that censored regression avoids this problem

model uncertainty in characterizing recreation demand a bayesian variable selection procedure is used to control for uncertainty in the specification of a recreational demand model specifically we propose a model that draws on the bayesian paradigm to integrate the variable selection process into model estimation and to reflect the accompanying uncertainty about which is the best specification in subsequent counterfactual predictions the advantage of this procedure over previous non bayesian approaches is that it overcomes the problem of pre testing in specification searches in our application evaluating demand for recreational lake usage in iowa we find clear evidence that site attributes such as lakes size handicap facilities and wake restrictions do impact lake usage there is also evidence that water quality matters in household recreation choices indeed contrary to abidoye et al am j agricult econ 2012 in which only a single functional form is considered we find clear evidence that water quality matters with posterior probability of less that 10 associated with a model without any water quality variables this suggests that the flexibility that the bayesian variable selection model affords in capturing the linkage between recreation demand and site characteristics can be important

maximal manipulation of envy free solutions in economies with indivisible goods and money abstract we consider the problem of the fair allocation of indivisible goods and money with non quasi linear preferences the purpose of the present study is to examine strategic manipulation under envy free solutions we show that under a certain domain richness condition each individual obtains the welfare level of his optimal envy free allocation by maximally manipulating the solutions this maximal manipulation theorem is helpful in analyzing the set of nash equilibrium allocations in the direct revelation games associated with a given envy free solution if an envy free solution satisfies a mild condition the set of nash equilibrium allocations in its associated direct revelation game coincides with that of envy free allocations

relative performance of two simple incentive mechanisms in a public goods experiment we compare the performance of two incentive mechanisms in public goods experiments one mechanism the falkinger mechanism rewards and penalizes agents for deviations from the average contributions to the public good falkinger mechanism the other the compensation mechanism allows agents to subsidize the other agents contributions compensation mechanism it is found that both mechanisms lead to an increase in the level of contributions to the public goods however the falkinger mechanism predicts the average level of contributions more reliably than the compensation mechanism

transferring ownership of public housing to existing tenants a market design approach this paper explores a housing market with an existing tenant in each house and where the existing tenants initially rent their houses the idea is to identify equilibrium prices for the housing market given the prerequisite that a tenant can buy any house on the housing market including the one that he is currently possessing or continue renting the house he is currently occupying the main contribution is the identification of an individually rational equilibrium selecting and group non manipulable price mechanism in a restricted preference domain that contains almost all preference profiles in this restricted domain the identified mechanism is the minimum price equilibrium selecting mechanism that transfers the maximum number of ownerships to the existing tenants we also relate the theoretical model and the main findings to the u k housing act 1980 whose main objective is to transfer ownerships of houses to existing tenants

combining revealed preference data with stated preference data a latent class approach a substantial literature exists combining data from revealed preference rp and stated preference sp sources aimed either at testing for the convergent validity of the two approaches used in nonmarket valuation or as a means of drawing on their relative strengths to improve the ultimate estimates of value in doing so it is assumed that convergence of the two elicitation approaches is an all or nothing proposition i e the rp and sp data are either consistent with each other or they are not the purpose of this paper is to propose an alternative framework that allows for possible divergence among individuals in terms the consistency between their rp and sp responses in particular we suggest the use of a latent class approach to segment the population into two groups the first group has rp and sp responses that are internally consistent while the remaining group exhibits some form of inconsistent preferences an em algorithm is employed in an empirical application that draws on the alberta and saskatchewan moose hunting data sets used in earlier combined rp and sp exercises the empirical results suggest that somewhere between one third and one half the sample exhibits consistent preferences we also examine differences in welfare estimates drawn from the two classes

house allocation with transfers we consider the shapley scarf house allocation problem where monetary transfers are allowed we characterize the class of mechanisms that are strategy proof ex post individually rational ex post budget balanced and collusion proof in these mechanisms the price of each object is fixed in advance and the objects are reallocated according to the unique core assignment of the shapley scarf economy associated with the prices the special case in which all prices are zero is the core mechanism studied by shapley and scarf our mechanisms are compelling alternatives to the groves mechanisms which satisfy neither budget balance nor our condition of collusion proofness journal of economic literature classification numbers c71 c78 d71 d78 d89

house allocation with existing tenants an equivalence abstract we analyze two mechanisms designed to eliminate inefficiencies in house allocation problems where there are both existing tenants and newcomers the first mechanism chooses the unique core allocation of a sister exchange economy constructed by endowing each existing tenant with her current house and each newcomer with a random vacant house the second mechanism chooses an ordering from a given distribution and determines the final outcome as follows assign the agents the best available house one at a time following their ordering in the queue and whenever an agent demands the house of an existing tenant who is still in the line modify the queue by inserting the existing tenant at the top whenever a loop of existing tenants forms assign each of them the house she demands and proceed we show that the first mechanism is equivalent to an extreme case of the second which favors the newcomers

implementation in economies with a continuum of agents we study a general implementation problem for exchange economies with a continuum of players and private information and test the robustness of the results for sequences of approximating finite economies assuming that the designer knows the distribution of the characteristics in the economy we consider continuous and unique implementation in both its equilibrium and dominant strategies versions and obtain results for general self selective first and second best allocations an upper hemicontinuity property of bayesian equilibria of approximating economies for continuous mechanisms is demonstrated using this we can for example conclude that if a given continuous mechanism implements uniquely a walrasian allocation in the continuum economy then all bayesian equilibria of large approximation economies will with probability close to one yield an allocation which is almost ex post pareto optimal

inducing patterns of correlation and substitution in repeated logit models of recreation demand repeated logit models are among the most commonly applied methods for modeling seasonal recreation demand in this article we examine the capabilities of the repeated nested logit and repeated mixed logit models to capture patterns of error correlation and demand substitution particular attention is paid to the use of the mixed logit framework to generalize the strong assumptions on correlation patterns across sites and choice occasions imbedded in the nested logit model we examine the implications for the range of price elasticities allowed in both models based on the implied correlation structures copyright 2002 oxford university press

on the generic nonoptimality of dominant strategy allocation mechanisms a general theorem that includes pure exchange economies it is shown that if an economy s participants cannot be separated into groups across which there are no potentially conflicting interests i e if the economy is indecomposable then every continuous truth dominant allocation mechanism will attain nonoptimal allocations on an open dense set of preference profiles classical edgeworth box exchange economies economies with no externalities and no production but with arbitrary numbers of consumers and goods as well as economies with public goods and economies with other kinds of externalities are all shown via simple arguments to be indecomposable the results are extended to cover nonrevelation mechanisms copyright 1990 by the econometric society

manipulation through bribes we consider allocation rules that choose outcomes and transfers based on agents reported valuations of the outcomes a bribing situation exists when one agent could pay another to misreport his valuations resulting in a net gain to both a bribe proof rule eliminates such opportunities we show that under a bribe proof rule each agent s payoff is a continuous function of other agents reported valuations furthermore on connected domains if the set of outcomes is finite or the domain is smoothly connected each agent s payoff is a constant function of other agents reports finally under a domain richness condition a bribe proof rule must be constant the results apply to a broad class of economies journal of economic literature classification numbers c70 d70

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

when does learning in games generate convergence to nash equilibria the role of supermodularity in an experimental setting this study clarifies the conditions under which learning in games produces convergence to nash equilibria in practice previous work has identified theoretical conditions under which various stylized learning processes achieve convergence one technical condition is supermodularity which is closely related to the more familiar concept of strategic complementarities we experimentally investigate the role of supermodularity in achieving convergence through learning using a game from the literature on solutions to externalities we systematically vary a free parameter below close to at and beyond the threshold of supermodularity to assess its effects on convergence we find that supermodular and near supermodular games converge significantly better than those far below the threshold from a little below the threshold to the threshold the improvement is statistically insignificant within the class of supermodular games increasing the parameter far beyond the threshold does not significantly improve convergence simulation shows that while most experimental results persist in the long run some become more pronounced

characterizations of the pivotal mechanism the pivotal mechanism is strategyproof demand revealing in public decision problems where preferences are quasi linear moreover no agent has an incentive to free ride by withdrawing from the committee and consuming whatever decision is taken by the remaining agents strategyproofness plus no free ride characterize the pivotal mechanism this mechanism is anonymous and neutral yet together strategyproofness anonymity and neutrality do not characterize it they will however if reasonable lower or upper bounds on final utilities are imposed our last characterization of the pivotal mechanism uses the no free ride axiom and two mild monotonicity properties but not strategyproofness

stable implementation of lindahl allocations abstract the resource allocation mechanisms using nash equilibrium as the solution concept in economies with incomplete information rely on the assumption that agent s disequilibrium messages converge to a nash equilibrium the mechanisms implementing lindahl allocations are however extremely unstable under the most used process to represent disequilibrium behaviour in games of incomplete information the cournot process we provide a new mechanism overcoming the instability difficulty in the case of quasi linear preferences

the groves ledyard mechanism an experimental study of institutional design the groves ledyard mechanism theoretically can solve the free rider problem in public good provision in certain environments two questions are of overriding importance in implementing the mechanism the first is related to the actual performance of the mechanism in general the second is the choice of a punishment parameter which is the only parameter that is available for those who may want to actually use the mechanism thus the determination of the role of this variable on mechanism performance is fundamental for any advances along the lines of actual implementation in studying the groves ledyard mechanism we show that the punishment parameter plays a crucial role in the performance of the mechanism by using 1 and 100 we show that under the higher punishment parameter the groves ledyard equilibrium is chosen much more frequently a higher level of the public good is provided and efficiency is higher by examining two behavioral models we show that a higher leads to an increase in the probability of an individual choosing a best response predicted by the model the parameter alone explains nearly 70 of the data in both the cournot and the carlson auster behavioral model we also found that convergence to cournot behavior is faster and more stable under a high than under a low

economic choice political decision and the problem of limits assesses the arguments for the use of market or political processes for making collective choices the border between what is mine and what is ours is contested but it is unguarded where should it lie how would we know when it should be adjusted i uncover an old paradox a society can never use political means to guard against incursions across the border for political ends some other mechanism such as constitutional or other extra statutory rules are required

perfect competition and the creativity of the market from the perspective of the walrasian general equilibrium model entrepreneurial and opportunistic behavior seems foreign can the model be refashioned so that it can accommodate such behavior many would say no but we argue the contrary indeed we present a reformulation of the model that serves as a gateway to rather than a detour from such contemporary issues as innovation and incentives the trick is to reexamine what perfect competition means starting with an historical summary of general equilibrium we sketch an image of the perfect competitor as an active market opportunist seeking out profit potentials wherever he can

strategy proof risk sharing abstract we consider risk sharing problems with a single good and a finite number of states agents have a common prior and their preferences are represented in the expected utility form and are risk averse we study efficient and individually rational risk sharing rules satisfying strategy proofness the requirement that no one can ever benefit by misrepresenting his preference when aggregate certainty holds we show that fixed price selections from walrasian correspondence are the only rules satisfying efficiency individual rationality and strategy proofness however when aggregate uncertainty holds we show that there exists no rule satisfying the three requirements moreover in the two agents case we show that dictatorial rules are the only efficient and strategy proof rules dropping the common prior assumption in the model we show that this assumption is necessary and sufficient for the existence of rules satisfying the three main requirements in the two agents and aggregate certainty case

selection dynamics asymptotic stability and adaptive behavior selection dynamics are often used to distinguish stable and unstable equilibria this is particularly useful when multiple equilibria prevent a priori comparative static analysis this paper reports an experiment designed to compare the accuracy of the myopic best response dynamic and an inertial selection dynamic the inertial selection dynamic makes more accurate predictions about the observed mutual best response outcomes

iterative computation of cournot equilibrium abstract in a homogeneous coumot model with quasi concave profit functions the problem of determining an equilibrium can be posed as one of solving an equation in one real variable total sales if the response functions are monotone or firms are identical then a certain iterative process based on averaging converges to an equilibrium such iterations have the interpretation that every firm responds to the average of sales by other firms in brevious periods

limit theorems for estimating the parameters of differentiated product demand systems we provide an asymptotic distribution theory for a class of generalized method of moments estimators that arise in the study of dierentiated product markets when the number of observations is associated with the number of products within a given market we allow for three sources of error sampling error in estimating market shares simulation error in approximating the shares predicted by the model and the underlying model error it is shown that the estimators are can provided the size of the consumer sample and the number of simulation draws grow at a large enough rate relative to the number of products we consider the implications of the results for berry levinsohn and pakes 1995 random coecient logit model and the pure characteristic model analyzed in berry and pakes 2002 the required rates dier for these two frequently used demand models a small monte carlo study shows that the dierence in asymptotic properties of the two models are reflected in quite a striking way in the models small sample properties moreover the limit distributions provide a good approximation to the actual monte carlo distribution of the parameter estimates the results have important implications for the computational burden of the two models

perfect competition in the continuous assignment model abstract this paper provides a rigorous formalization in the context of the transferable utility assignment model of perfect competition as the inability of individuals to favorably influence prices the central tool for the analysis is the social gains function the central issue is differentiability of the gains function with respect to the population seven conditions are shown to be equivalent to perfect competition perfect competition and imperfect competition are possible for both finite and continuum assignment economies but most finite economies are imperfectly competitive while most continuum economies are perfectly competitive however most large finite assignment economies are approximately perfectly competitive journal of economic literature classification numbers c61 c62 c78

on the existence of optimal truth dominant mechanisms abstract the existence of optimal dominant strategy mechanisms has been shown only for quadratic valuation functions this paper shows that non trivial pareto efficient and truth dominant mechanisms exist for a slightly larger set of valuation functions

evolutionary drift and equilibrium selection this paper develops an approach to equilibrium selection in game theory based on studying the learning process through which equilibrium is achieved the differential equations derived from models of interactive learning typically have stationary states that are not isolated instead nash equilibria that specify different out of equilibrium behaviour appear in connected components of stationary states the stability properties of these components can depend critically on the perturbations to which the system is subjected we argue that it is then important to incorporate such drift into the model a sufficient condition is provided for drift to create stationary states with strong stability properties near a component of equilibria applications to questions of forward and backward induction are developed

efficient incentive compatible economies are perfectly competitive abstract efficient anonymous and continuous mechanisms for exchange environments with a finite number of individuals are dominant strategy incentive compatible if and only if they are perfectly competitive i e each individual is unable to influence prices or anyone s wealth equivalently in such a mechanism each individual creates no externalities for others by her announcement of a type the characterization applies whether preferences are ordinal or quasilinear and it also applies to continuum economies perfectly competitive mechanisms are non generic although non vacuous in finite economies and are generic but non universal in continuum economies we use these results to provide bridges to related work journal of economic literatureclassification numbers c72 d51 d62

the social and political consequences of overeducation this study employs national survey data to estimate the extent of overeducation in the u s labor force and its impact on a variety of worker attitudes estimates are made of the extent of overeducation and its distribution among different categories of workers according to sex race age and class background the effects of overeducation are examined in four areas of worker attitudes job satisfaction political leftism political alienation and stratification ideology evidence is found of significant effects of overeducation on job satisfaction and several aspects of stratification ideology the magnitude of these effects is small however and they are concentrated almost exclusively among very highly overeducated workers no evidence is found of generalized political effects of overeducation either in the form of increased political leftism or in the form of increased political alienation these findings fail to support the common prediction of major political repercussions of overeducation and suggest the likelihood of alternative forms of adaptation among overeducated workers

generalized groves ledyard mechanisms abstract groves and ledyard 1977 construct a mechanism for public goods procurement that can be viewed as a direct revelation groves mechanism in which agents announce a parameter of a quadratic approximation of their true preferences the mechanism s nash equilibrium outcomes are efficient the budget is balanced because groves mechanisms are balanced for the announced quadratic preferences tian 1996 subsequently discovered a richer set of budget balancing preferences we replicate the groves ledyard construction using this expanded set of preferences and uncover a new set of complex mechanisms that generalize the original groves ledyard mechanism the original mechanism however remains the most appealing in terms of both simplicity and stability

estimation and welfare calculations in a generalized corner solution model with an application to recreation demand the kuhn tucker model of wales and woodland 1983 provides a utility theoretic framework for estimating preferences over commodities for which individuals choose not to consume one or more of the goods due to the complexity of the model however there have been few applications in the literature and little attention has been paid to the problems of welfare analysis within the kuhn tucker framework this paper provides an application of the model to the problem of recreation demand in addition we develop and apply a methodology for estimating compensating variation relying on monte carlo integration to derive expected welfare changes

valuing water quality as a function of water quality measures employing a unique and rich data set of water quality attributes in conjunction with detailed household characteristics and trip information we develop a mixed logit model of recreational lake usage and undertake thorough model specification and fitting procedures to identify the best set of explanatory variables and their functional form for the estimated model our empirical analysis shows that individuals are responsive to the full set of water quality measures used by biologists to identify the impaired status of lakes thus changes in these quality measures are not simply a scientific exercise but they also translate into changes in the recreational usage patterns and well being of individual households willingness to pay wtp estimates are reported based on improvements in these physical measures

eliciting preferences to assign positions and compensation abstract we describe strategy proof rules for economies where an agent is assigned a position e g a job plus some of a divisible good for the 2 agent 2 position case we derive a robust characterization for the multi agent position case many arbitrary such rules exist so we consider additional requirements by also requiring coalitional strategy proofness or nonbossiness the range of a solution is restricted to the point that such rules are not more complex than those for the shapley scarf housing model no divisible good third we show that essentially only constant solutions are immune to manipulations involving bribes finally we demonstrate a conflict between efficiency and strategy proofness the results extend to models without externalities in which agents share positions journal of economic literature classification numbers c72 d70

strategyproof collective choice in economic and political environments this paper surveys some recent results characterizing strategyproof collective choice rules when preferences satisfy conditions that are meaningful in economic or political environments

robust collusion with private information the game theoretic literature on collusion has been hard pressed to explain why a cartel should engage in price wars without resorting to either impatience symmetry restrictions inability to communicate or failure to optimize this paper introduces a new explanation that relies on none of these assumptions if the cartel s member firms have private information about their costs price wars can be optimal in the face of complexity specifically equilibria that are robust to pay off irrelevant disruptions of the information environment generically cannot attain or approximate efficiency an optimal robust equilibrium must allocate market shares inefficiently and may call for price wars under certain conditions for a two firm cartel cost interdependence is a sufficient condition for price wars to arise in an optimal robust equilibrium that optimal equilibria are inefficient generically applies not only to collusion games but also to the entire separable pay off environment a class that includes most typical economic models copyright 2012 oxford university press

implementing efficient multi object auction institutions an experimental study of the performance of boundedly rational agents abstract we study three alternative implementations of the vickrey multi unit demand auction vickrey s original static sealed bid auction and two dynamic ausubel auctions with and without public dropout information reported during the auction although implemented by a weaker solution concept behavior in the dynamic vickrey auction with the public dropout information comes significantly closer to the theoretical prediction of sincere bidding bidding one s valuations than either the static vickrey auction or the dynamic auction without dropout information this suggests a possible tradeoff between the simplicity and transparency of a mechanism and the strength of its solution concept when agents are still learning and or when players are not fully rational drawing on results from related single unit and multi unit demand auctions and the results of a new single unit demand auction experiment we provide important insights into the behavioral mechanism underlying the superior performance of the ausubel auction with feedback information

identifying demand parameters in the presence of unobservables a combined revealed and stated preference approach we develop a combined revealed and stated preference approach to identify discrete choice demand parameters in the presence of unobserved determinants of choice our approach overcomes difficulties associated with small choice sets multicollinearity and endogeneity that arise with revealed preference approaches to illustrate our framework we revisit two canadian moose hunting datasets our empirical results suggest the potential gains from fusing revealed and stated preference data but they also suggest its limitations when the data generating processes for the data sources differ

a note on incentives in large economies nash equilibria of anonymous and efficient mechanisms are studied in economies with a continuum of traders conditions are given under which some or all the nash equilibria of such mechanisms yield competitive allocations particular attention is payed to the case of direct mechanisms where the truth constitutes a nash equilibrium

maskin monotonicity in economies with indivisible goods and money abstract we consider the problem of allocating indivisible objects with monetary transfers we show that any maskin monotonic allocation rule exhibits strong asymmetry in treating agents even on finitely restricted preference domains

impossibility of strategy proof mechanisms in economies with pure public goods this paper investigates the structures of strategy proof mechanisms in general models of economies with pure public goods under the assumptions that the set of allocations is a subset of some finite dimensional euclidean space and that the admissible preferencees are continuous and convex i establish that any strategy proof mechanism is dictatorial whenever the decision problem is of more than one dimension furthermore i establish a similar result when preference relations also satisfy the additional assumption of monotonicity these results properly extend the gibbard satterthwaite theorem to economies with pure public goods

experiments with the pivot process for providing public goods interest in demand revealing mechanisms for providing public goods has both waned and then renewed over the past two decades the possibility of using such mechanisms in different venues than originally anticipated sparked the research reported here the specific motivation for this paper is to conduct a series of simple direct tests of one version of the class of mechanisms failure of demand revelation was much more expensive than we had expected even when compared to previous research with related mechanisms the reason for this remains an open question

the strategy structure of two sided matching markets we study two sided markets in which agents are buyers and sellers or firms and workers or men and women the agents are to form partnerships which provide them with satisfaction and at the same time make monetary transfers e g salaries or dowries the core of this market game is shown to have a particularly nice structure so that precise answers can be given to questions concerning comparative statics and manipulability the idea of using walrasian equilibrium as a mechanism for making allocations with desirable properties of fairness and efficiency has been studied extensively the scheme involves having agents specify their supply and demand functions the competitive equilibria are then calculated and allocations are made accordingly in general this procedure may run into two difficulties first nonuniqueness if there are several equilibria there may be no fair way to decide which one should be implemented and second manipulability if there is only one equilibrium an informed agent may be able to influence it by suitably falsifying his demand data however as we will show here using the walrasian mechanism does work remarkably well for a certain class of important markets these are the matching markets of our title and they include markets for single items like houses where it is assumed that traders do not wish to acquire more than one item they also include labor markets in which it is desired to match workers with jobs at suitable salaries academic markets in which students are to be assigned to educational institutions marriage markets where men and women are matched through negotiating of dowries it turns out that in these markets both the problems of nonuniqueness and manipulability can be resolved in a

no envy and consistency in economies with indivisible goods we consider the problem of fair allocation in economies with indivisible goods our main objective is to identify appealing subsolutions of the no envy solution we formulate desirable properties of solutions and look for solutions satisfying them given an allocation chosen by a solution for some economy and given a subgroup of the agents consider the problem of fairly distributing among its members the resources that this group has collectively received the solution is consistent if it recommends that the same bundle be attributed to each of these agents as initially we show that there is no proper subsolution of the no envy solution that satisfies consistency however many subsolutions satisfy bilateral consistency or the converse of consistency but again there is no proper subsolution satisfying these two properties together

vickrey clarke groves mechanisms and perfect competition abstract we present a game theoretic mechanism characterization of perfect competition we prove the perfectly competitive mechanism is the only pareto optimal individually rational dominant strategy allocation mechanism thus perfect competition is uniquely capable of efficiently and non coercively solving the incentive bargaining problem when there is incomplete information i e when each individual knows his own tastes and production possibilities better than anyone else we also show one can interpret any dominant strategy demand revealing mechanism as working because it mimics the reward scheme that characterizes the perfectly competitive market namely the marginal product reward scheme

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

fair allocations in large economies the purpose of this paper is the study of problems of equity in an economy with many agents conditions are given under which every equitable and pareto optimal allocation is a competitive equilibrium with equal incomes for all agents the results are also of potential relevance for the literature on incentive compatibility since the allocations that are obained through incentive mechanisms in large economies turn out to be equitable

incentive compatibility in a market with indivisible goods abstract in a market in which each trader s initial endowment is one unit of an indivisible good there exists an incentive compatible procedure for reaching a competitive allocation this contrasts with some recent results for similar problems

inefficiency of strategy proof rules for pure exchange economies abstract in his pioneering article in decision and organization c b mcguire and r radner eds pp 297 336 north holland amsterdam 1972 hurwicz establishes that there is no strategy proof pareto efficient and individually rational rule for pure exchange economies with two agents and two goods provided that the domain includes a sufficiently wide class of classical preferences in this article we extend his result to pure exchange economies with any finite number of agents and goods we establish that i there is no strategy proof pareto efficient and individually rational rule on the class of classical homothetic and smooth preferences and ii there is no strategy proof pareto efficient and symmetric rule on the same class of preferences journal of economic literature classification numbers d78 d71 c72

fair allocation of indivisible goods and criteria of justice a set of n objects and an amount m of money is to be distributed among m people example the objects are tasks and the money is compensation from a fixed budget an elementary argument via constrained optimization shows that for m sufficiently large the set of efficient envy free allocations is nonempty and has a nice structure in particular various criteria of justice lead to unique best fair allocations that are well behaved with respect to changes of m this is in sharp contrast to the usual fair division theory with divisible goods

education and training an american perspective america is a country worried about its excess of life s necessities while many other countries are concerned about satisfying minimum daily nutritional needs we worry about overeating or improper diet so too while others fight illiteracy we discuss overeducation or misdirected schooling this is not a paper about cholesterol but about a system or lack of one which makes the school leaving decision almost entirely that of the student and which places so great an emphasis on college education as a means of achievement college and university will be used interchangeably hereafter that among the 1985 high school graduating class 58 per cent went on to further education cohany 1986