the role of risk preferences in pay to bid auctions we analyze a new auction format in which bidders pay a fee each time they increase the auction price bidding fees are the primary source of revenue for the seller but produce the same expected revenue as standard auctions assuming risk neutral bidders if risk loving preferences are incorporated in the model expected revenue increases our model predicts a particular distribution of ending prices which we test against observed auction data the degree of fit depends on how unobserved parameters are chosen in particular a slight preference for risk has the biggest impact in explaining auction behavior suggesting that pay to bid auctions are a mild form of gambling this paper was accepted by peter wakker decision analysis

bid caps in large contests abstract we study the effect of rigid and flexible bid caps on contestants aggregate costs and aggregate bids in all pay contests with a large number of heterogeneous contestants and prizes we show that rigid caps always decrease aggregate costs whereas flexible caps have essentially no effect on aggregate costs rigid caps decrease aggregate bids when costs are linear or concave but increase aggregate bids under some conditions when costs are convex flexible caps always decrease aggregate bids

bilateral trading with naive traders we introduce naive traders in bilateral trading these traders report their true types in direct mechanisms and bid ask their values costs in auctions we show that by expropriating naive traders in direct mechanisms the mechanism designer can subsidize additional trades by strategic traders and improve efficiency in fact complete expropriation of naive traders is a necessary condition for constrained efficiency a significant implication is that in the presence of naive traders ex post individually rational mechanisms are not constrained efficient in contrast if the traders must use a given mechanism then the introduction of naive traders has an ambiguous effect on efficiency

what can we learn about financial access from u s immigrants the role of country of origin institutions and immigrant beliefs immigrants from countries with more effective institutions are more likely than other immigrants to have a relationship with a bank and to use formal financial markets more extensively the evidence that a country s institutional environment shapes beliefs and by extension the use of financial services provides support for policies that focus on institutional reforms in promoting financial access after holding wealth education and other factors constant the impact of institutional quality in the country of origin affects the financial market participation of all immigrant groups except those who have lived in the united states for more than 28 years these findings are robust to alternative measures of institutional effectiveness to controlling for additional country of origin characteristics and to various methods for addressing potential biases caused by immigrant self selection

a near pareto optimal auction with budget constraints abstract in a setup where a divisible good is to be allocated to a set of bidders with budget constraints we introduce a mechanism in the spirit of the vickrey auction in the mechanism we propose understating budgets or values is weakly dominated since the revenue is increasing in budgets and values all kinds of equilibrium deviations from true valuations turn out to be beneficial to the auctioneer we also show that ex post nash equilibrium of our mechanism is near pareto optimal in the sense that all full winners values are above all full losers values

simple mechanisms and preferences for honesty we consider full implementation in complete information environments when agents have an arbitrarily small preference for honesty we offer a condition called separable punishment and show that when it holds and there are at least two agents any social choice function can be implemented by a simple mechanism in two rounds of iterated deletion of strictly dominated strategies

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

strategic offering for a wind power producer as a result of subsidies and technological maturity renewable electricity producers have grown in some jurisdictions to clearly dominant positions in the market under this context we propose an offering strategy for a wind power producer with market power that participates in the day ahead market as a price maker and in the balancing market as a deviator uncertainty pertaining to wind power production and balancing market price is represented through a set of correlated scenarios the proposed model is a stochastic mathematical program with equilibrium constraints mpec that can be recast as a tractable mixed integer linear programming milp problem which is solvable using available optimization software results from an illustrative example and two case studies show the effectiveness of the proposed model

min max regret bidding strategy for thermal generator considering price uncertainty the electricity price volatility brings challenges to bidding strategies in the electricity markets in this paper we propose a minimax regret approach for a market participant to obtain an optimal bidding strategy and the corresponding self scheduled generation plans motivated by recently proposed robust optimization approaches our approach relies on the confidence intervals of price forecasts rather than point estimators we reformulate the minimax regret model as a mixed integer linear program milp and solve it by the benders decomposition algorithm moreover we design a bidding strategy based on the price forecast confidence intervals to generate the offer curve finally we numerically test the minimax regret approach in comparison with the robust optimization approach on three types of thermal generators by using real electricity price data from pjm to verify the effectiveness of our proposed approach

caps on political lobbying comment following the 1999 israeli elections the winning candidate s ehud barak s party was fined 3 2 million dollars for violating israel s campaign financing laws by exceeding the spending cap imposed and raising 1 2 million dollars illegally see time europe 2000 while adhering to the strict ncaa recruiting regulations the university of oregon spent 3 million dollars to make their football locker room the best anywhere including the nfl lexington herald leader 2003 when asked about the previous salary cap in the uk football league players said that it the cap was so artificial that clubs paid money in brown paper envelopes bbc2 newsnight 2002 in all these cases there officially existed a rigid spending cap however they show that even though a cap exists the cap might not be easily enforced when enforced the penalty may just be financial rather than a change in outcome the cap may be enforced and adhered to but there may also be alternate perhaps less effective hence more costly means of spending we also see that the flexible nature of the cap is often built into the rules by examining the salary caps of the four major us sports leagues where the caps are routinely exceeded in baseball and basketball surpassing the cap invokes a pure financial penalty called a luxury tax which is proportional to the excess in football while the cap is stated in terms of salaries many teams use signing bonuses as a way to circumvent it in ice hockey there is a dual cap system where the luxury tax is invoked on salaries falling between the two caps and signing bonuses are an allowed method to exceed the

on optimal public good provision with tax evasion it is proved that for public goods with zero income effects also called ziff public goods tax evasion does not affect the optimal level of public expenditure further examples show that in general tax evasion may lead to less but also to more public expenditure

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

auctions development and privatization efficient auctions with liquidity constrained buyers abstract we exhibit an efficient auction an auction for which the winner is the buyer with the highest valuation subject to the constraint that buyers may be budget or liquidity constrained

a restriction on lobbyist donations abstract this paper studies the consequences of a fine for violating a ceiling on permissible donations in a competition for a political prize increasing the fine can increase or decrease the amount of expected donations in equilibrium

representative evidence on lying costs abstract a central assumption in economics is that people misreport their private information if this is to their material benefit several recent models depart from this assumption and posit that some people do not lie or at least do not lie maximally these models invoke many different underlying motives including intrinsic lying costs altruism efficiency concerns or conditional cooperation to provide an empirically validated microfoundation for these models it is crucial to understand the relevance of the different potential motives we measure the extent of lying costs among a representative sample of the german population by calling them at home in our setup participants have a clear monetary incentive to misreport misreporting cannot be detected reputational concerns are negligible and altruism efficiency concerns or conditional cooperation cannot play a role yet we find that aggregate reporting behavior is close to the expected truthful distribution suggesting that lying costs are large and widespread further lab experiments show that this result is not driven by the mode of communication

asymmetric all pay auctions with incomplete information the two player case abstract we prove existence and uniqueness of bayesian equilibrium for a class of generally asymmetric all pay auctions with incomplete information due to its importance in applications some prominence is given to the first price all pay auction for which a detailed characterization of equilibrium and an approximation to equilibrium of its well studied complete information version are supplied furthermore we relate our uniqueness result to the well known multiplicity of equilibria in the war of attrition second price all pay auction which emerges as a limit point of the class of two player auction games considered journalof economic literature classification numbers d44 c62 c72

bid costs and endogenous bid caps we study contests where several privately informed agents bid for a price all bidders bear a cost of bidding that is an increasing function of their bids and moreover bids may be capped we show that regardless of the number of bidders if agents have linear or concave cost functions then setting a bid cap is not profitable for a designer who wishes to maximize the average bid on the other hand if agents have convex cost functions i e an increasing marginal cost then affectively capping the bids is profitable for a designer facing a sufficiently large number of bidders

on the continuous equilibria of affiliated value all pay auctions with private budget constraints abstract we consider all pay auctions in the presence of interdependent affiliated valuations and private budget constraints for the sealed bid all pay auction we characterize a symmetric equilibrium in continuous strategies for the case of n bidders budget constraints encourage more aggressive bidding among participants with large endowments and intermediate valuations we extend our results to the war of attrition where we show that budget constraints lead to a uniform amplification of equilibrium bids among bidders with sufficient endowments an example shows that with both interdependent valuations and private budget constraints a revenue ranking between the two auction formats is generally not possible equilibria with discontinuous bidding strategies are discussed

credit auctions and bid caps abstract in this paper we offer two contributions to the field of credit auctions first we compare first and second price credit auctions and provide solvency dependent conditions such that one mechanism dominates the other in terms of expected payoffs of all the parties involved in addition we present a new possibility of using bid caps in credit auctions we study the equilibria in the capped mechanisms and show that bid caps can increase the seller s expected payoff and in some cases the expected payoffs of all sides a win win situation

gender and competition at a young age gender gaps may be observed in a variety of economic and social environments one of the possible determining factors is that men are more competitive than women and so when the competitiveness of the environment increases the performance of men increases relative to that of women we test this hypothesis in a field study conducted with 9 year old children running on a track they first run alone and then in pairs over a short distance with different gender composition of the pairs the results support the hypothesis that performance in competition varies according to gender when children ran alone there was no difference in performance in competition boys but not girls improved their performance this finding relates to the discussion regarding single sex schools the outcomes of examinations in a mixed sex school can show a gender gap in favor of boys even when this gap does not reflect actual abilities girls who are as talented as boys will end up performing worse just because they are not as competitive and will not achieve as high scores in examinations as boys

inherited trust and growth this paper develops a new method to uncover the causal effect of trust on economic growth by focusing on the inherited component of trust and its time variation we show that inherited trust of descendants of us immigrants is sig nificantly influenced by the country of origin and the timing of arrival of their forebears we thus use the inherited trust of descendants of us immigrants as a time varying measure of inherited trust in their country of origin this strategy allows to identify the sizeable causal impact of inherited trust on worldwide growth during the twentieth century by controlling for country fixed effects jel n11 n12 n31 n32 o47 z13

sizing the government is there such a thing as an optimal government size we investigate the so called armey curve which claims an inverted u shaped relationship between government size and economic performance using non parametric data envelopment analysis dea the dea scores are linked to control variables such as initial per capita income openness population density urbanization country size and family size for 23 oecd countries we estimate the country specific efficiency scores which reveal the extent to which a country uses excess public resources to achieve the observed growth rate of gdp

monetary intelligence and behavioral economics the enron effect love of money corporate ethical values corruption perceptions index cpi and dishonesty across 31 geopolitical entities monetary intelligence theory asserts that individuals apply their money attitude to frame critical concerns in the context and strategically select certain options to achieve financial goals and ultimate happiness this study explores the dark side of monetary intelligence and behavioral economics dishonesty corruption dishonesty a risky prospect involves cost benefit analysis of self interest we frame good or bad barrels in the environmental context as a proxy of high or low probability of getting caught for dishonesty respectively we theorize the magnitude and intensity of the relationship between love of money and dishonest prospect dishonesty may reveal how individuals frame dishonesty in the context of two levels of subjective norm perceived corporate ethical values at the micro level cev level 1 and corruption perceptions index at the macro level cpi level 2 collected from multiple sources based on 6382 managers in 31 geopolitical entities across six continents our cross level three way interaction effect illustrates as expected managers in good barrels high cev high cpi mixed barrels low cev high cpi or high cev low cpi and bad barrels low cev low cpi display low medium and high magnitude of dishonesty respectively with high cev the intensity is the same across cultures with low cev the intensity of dishonesty is the highest in high cpi entities risk seeking of high probability the enron effect but the lowest in low cpi entities risk aversion of low probability cpi has a strong impact on the magnitude of dishonesty whereas cev has a strong impact on the intensity of dishonesty we demonstrate dishonesty in light of monetary values and two frames of social norm revealing critical implications to the field of behavioral economics and business ethics

favoritism in asymmetric contests head starts and handicaps abstract i examine a contest with identity dependent rules in which contestants are privately informed and ex ante heterogeneous a contestant may suffer from a handicap or benefit from a head start the former reduces the contestant s score by a fixed percentage the latter is an additive bonus although total effort increases if the weak contestant is favored with a head start the optimal use of handicaps is not as clear cut depending on the nature of the asymmetry it may or may not be optimal to handicap the strong contestant moreover it is generally optimal to combine the two instruments for instance when contestants are sufficiently heterogeneous the weak contestant should be given both a head start and a handicap it may also be possible to induce higher effort and at the same time make both contestants better off ex ante

application of information gap decision theory to risk constrained self scheduling of gencos in a competitive electricity market a generation company genco optimizes its operation schedules referred to as self scheduling in order to maximize its profit however various sources of uncertainty such as market price fluctuations or forced outage of generating units may impact the genco s profit in this paper a non probabilistic information gap model is proposed to model the uncertainties in short term scheduling of a genco the self scheduling problem is formulated for risk neutral risk averse and risk seeker gencos robustness of the decisions against low market prices are evaluated using a robustness model furthermore windfall higher profit due to unpredicted higher market prices is modeled using an opportunity function the proposed models are applied to a 54 unit thermal genco

nash equilibrium in strategic bidding a binary expansion approach this paper presents a mixed integer linear programming solution approach for the equilibrium problem with equilibrium constraints epec problem of finding the nash equilibrium ne in strategic bidding in short term electricity markets a binary expansion be scheme is used to transform the nonlinear nonconvex ne problem into a mixed integer linear problem milp which can be solved by commercially available computational systems the be scheme can be applicable to cournot bertrand or joint price quantity bidding models the approach is illustrated in case studies with configurations derived from the 95 gw brazilian system including unit commitment decisions to the price maker agents

perfect equilibria in budget constrained sequential auctions an experimental study this article presents an experimental study of bidding behavior in sequential auctions in which there are budget constraints and perfect information our experiments test both the properties of such auctions and the predictive power of a refinement of the nash equilibrium concept we find that budget constraints affect the behavior of bidders and that the trembling hand perfect equilibrium is generally a good predictor of prices

controlling collusion in auctions the role of ceilings and reserve prices abstract we examine a simple model of collusion under a single object second price auction under the appropriate parameter conditions in particular as long as collusion is neither too easy nor too difficult we find that the optimal policy involves both an effective ceiling as well as a reserve price set at the lowest bidder valuation

tie breaks and bid caps in all pay auctions we revisit the complete information all pay auction with bid caps introduced by che and gale 1998 dropping their assumption that tie breaking must be symmetric any choice of tie breaking rule leads to a dierent set of nash equilibria compared to the optimal bid cap of che and gale we obtain that in order to maximize the sum of bids the designer prefers to set a less restrictive bid cap combined with a tie breaking rule which slightly favors the weaker bidder moreover the designer is better o breaking ties deterministically in favor of the weak bidder than symmetrically except when bidding costs are strongly convex jel classication d72 d44

contracting for health services when patient demand does not reflect quality this paper analyses contracts to keep down costs while maintaining quality of health services when patient demand does not reflect quality there is then a natural role for forms of contract that have emerged during the reforms of the nhs in britain that differ from pure fixed price or cost reimbursement contracts the optimal form depends on whether the provider is entirely self interested or benevolent in having genuine concern for patient welfare with fully benevolent providers there are roles for block and cost and volume contracts with partially benevolent providers some degree of cost sharing is typically optimal

honesty in a model of strategic information transmission we consider the following simple model of consumer fraud consumers need one of two possible repairs an expensive repair denoted e or an inexpensive repair denoted i the exogenous probability that a consumer needs the more costly remedy is r each consumer is assumed to know r an expert can observe with certainty which of the two repairs is needed and can offer to sell either to the consumer in a simple extension we allow for uncertainty with respect to the expert s observation we assume that selling the expensive remedy to a consumer who needs only the inexpensive one is more profitable than selling the inexpensive one thus h eii h1 iji where h denotes profit and i denotes conditional on needing the profit functions are increasing in the price of the respective repairs for convenience we suppress the dependence of h on prices in our notation we also assume that a consumer prefers to obtain the appropriate repair to the inappropriate one thus u eie u ije and u iii u eii where u is the consumer s payoff lastly we assume that the functions u eje and u e i are decreasing in the price of the expensive repair and that u iie and u iii are decreasing in the price of the inexpensive repair we also assume that u iie is decreasing in the price of the expensive repair since the consumer ultimately buys the expensive repair in this case see below for further assumptions regarding the repairs we are interested in the equilibrium levels of honesty in this model how honest is the expert at the equilibrium do consumers always follow the expert s advice does the level of honesty increase as the interests of the agents become more similar in a sense to be defined below our assumptions are similar to those in the abstract strategic information transmission models of vincent crawford and joel sobel 1982 and jerry green and nancy stokey 1980 we follow the former paper which asks whether the signals sent become less noisy as the agents preferences become more similar despite the similarity of our model to crawford sobel s we arrive at some different conclusions with respect to the expert s honesty vis a vis the agents closeness of interests we explain this in detail in section iii in addition we allow that the expert may be uncertain about the true state of the world we also explicitly model the level of expert honesty which extends crawford sobel the outline of the paper is as follows in section i we provide the details of the model and show that a unique equilibrium exists comparative static results and a simple extension incorporating the assumption of the incompetent expert are given in section ii we draw comparisons with crawfordsobel in section iii in section iv we conclude with a brief summary

symmetric two stage contests with budget constraints the impact of a budget constraint on individual expenditures is examined in two models of two stage contests with homogenous and risk neutral players competing to win a single indivisible commonly valued rent the set of players is partitioned into equally sized groups in the first model one contestant from each group survives to compete on the second stage against the other survivors in the second model one group survives the first stage and its members compete against each other on the second stage we derive and discuss the symmetric subgame perfect equilibrium solution for each model

how not to raise money we show that standard winner pay auctions are inept fund raising mechanisms because of the positive externality bidders forgo if they top another s high bid revenues are suppressed as a result and remain finite even when bidders value a dollar donated the same as a dollar kept this problem does not occur in lotteries and all pay auctions where bidders pay irrespective of whether they win we introduce a general class of all pay auctions rank their revenues and illustrate how they dominate lotteries and winner pay formats the optimal fund raising mechanism is an all pay auction augmented with an entry fee and reserve price

is there a cultural component in tax morale evidence from immigrants in europe abstract in this paper we examine the existence of a cultural component in individual tax morale to identify the effect of culture we use immigrant data drawn from the european social survey we find that culture is a significant determinant of tax morale the level of tax morale in the country of immigrant origin influences individual tax morale in the destination country the result is robust to the inclusion of a wide set of individual and aggregate controls and persists across different population segments

uniqueness and existence of equilibrium in auctions with a reserve price abstract we prove existence and uniqueness of equilibrium for a general class of two player bidding games we apply our results to the first price auction the combination of first and second price auctions the war of attrition the all pay auction as well as combinations of the latter two auction forms we also treat the first price auction without risk neutrality our results deal with the asymmetric affiliated common values environment in the case where signals are independent our results apply to all equilibria when signals are not independent our uniqueness results hold in the class of nondecreasing strategy equilibria journal of economic literature classification number d44

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

measuring lying aversion abstract we introduce a new method for measuring the decision to lie in experiments in the game the decision to lie increases own payment independent of the counterpart s decision but potentially at a cost for the counterpart we identify at the individual level the decision to lie and measure how individuals react to different incentives to lie furthermore we investigate how lying behavior changes over time our method allows us to classify people into types including those who never lie those who always lie and those who react to incentives to lie we suggest this method as a useful instrument for examining factors that influence the decision to lie

motivation money prestige and cheats a b s t r a c t this paper investigates the effects of supervision and incentives on subjects performance and cheating behavior in a real effort task with a sample of 540 participants in three differ ent experiments we investigated the interaction between motivation and monetary and social rewards with and without supervision our results suggest 1 lack of supervision promotes cheating though workers tend to cheat moderately 2 both economic and social incentives increase motivation but only when workers like their jobs 3 workers do not increase their band of acceptable dishonest behavior for possible economic rewards but they do increase dishonest behavior for possible social rewards like prestige

loss aversion and lying behavior abstract we theoretically show that loss averse agents are more likely to lie to avoid receiving a low payoff after a random draw the lower the ex ante probability of this bad outcome the ex ante expected payoff increases as the bad outcome becomes less likely and hence the greater is the loss avoided by lying we demonstrate robust support for this theory by reanalyzing the results from the extant literature and with a new experiment that varies the outcome probabilities and is run double anonymous

monitoring motivation and management the determinants of opportunistic behavior in a field experiment economic models of incentives in employment relationships are based on a specific theory of motivation employees are rational cheaters who anticipate the consequences of their actions and shirk when the marginal benefits exceed costs we investigate the rational cheater model by observing how experimentally induced variation in monitoring of telephone call center employees influences opportunism a significant fraction of employees behave as the rational cheater model predicts a substantial proportion of employees however do not respond to manipulations in the monitoring rate this heterogeneity is related to variation in employee assessments of their general treatment by the employer jel d2 j2 l2 l8 m12

honesty and evasion in the tax compliance game conventional models of tax compliance emphasize that taxpayers make strategic tax reports underreporting income to the extent that this behavior is functionally rewarded in contrast to this view considerable empirical evidence suggests that many taxpayers are inherently honest reporting truthfully regardless of the incentive to cheat in this article we build a game theoretic model of tax compliance that includes both honest and potentially dishonest taxpayers we show that including honest taxpayers significantly alters the model leading to much improved empirical predictions and somewhat different and novel policy implications

competitive burnout theory and experimental evidence abstract we examine equilibrium selection in a two stage sequential elimination contest in which contestants compete for a single prize this game has a continuum of equilibria only one of which satisfies the coalition proof nash equilibrium cpne refinement that equilibrium involves burning out by using all of one s resources in the first stage it is pareto dominated by many other equilibria we find that cpne predicts well when four people compete but not when eight people compete for two second stage spots using a cognitive hierarchy ch framework we show that when the number of players and the mean number of thinking steps are large the ch prediction involves burning out this provides a partial explanation of our results we also develop a formal argument as to why cpne logic is more compelling with more players we conclude that more competition leads to higher bids and that burning out is indeed a competitive phenomenon

rigging the lobbying process an application of the all pay auction textabstractin a world where a politician can explicitly auction off a prize to the high bidder the standard auction literature can be used to analyse political behavior the justice system however precludes politicians from explicitly selling the prize to the highest bidder thus politicians cannot let it become public knowledge that they are in the business of selling political favors an institution has emerged in political markets to overcome this constraint which are termed as lobbying lobbyists make implicit payments to the politician through campaign contributions if these up front payments were rebated to those failing to receive the prize it would be clear that the politician was selling favors this article has examined an interesting principle arising in all pay auctions this principle states that a politician wishing to maximize political rents may find it in his best interest to exclude certain lobbyists from participating in the lobbying process particularly lobbyists valuing most the political prize

on the effects of bid caps in all pay auctions abstract this paper analyzes the effects of a bid cap in an all pay auction with incomplete information i find that a non trivial bid cap affects an agent s expected payment in three ways an anti competition effect which is associated with this agent s own signal a pro competitive good news effect which is associated with her opponents signals and which alleviates the winner s curse and an inference effect caused by affiliation of signals unlike the former two effects the inference effect is a double edged sword it is anti competitive when the cap is relatively low and pro competitive when a cap is relatively high

optimal energy management of an industrial consumer in liberalized markets this paper presents an optimization model for mid term management of a thermal and electricity supply system of an industrial consumer under liberalized energy markets electricity is supplied from the electric grid or from a gas engine while thermal energy is satisfied through a boiler or the mentioned gas engine the objective is to minimize the overall annual energy supply costs in order to make optimal contracting decisions mixed integer linear programming is applied to solve the problem since binary decision and operation variables have been employed a realistic case is presented to illustrate the model capabilities

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

cheating ourselves the economics of tax evasion no government can announce a tax system and then rely on taxpayers sense of duty to remit what is owed some dutiful people will undoubtedly pay what they owe but many others will not over time the ranks of the dutiful will shrink as they see how they are being taken advantage of by the others thus paying taxes must be made a legal responsibility of citizens with penalties attendant on noncompliance but even in the face of those penalties substantial tax evasion exists and always has the history of taxation is replete with episodes of evasion often notable for their inventiveness during the third century many wealthy romans buried their jewelry or stocks of gold coin to evade the luxury tax and homeowners in eighteenth century england temporarily bricked up their fireplaces to escape notice of the hearth tax collector webber and wildavsky 1986 p 141 this essay reviews what is known about the magnitude nature and determinants of tax evasion with an emphasis on the u s income tax alm 1999 andreoni erard and feinstein 1998 and slemrod and yitzhaki 2002 offer more comprehensive recent reviews of the literature it then places this information into a conceptual and policy context

equilibrium of affiliated value second price auctions with financially constrained bidders the two bidder case we study an affiliated value second price auction with two financially constrained bidders we prove the existence of a symmetric equilibrium under quite general conditions comparative static results are provided journal of economic literature classification number d44

pay to play politics informational lobbying and contribution limits when money buys access abstract we develop a game theoretic model of informational lobbying between two interest groups and a politician in which the politician can require political contributions in exchange for access the analysis considers three claims 1 the rich have better access to politicians than less wealthy groups 2 this access advantage makes the rich better off and skews policy in their favor and 3 contribution limits can reduce the rich group advantage and result in less skewed policy we show that the rich do have better access with the politician always offering access to the rich groups and only sometimes offering access to the less wealthy group this does not however mean that the rich group is better off or that policy is biased in its favor the politician sets access fees to extract the greatest amount of rent from the political process when only the rich group has access its expected benefit from gaining access is fully offset by its payment to the politician in this case the less wealthy interest group who is not targeted by the politician is better off contribution limits decrease the politician s ability to extract rent which improves the payoffs of rich interests and decreases politician payoffs finally the paper presents a novel benefit of contribution limits they can encourage the formation of lobby groups or the search for evidence which results in more evidence disclosure and better policy

optimal allocation without transfer payments abstract often an organization or government must allocate goods without collecting payment in return this may pose a difficult problem either when agents receiving those goods have private information in regards to their values or needs in this paper we find an optimal mechanism to allocate goods when the designer is benevolent while the designer cannot charge agents he can receive a costly but wasteful signal from them we find conditions for cases in which ignoring these costly signals by giving agents equal share or using lotteries if the goods are indivisible is optimal in other cases those that send the highest signal should receive the goods however we then show that there exist cases where more complicated mechanisms are superior also we show that the optimal mechanism is independent of the scarcity of the goods being allocated

context dependent cheating experimental evidence from 16 countries policy makers use several international indices that characterize countries according to the quality of their institutions however no effort has been made to study how the honesty of citizens varies across countries this paper explores the honesty among citizens across 16 countries with 1440 participants we employ a very simple task where participants face a trade off between the joy of eating a fine chocolate and the disutility of having a threatened self concept because of lying despite the incentives to cheat we find that individuals are mostly honest further international indices that are indicative of institutional honesty are completely uncorrelated with citizens honesty for our sample countries

strategic bidding for a virtual power plant in the day ahead and real time markets a price taker robust optimization approach we consider an energy management system that controls a cluster of price responsive demands besides these demands it also manages a wind power plant and an energy storage facility demands wind power plant and energy storage facility are interconnected within a small size electric energy system equipped with smart grid technology and constitute a virtual power plant that can strategically buy and sell energy in both the day ahead and the real time markets to this end we propose a two stage procedure based on robust optimization in the first stage the bidding strategy in the day ahead market is decided in the second stage and once the actual scheduling in the day ahead market is known we decide the bidding strategy in the real time market for each hour of the day we consider that the virtual power plant behaves as a price taker in these markets robust optimization is used to deal with uncertainties in wind power production and market prices which are represented through confidence bounds results of a realistic case study are provided to show the applicability of the proposed approach

politician preferences law abiding lobbyists and caps on political contributions the effect of a contribution cap is analyzed in a political lobbying game where the politician has a policy preference in contrast to the previous literature without politician policy preferences more restrictive binding caps always reduce expected aggregate contributions however the initial imposition of a cap increases contributions if the politician mildly favors the low valuation lobbyist s policy the introduction of policy preferences permits analysis of monied interests policy influence a more restrictive cap makes it more likely that the politician enacts the policy he would have enacted in the absence of lobbying even in cases where expected aggregate contributions increase

pool strategy of a price maker wind power producer we consider the problem of a wind power producer trading energy in short term electricity markets the producer is a price taker in the day ahead market but a price maker in the balancing market and aims at optimizing its expected revenues from these market floors the problem is formulated as a mathematical program with equilibrium constraints mpec and cast as a mixed integer linear program milp which can be solved employing off the shelf optimization software the optimal bid is shown to deliver significantly improved performance compared to traditional bids such as the conditional mean or median forecast of wind power distribution finally sensitivity analyses are carried out to assess the impact on the offering strategy of the producer s penetration in the market of the correlation between wind power production and residual system deviation and of the shape of the forecast distribution of wind power production

caps in sequential contests i introduction in many competitions we can often observe situations where severe constraints are imposed on contestants for example in the u s electoral campaign there is a specific maximum campaign contribution that a single agent can make to a candidate 1 in sports where equipment plays a major role e g sailing motor races etc explicit or implicit technological constraints are imposed on the allowed equipment also several sports leagues e g the national basketball association nba implement a salary cap which places a limit on the total amount of money a team can spend on players salaries salary caps are clearly binding and teams are sometimes forced to trade expensive players in order to make place for other needed team members the usual reason for applying salary caps is that they facilitate even competition between small and large city teams otherwise large city teams could pay more buy the best talent and ultimately destroy any semblance of competition in the league the goal of caps imposed by designers of competitions is to create what we call a competitive balance so that many players have a chance to win and not necessarily the strongest ones in addition if the contest is more competitively balanced the uncertainty of the outcome is higher and therefore the contest is more attractive furthermore competitive balance may lead to an improvement of the expected total performance of all the players rather than just the performance of the top player several other ways have been suggested to enhance the competitive balance in contests for example baye kovenock and de vries 1993 showed that in all pay auctions contests by excluding the strongest player the player with the highest value of winning the contest becomes more competitively balanced and then the players expected total bid may increase moldovanu and sela 2001 found that in all pay auctions under incomplete information when cost functions are convex several positive prizes may be optimal for a designer who wishes to maximize the expected total bid in other words by increasing the number of the prizes the chances of the players with relatively low values of winning to win one of the prizes increase and therefore these players will increase their efforts accordingly cohen kaplan and sela 2008 studied all pay auctions with effort dependent rewards under incomplete information and demonstrated that when the designer maximizes the total bid effort and when there is a sufficiently large number of contestants the optimal reward decreases in the contestants bid this means that a designer will offer higher prizes to the players with relatively low values of winning those who exert lower efforts than to the players with relatively high values of winning those who exert higher efforts such a distribution of prizes balances the bids submitted by the players with high and low values of winning we focus here on the role of bid caps to enhance the competitive balance in contests relatively weak players players with low abilities or low values of winning usually exert low efforts which are lower than the level of the bid cap imposed by a designer in a contest with a bid cap if these players exert an effort that is equal to the bid cap they will have a higher chance to win since no one can exert a higher effort than the bid cap thus the weak players exert more effort than they would in a contest without a bid cap however relatively strong players players with high abilities or high values of winning usually exert higher efforts than the level of the bid cap thus the strong players exert less effort than they would in a contest without a bid cap hence the effect of the bid cap on the players total effort depends on the trade off between the increase of the weaker players efforts and the decrease of the stronger players efforts to be fully effective the bid cap system must guarantee that as many players as possible raise their efforts to the level of the bid cap and as less as possible reduce their efforts to this level

what determines corruption international evidence from microdata this paper uses a microlevel data set from 49 countries to create a direct measure of corruption which portrays the extent of bribery as revealed by individuals who live in those countries in addition it investigates the determinants of being asked for a bribe at the individual level the results show that both personal and country characteristics determine the risk of exposure to bribery examples are gender income education marital status the city size the country s unemployment rate average education and the strength of the institutions in the country jel k4 d73 p16

price taker bidding strategy under price uncertainty this paper provides a framework to obtain the optimal bidding strategy of a price taker producer an appropriate forecasting tool is used to estimate the probability density functions of next day hourly market clearing prices this probabilistic information is used to formulate a self scheduling profit maximization problem that is solved taking advantage of its particular structure the solution of this problem allows deriving a simple yet informed bidding rule results from a realistic case study are discussed in detail

why do we lie a practical guide to the dishonesty literature over the last decade a massive body of research has been devoted to uncovering human dishonesty in the present paper we review more than a hundred papers from this literature and provide a comprehensive overview by first listing the existing theoretical frameworks and then covering the common empirical approaches synthesizing the demographic and personal characteristics of those who cheat identifying the behavioural mechanisms found that affect dishonesty and finally we finish by discussing how the empirical evidence fit theory overall the review concludes that many people behave dishonestly but also that it is a highly malleable behavior sensitive to elements such as decision contexts behaviour of others state of mind and depletion the review can be used as an overview of the dishonesty literature or as a guide or work of reference for selected topics of interest

man s search for meaning the case of legos we investigate how perceived meaning influences labor supply in a laboratory setting we manipulate the perceived meaning of simple repetitive tasks and find a strong influence on subjects labor supply despite the fact that the wage and the task are identical across the conditions in each experiment subjects in the less meaningful conditions exhibit reservation wages that are consistently much higher than the subjects in the more meaningful conditions the result replicates across different types of tasks moreover in the more meaningful conditions subjects productivity influences labor supply more strongly

strategic bidding under uncertainty a binary expansion approach this work presents a binary expansion be solution approach to the problem of strategic bidding under uncertainty in short term electricity markets the be scheme is used to transform the products of variables in the nonlinear bidding problem into a mixed integer linear programming formulation which can be solved by commercially available computational systems the be scheme is applicable to pure price pure quantity or joint price quantity bidding models it is also possible to represent transmission networks uncertainties scenarios for price quantity plant availability and load financial instruments capacity reinforcement decisions and unit commitment the application of the methodology is illustrated in case studies with configurations derived from the 80 gw brazilian system

price maker self scheduling in a pool based electricity market a mixed integer lp approach this paper addresses the self scheduling problem faced by a price maker to achieve maximum profit in a pool based electricity market an exact and computationally efficient mixed integer linear programming milp formulation of this problem is presented this formulation models precisely the price maker capability of altering market clearing prices to its own benefits through price quota curves no assumptions are made on the characteristics of the pool and its agents a realistic case study is presented and the results obtained are analyzed in detail

contests with three or more heterogeneous agents abstract we study monotone equilibrium behavior in contests with observable effort bid where three or more participants have distinct risk attitudes and the monetary value for the prize of each is drawn independently from a distinct distribution these differences can either cause a player to drop out that is always choose zero effort regardless of his valuation or use all or nothing strategies with discontinuous effort choice neither complete drop out nor discontinuous bidding with finitely many gaps is consistent with pure strategy monotone bayesian nash equilibrium in a contest with either ex ante identical players or only two distinct participants

restricted coasean bargaining we investigate the efficiency of coasean bargaining when restrictions are placed on the set of feasible bargaining outcomes when property rights are costly to defend appropriate we find bargaining restrictions may be pareto superior to unconstrainedvoluntary exchange under cost uncertainty over the harmful activity we show an efficient configuration of restrictions must balance the potential reduction in appropriation costs with the possibility of allocatively inefficient bargaining restrictions for an all pay auction we find conditions where precluding bargaining is always ex ante preferable to unrestricted bargaining for cases where the restrictions are contested we show conditions for the continuing existence of welfare improvements

linear complementarity models of nash cournot competition in bilateral and poolco power markets two cournot models of imperfect competition among electricity producers are formulated as mixed linear complementarity problems lcps and a simple example is presented to illustrate their application the two models simulate bilateral markets the models include a congestion pricing scheme for transmission but other transmission pricing approaches can also be represented in this framework the two models differ from each other in that one has no arbitrage between nodes of the network while in the other model arbitragers erase any noncost based differences in price the latter bilateral model turns out to be equivalent to a cournot model of a poolco the models differ from other cournot market models in that they include both of kirchhoff s laws via a dc approximation can include arbitragers possess unique solutions and are readily solved by efficient lcp algorithms the key assumption that permits their formulation as lcps is that each producer naively assumes that its output will not affect transmission prices

a robust linear approach for offering strategy of a hybrid electric energy company this paper presents a new approach for determining the day ahead bidding strategies of a large scale hybrid electric energy company the company has both energy generation and energy retailing businesses in a competitive electricity market demand response programs are also considered in the retail side of the company in order to hedge the risk of participation in wholesale market this paper introduces a max min bilevel mathematical programming with equilibrium constraint model for offering a strategy that manages the risk of uncertain forecasted rivals bids by robust optimization the max min bilevel model is converted to its equivalent single level optimization using karush kuhn tucker optimality conditions the duality theory is utilized to find the equivalent ordinary maximization model of the max min problem strong duality theory and big m method are also used to linearize the final model of offering strategy applicability of the proposed approach is shown by implementing it on the ieee 118 bus test system

strategic communication with lying costs i study a model of strategic communication between an uninformed receiver and an informed but upwardly biased sender the sender bears a cost of lying or more broadly of misrepresenting his private information the main results show that inflated language naturally arises in this environment where the sender almost always claims to be of a higher type than he would with complete information regardless of the intensity of lying cost there is incomplete separation with some pooling on the highest messages the degree of language inflation and how much information is revealed depend upon the intensity of lying cost the analysis delivers a framework to span a class of cheap talk and verifiable disclosure games unifying the polar predictions they make under large conflicts of interest i use the model to discuss how the degree of manipulability of information can affect the trade off between delegation and communication copyright 2009 wiley blackwell

honesty beliefs about honesty and economic growth in 15 countries the honesty of people in an online panel from 15 countries was measured in two experiments reporting a coin flip with a reward for heads and an online quiz with the possibility of cheating there are large differences in honesty across countries average honesty is positively correlated with per capita gdp this is driven mostly by gdp differences arising before 1950 rather than by gdp growth since 1950 a country s average honesty correlates with the proportion of its population that is protestant these facts suggest a long run relationship between honesty and economic development the experiment also elicited participants expectations about different countries levels of honesty expectations were not correlated with reality instead they appear to be driven by cognitive biases including self projection

should we tax or cap political contributions a lobbying model with policy favors and access abstract this paper develops a model of political contributions in which a politician can either sell policy favors or sell access access allows interest groups to share hard information with the politician in support of their preferred policy here selling access maximizes policy utility while selling policy favors maximizes total contributions imposing a binding contribution limit makes it more likely that the politician sells access which can improve expected constituent welfare however a contribution limit distorts the signals associated with the contributions which tends to result in worse policy alternatively a tax on political contributions can ensure that the politician sells access without distorting his information therefore from the viewpoint of a representative constituent a tax on contributions is strictly preferred to a contribution limit or no reform the politician however may prefer regulation in the form of a contribution limit even when a tax is better for the constituent

tax morale affects tax compliance evidence from surveys and an artefactual field experiment our working hypothesis is that cross cultural differences in tax compliance behavior have foundations in the institutions of tax administration and citizen assessment of the quality of governance tax compliance being a complex behavioral issue its investigation requires use of a variety of methods and data sources results from artefactual field experiments conducted in countries with substantially different political histories and records of governance quality demonstrate that observed differences in tax compliance levels persist over alternative levels of enforcement the experimental results are shown to be robust by replicating them for the same countries using survey response measures of tax compliance

an analysis of the war of attrition and the all pay auction we study the war of attrition and the all pay auction when players signals are affiliated and symmetrically distributed we a find sufficient conditions for the existence of symmetric monotonic equilibrium bidding strategies and b examine the performance of these auction forms in terms of the expected revenue accruing to the seller under our conditions the war of attrition raises greater expected revenue than all other known sealed bid auction forms journal of economic literature classification numbers d44 d82 1997 academic press

finding multiple nash equilibria in pool based markets a stochastic epec approach we present a compact formulation to find all pure nash equilibria in a pool based electricity market with stochastic demands the equilibrium model is formulated as a stochastic equilibrium problem subject to equilibrium constraints epec the problem is based on a stackelberg game where the generating companies gencos optimize their strategic bids anticipating the solution of the independent system operator iso market clearing a finite strategy approach both in prices and quantities is applied to transform the nonlinear and nonconvex set of nash inequalities into a mixed integer linear problem milp a procedure to find all nash equilibria is developed by generating holes that are added as linear constraints to the feasibility region the result of the problem is the set of all pure nash equilibria and the market clearing prices and assigned energies by the iso a case study illustrates the methodology and proper conclusions are reached

a fairness approach to income tax evasion abstract the tax that a taxpayer wishes to evade is determined on the basis of his perception of the fairness of his fiscal treatment with respect to both governmental supply of public goods and the perceived behaviour of other taxpayers the coercive powers of the state and the taxpayer s attitude toward risk determine the extent to which this desired level is undertaken in practice this approach is able to produce implications for the relationship between public expenditure tax rates and tax evasion which are more consistent with empirical evidence than the results of the conventional portfolio choice approach

liquidity constraints and the formation of unbalanced contests abstract we analyze the effects of future liquidity constraints on contestants investment in a dynamic contest model contestants invest in two consecutive contests to win a prize in each period the loser of the first period contest can be liquidity constrained in the second period due to too little remaining wealth the winner of the first contest can reinvest the prize in the second contest we show that future liquidity constraints mainly affect the imbalance of the contest in the future but not today surprisingly larger contest prizes decrease contestants future investments and amplify the imbalance of future contests however the contest organizer can reduce this imbalance by increasing the share of the prize money in the second contest