sealed bids sunk costs and the process of competition how do firms recover precontract costs for example suppose 10 firms compete in a sealed bid auction for the right to explore and develop an offshore oil field each spends 500 000 to estimate the value of the field and to prepare its bid suppose this investigation reveals that the tract is worth approximately 20 million if sunk costs do not matter competition dictates that the winner must bid 20 million but if the winner is to recover its prebid costs the maximum offer can be only 19 5 million furthermore long run industry equilibrium considerations suggest that the highest bid will be only 15 million 20 million minus the total bid preparation costs of 5 million if competition forces firms to charge marginal cost why do firms ever invest in resources which become sunk in some industries inframarginal rents can be used to recover these costs however the example above as well as many others involves an all or none deci

anonymous markets and monetary trading abstract we study infinite horizon monetary economies characterized by trading frictions that originate from random pairwise meetings and commitment and enforcement limitations we prove that introducing occasional trade in centralized markets opens the door to an informal enforcement scheme that sustains a non monetary efficient allocation all is required is that trading partners be patient and their actions be observable we then present a matching environment in which trade may occur in large markets and yet agents trading paths cross at most once this allows the construction of models in which infinitely lived agents trade in competitive markets where money plays an essential role

payments systems and monetary policy abstract a dynamic spatial model is constructed where there is a role for money and for centralized payments arrangements and where there are aggregate fluctuations driven by fluctuations in aggregate productivity with decentralized monetary exchange and no centralized payments arrangements there is price level indeterminacy and the equilibrium allocation is inefficient a private clearinghouse arrangement improves efficiency but produces a real indeterminacy the pricing of daylight overdrafts is irrelevant for the equilibrium allocation efficiency is achieved with a zero nominal interest rate on overnight central bank lending or through private overnight interbank lending

forecast of biofuel production and consumption in top co2 emitting countries using a novel grey model abstract mounting environmental concerns have given rise to an increasing focus on renewable energies like biofuels in 2018 three countries china the united states and india together emitted almost half 50 3 of the world s co2 emissions billion metric tons the current study aims to forecast biofuels production consumption and self sufficiency in these top co2 emitting countries using a novel grey forecasting model the study improves on an existing grey forecasting model by optimizing the model architecture data accumulation operation and background value generation the proposed forecasting model egm 1 1 is a generalized form of the even form of the grey forecasting model and its relative performance turned out to be generally superior to that of the original model the comparative analyses of the proposed model with two forecasting models revealed that the new model s forecast accuracy is generally better than those of others the study finds achieving self sufficiency in both biofuels fuel ethanol and biodiesel would remain a challenge for china while the united states and india would maintain their self sufficiency in ethanol and biodiesel respectively at least till 2028 the study also argues that biofuel is more likely to be a complementary fuel rather than an alternative fuel the study helps us understand how in the next decade the landscapes of biofuel production and consumption are changing and concludes with significant policy implications

money credit and banking in monetary models where agents are subject to trading shocks there is typically an ex post inefficiency since some agents are holding idle balances while others are cash constrained this problem creates a role for financial intermediaries such as banks who accept nominal deposits and make nominal loans in general financial intermediation improves the allocation the gains in welfare come from the payment of interest on deposits and not from relaxing borrowers liquidity constraints we also demonstrate that when credit rationing occurs increasing the rate of inflation can be welfare improving

unbundling the biofuel promise querying the ability of liquid biofuels to deliver on socio economic policy expectations abstract while excitement around biofuels initially focused on finding a clean and secure alternative to fossil fuels many other expectations have subsequently been attached to the biofuel boom biofuels are not only expected to mitigate climate change or foster domestic energy security but also to generate employment provide opportunities to smallholders and support decentralized energy systems this paper interrogates the expectations attached to biofuels we begin by examining how policies in consumer and producer countries articulate a series of expectations for biofuels that are bundled with the promise of cleaner energy using the rationales behind these expectations to derive criteria for success we then review evidence from the published literature on biofuel outcomes against these criteria to assess whether the most prevalent assumptions have been met we find that policy expectations for biofuels are often expressed in narrow terms failing to capture important potential impacts for example focusing on new jobs in the formal sector rather than job quality or whether employment offsets livelihood costs associated with biofuel investments some expectations have proven elusive irrespective of the metrics employed for example using biofuels to improve energy access in remote rural areas the paper concludes by discussing implications for policy and practice

a search theoretic approach to monetary economics the essential function of money is its role as a medium of exchange the authors formalize this idea using a search theoretic equilibrium model of the exchange process that captures the double coincidence of wants problem with pure barter one advantage of the framework described here is that it is very tractable the authors also show that the model can be used to addre ss some substantive issues in monetary economics including the potenti al welfare enhancing role of money the interaction between specializat ion and monetary exchange and the possibility of equilibria with multip le fiat currencies copyright 1993 by american economic association

a divisible search model of fiat money this paper extends the kiyotaki wright search model of fiat money to allow for divisible money and goods the extension allows me to examine the standard issues in monetary economics such as the neutrality and superneutrality of money by severing the artificial link in the kiyotaki wright model between the money supply and the number of money holders it is shown that money is neutral but not superneutral money growth generates a trading opportunity effect it changes the fraction of different agents in the economy and hence changes the probability with which agents have a successful match in addition money growth has a negative effect on the real money balance that is familiar in walrasian monetary models the balance of the two effects can imply a positive optimal money growth rate

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

an empirical study of an auction with asymmetric information this paper examines federal auctions for drain age leases on the outer continental shelf from 1959 to 1969 these are leases that are adjacent to tracts on which a deposit has been discovered the authors find that the data strongly support the hypotheses that neighbor firms are better informed about the value of a lease than nonneighbor firms that neighbor firms coordinate their bidding decisions and that both types of firms bid strategically in accordance with the bayesian nash equilibrium model for first price sealed bid auctions with asymmetric information

biofuels and food security micro evidence from ethiopia abstract there is considerable controversy about the impact of biofuels on food security in developing countries a major concern is that biofuels reduce food security by increasing food prices in this paper we use survey evidence to assess the impact of castor production on poor and food insecure rural households in ethiopia about 1 3 of poor farmers have allocated on average 15 of their land to the production of castor beans under contract in biofuel supply chains castor production significantly improves their food security they have fewer months without food and the amount of food they consume increases castor cultivation is beneficial for participating households food security in several ways by generating cash income from castor contracts they can store food for the lean season castor beans preserve well on the field which allows sales when farmers are in need of cash or food spillover effects of castor contracts increases the productivity of food crops increased food crop productivity offsets the amount of land used for castor so that the total local food supply is not affected

optimal selling strategies for oil and gas leases with an informed buyer a study is presented on whether the us government can increase its revenues from the sale of drainage leases by using a different allocation mechanism the optimal mechanism is characterized for selling a lease when there is a single informed buyer and a fixed number of uniformed buyers implementation and the magnitude of potential revenue gains if any are discussed

whither monetary economics i argue that monetary economics should be pursued by applying implementation theory to models which contain explicit frictions that make money essential the argument has two parts first i argue that models in which real balances are assumed to be productive models with money in utility or production functions or with cash in advance constraints contain hidden inconsistencies second i argue that the approach advocated is capable of providing new insights about some of the main issues in monetary economics the effects of monetary shocks the welfare cost of inflation and the roles of inside and outside money

money in search equilibrium in competitive equilibrium and in competitive search equilibrium we compare three market structures for monetary economies bargaining search equilibrium price taking competitive equilibrium and price posting competitive search equilibrium we also extend work on the microfoundations of money by allowing a general matching technology and entry we study how equilibrium and the effects of policy depend on market structure under bargaining trade and entry are both inefficient and inflation implies first order welfare losses under price taking the friedman rule solves the first inefficiency but not the second and inflation may actually improve welfare under posting the friedman rule yields the first best and inflation implies second order welfare losses

how biofuel policies backfire misguided goals inefficient mechanisms and political ecological blind spots abstract the development of an economically viable biofuel industry rests on strong state subsidies for production and processing creation of markets through government procurement fuel blending mandates price controls as well as foreign trade tariffs and quotas and multiple interventions in agricultural ecological and other regulations we use an approach grounded in agrarian political economy to critically analyze the literature on how biofuel policies interact with broader production trade and agro ecological processes we focus on policies involving the most prominent crops in the places where biofuel production has advanced the most i e usa brazil and the eu but also extend analysis to their relations with broader transformations in production commercial and even governance practices around the world we investigate the political and economic interests driving biofuel policies and how these set the terms in which state interventions and policies are conceived and implemented we find that these are not developed and implemented according to environmental or inclusive pro poor development purposes but according to state interests in energy security and its intersection with a tense alliance between corporate sectors rendering many policy mechanisms ineffective or even outright counterproductive to effectively facilitate more socially and environmentally sustainable energy production and agricultural practices

money and capital as competing media of exchange we construct a model where capital competes with fiat money as a medium of exchange and we establish conditions on fundamentals under which fiat money can be both valued and socially beneficial when the socially efficient stock of capital is too low to provide the liquidity agents need they overaccumulate productive assets to use as media of exchange when this is the case there exists a monetary equilibrium that dominates the nonmonetary one in terms of welfare under the friedman rule fiat money provides just enough liquidity so that agents choose to accumulate the same capital stock a social planner would

the real bills doctrine versus the quantity theory a reconsideration two competing monetary policy prescriptions are analyzed within the context of overlapping generations models the real bills prescription is for unfettered private intermediation or central bank operations designed to produce the effects of such intermediation the quantity theory prescription in contrast is for restrictions on private intermediation designed to separate money from credit although our models are consistent with quantity theory predictions about money supply and price level behavior under these two policy prescriptions the models imply that the quantity theory prescription is not pareto optimal and the real bills prescription is

a model of money and credit with application to the credit card debt puzzle many individuals simultaneously have significant credit card debt and money in the bank the credit card debt puzzle is given high interest rates on credit cards and low rates on bank accounts why not pay down the debt while economists have gone to elaborate lengths to explain this observation we argue it is a special case of the rate of return dominance puzzle from monetary economics we analyze the issue by extending standard monetary theory to incorporate consumer debt this seems interesting in its own right since developing models where money and credit coexist is a long standing challenge and it helps put into context recent discussions of consumer debt

scaling up biofuels a critical look at expectations performance and governance this editorial is the introduction to a special issue of scaling up biofuels a critical look at expectations performance and governance which assesses biofuels contribution to sustainability governance and upscaling the issue aims to contribute to a more informed evidence based policy debate on the role of bioenergy for sustainable development it comprises six review papers that share a solutions oriented and policy focused approach towards the assessment of sustainability bioenergy production and consumption is not evaluated as an isolated industry or additionality instead it is assessed as an inherent component of the broader social ecological system and history of which it forms a part synthesizing available empirical evidence on performance and contextualizing the evidence in view of expectations and bioenergy governance in and over time the papers address the role of biofuels for climate mitigation their ability to deliver on socio economic policy expectations the actual performance in view of risk anticipation and mitigation the role of state policy considering sector development and sustainability and the ability of certification schemes to deliver on market conversion and quality the synthesis paper draws on the empirical findings to develop a set of sustainability conditions sine qua nons that have to be considered in processes of policy making and upscaling

on money as a medium of exchange we analyze economies in which individuals specialize in consumption and production and meet randomly over time in a way that implies that trade must be bilateral and quid pro quo nash equilibria in trading strategies are characterized certain goods emerge endogenously as media of exchange or commodity money depending both on their intrinsic properties and on extrinsic beliefs there are also equilibria with genuine fiat currency circulating as the general medium of exchange we find that equilibria are not generally pareto optimal and that introducing fiat currency into a commodity money economy may unambiguously improve welfare velocity acceptability and liquidity are discussed

payment obligations reserve requirements and the demand for central bank balances we develop a model in which a bank s demand for reserves depends on the joint distribution of transactions reserve requirements and the interest rate by devoting resources to its liquidity management a bank can save on costly reserves required to settle its payments on time we test the model with data from the largest banks in the swiss interbank clearing system we find that the turnover ratio the speed with which a bank turns over its reserves in the payment system depends largely on the aggregate value of its payments we also find that reserve requirements impose a highly uneven burden on the banks

alternative bidding systems for leasing offshore oil experimental evidence alternative bidding systems for leasing offshore oil tracts the goal was to encourage participation by small companies by reducing the initial cost associated with the traditional bonus bid system we analyse the results of this unique experiment we find that although one alternative generated more bids in general the number of bids was no higher the winning bids were no lower and participation by small companies who already use joint bids was significantly lower than the traditional system which appears to be superior to these alternatives

reply to commentary on the special issue scaling up biofuels a critical look at expectations performance and governance abstract the special issue scaling up bioenergy identifies major policy expectations attached to biofuels production worldwide and it provides systematic reviews of actual biofuel performance and governance in these areas papers address the extent to which policy expectations related to climate change mitigation energy security rural livelihoods and risk mitigation have been achieved and the effectiveness of public and private governance in advancing sector sustainability building on these findings the synthesis paper asks what next for countries wishing to advance national biofuel programmes as one option for the necessary divestment from fossil fuels among other sine qua nons the special issue highlights the urgent need to downscale global energy demand and to stop treating biofuels as an isolated sector goldemberg et al 2018 query several aspects of our approach from research design data collection to our recommendation to apply the precautionary principle in research as well as policy making unfortunately goldemberg et al 2018 incorrectly portray our main argument moreover they claim bias in our approach and mistakes in our empirical evidence however without bringing forward an evenhanded critique of research philosophy methodology or referencing different empirical literature we fully stand behind our research philosophy and findings presented

interest rate corridors and reserves abstract this paper evaluates reserves regimes versus interest rate corridors which have become competing frameworks for monetary policy implementation rate corridors relying on lending and deposit facilities to create ceilings and floors for overnight interest rates evince mixed results on controlling volatility reserve requirements allow period average smoothing of interest rates but even if remunerated are subject to reserve avoidance activities a system of voluntary period average reserve commitments could offer equivalent rate smoothing advantages if central banks created symmetric opportunity costs of meeting or falling short of period average reserve requirements or commitments they could achieve flat reserve demand on settlement day

money and dynamic credit arrangements with private information abstract we construct a model with private information in which consumers write dynamic contracts with financial intermediaries a role for money arises due to random limited participation of consumers in the financial market without defection constraints a friedman rule is optimal the mean and variability of wealth tend to fall with inflation in the steady state and the welfare effects of inflation are very small with defection constraints the effects of inflation on the distribution of welfare and consumption are large but the effect on average welfare is still small the relaxation of defection constraints resulting from higher inflation can cause a substantial increase in the real interest rate journal of economic literature classification numbers d8 e4 g2

raising taxes through equalization a simple theory suggests that a common form of federal horizontal equalization grants should cause subnational governments to levy higher tax rates distorting local tax bases and so increasing federal transfers to test this i examine canadian provincial tax policies in the 1972 2002 period consistent with the theory provinces respond to expansions of equalization transfers by increasing their own tax rates i estimate that on average tax rates in grant receiving provinces were substantially and significantly higher as a consequence of the transfer formula jel classification h21 une theorie simple suggere qu une forme usuelle d octrois federaux de perequation horizontale devrait entrainer les gouvernements sub nationaux a imposer de plus hauts taux d imposition modifiant ainsi les bases de fiscalite locale et ce faisant accroissant les transferts federaux pour mettre au test cette hypothese on examine les politiques fiscales des provinces canadiennes pour la periode entre 1972 et 2002 d une maniere qui semble supporter l hypothese les provinces ont repondu a un accroissement des transferts de perequation en accroissant leur propre taux d imposition on estime que les taux moyens d imposition dans les provinces qui recoivent des transferts sont plus eleves de maniere substantielle et significative en raison de la formule de transferts

monetary policy in a channel system abstract channel systems for conducting monetary policy are becoming increasingly popular despite its popularity the consequences of implementing policy with a channel system are not well understood we develop a general equilibrium framework of a channel system and study the optimal policy a novel aspect of the channel system is that a central bank can tighten or loosen its policy without changing its policy rate this policy instrument has so far been overlooked by a large body of the literature on the optimal design of interest rate rules

lessons from first generation biofuels and implications for the sustainability appraisal of second generation biofuels the emergence of second generation 2g biofuels is widely seen as a sustainable response to the increasing controversy surrounding the first generation 1g yet sustainability credentials of 2g biofuels are also being questioned drawing on work in science and technology studies we argue that controversies help focus attention on key often value related questions that need to be posed to address broader societal concerns this paper examines lessons drawn from the 1g controversy to assess implications for the sustainability appraisal of 2g biofuels we present an overview of key 1g sustainability challenges assess their relevance for 2g and highlight the challenges for policy in managing the transition we address limitations of existing sustainability assessments by exploring where challenges might emerge across the whole system of bioenergy and the wider context of the social system in which bioenergy research and policy are done key lessons arising from 1g are potentially relevant to the sustainability appraisal of 2g biofuels depending on the particular circumstances or conditions under which 2g is introduced we conclude that sustainability challenges commonly categorised as either economic environmental or social are in reality more complexly interconnected so that an artificial separation of these categories is problematic

money and prices a model of search and bargaining abstract this paper makes commodities divisible and incorporates bargaining into the search theoretic model of money to determine the purchasing power of money or price it is shown that two monetary equilibria always coexist where fiat money is universally accepted the two equilibria differ in price output welfare and the velocity of money sunspot monetary equilibria exist in which money is universally accepted in all states of the economy multiplicity has novel implications on the effectiveness of currency substitution and exchange market intervention journal of economic literature classification numbers c78 e40

liquidity business cycles and monetary policy this paper presents a model of monetary economy with dier ences in liquidity across assets our purpose is to study how aggre gate production and asset prices uctuate with shocks to productivity and liquidity in so doing we examine what role government policy might have through open market operations that change the mix of assets held by the private sector we also show that certain apparent anomalies of asset markets are in fact normal features of a monetary economy in which the circulation of money is essential for a better allocation of resources

joint bidding entry and the price of ocs leases we use a two equation system to estimate the effects of joint bidding on the number of bids and the maximum bid the government received in auctions for offshore continental shelf tracts held between 1979 and 1983 the estimates are corrected for selection bias and simultaneity we find that joint bidding encourages entry in the sense that the number of bids is positively associated with the existence of joint bidding we also find support for the hypothesis that joint bidding increases the high bid with the number of bids held constant we use these results to estimate the cost of a ban on joint bidding for ocs leases

money is memory abstract this paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible following myerson 8 the standard definition of feasibility is adapted to take account of the lack of commitment the environments feature either memory or money memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past money is defined as an object that does not enter utility or production functions and is available in fixed supply the main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory depending on the environment the converse may or may not be true hence from a technological point of view money is equivalent to a primitive form of memory journal of economic literature classification numbers e40 c73 d82

biofuels and developing economies is the timing right in this article we discuss some key aspects of biofuel production in developing countries and where constraints and tradeoffs are likely to occur we use the example of two countries senegal and india to highlight some of the issues of cost competitiveness problems with ensuring stable supply of feedstock as well as critical missing links in the biofuels value chain that pose problems to scaling up national programs in these countries we discuss the particularly problematic nature of jatropha as a biodiesel feedstock and underline some helpful guiding principles that can help country level policy we point to an underlying duality between a well functioning food system and favorable conditions for agribusiness enterprises such as biofuels and the relevance it has to achieving food security goals

open mouth operations abstract this paper explains how central bank statements rather than open market operations can be used to implement monetary policy in the extreme policy instruments can be held constant and yet interest rates will evolve along the path desired by the central bank we show how the recent implementation of monetary policy in new zealand works in this way using announcement data from new zealand we find that open mouth operations lead to large changes in interest rates across all maturities and these changes cannot be explained by open market operations implications are drawn for monetary policy in other jurisdictions

do no harm risk perceptions in national bioenergy policies and actual mitigation performance this paper investigates how risks are anticipated in national bioenergy policies and in which way related expectations that harms can be prevented or mitigated have actually been met the paper draws on the national biofuel policies of ten countries and the eu selected to represent a diverse sample of regions producers and consumers and pioneers and latecomers it proceeds in two steps firstly it identifies three risk categories most frequently mentioned across the investigated national policies secondly it conducts a systematic review of available empirical research about biofuels effects in these risk categories findings are discussed regarding the empirical conditions under which related expectations to do no harm have materialized or failed and concerning the challenges of risks perception and management in actual policies we observe issues of crop selection and inadequate sectoral governance of biofuels but also challenges of large scale modes of intensive production effective risk mitigation was often the result of risk adverse choices by contract farmers engaged in biofuels production national policy documents have insufficiently conceptualized do no harm concepts and strategies in place to address these performance issues while remaining silent on the particular risk governance and accountability framework that keeps track of actual developments commitments and responsibilities

sine qua nons of sustainable biofuels distilling implications of under performance for national biofuel programs biofuels have been promoted worldwide under the assumption that they can support several strategic policy goals while mitigating associated risks drawing on published evidence on performance contributing papers to this special section question assumptions commonly attributed to biofuels their carbon neutrality their positive effect on rural livelihoods and policymakers ability to effectively govern for sustainability this paper takes these findings as its starting point and asks what next for countries wishing to advance biofuels as one option for the necessary divestment from fossil fuels deriving recommendations for national biofuel programs from past performance is no easy task context complexity power dynamics and scaling pose significant challenges to achieving policy aims we are nevertheless able to distill a set of sine qua nons indispensables for sustainable biofuel governance from the evidence and change management literatures they are put forward not as recipes for success but minimum conditions and best bet approaches requiring testing deliberation and refinement perhaps the most fundamental sine qua non is to pursue options that downscale global demand as current levels of global energy consumption if only in the transport sector cannot be met by biomass derived agrofuels in a way that meets social and environmental sustainability goals