prices and the winner s curse we usually assume that increases in supply allocation by rationing and exclusion of potential buyers reduce prices but all these activities raise the expected price in an important set of cases when common value assets are sold furthermore when we make the assumptions needed to rule out these anomalies for symmetric buyers small asymmetries among the buyers necessarily cause the anomalies to reappear our results help explain rationing in initial public offerings and outcomes of spectrum auctions we illustrate our results in the wallet game and in another new game we introduce the maximum game

almost common values auctions revisited in almost common value auctions one bidder the advantaged bidder has a valuation advantage over all other regular bidders it is well known that in second price auctions with two bidders even a slight private value advantage can have an explosive effect on auction outcomes as the advantaged bidder wins all the time and auction revenue is substantially lower than in a pure second price common value auction we explore the robustness of these results to the addition of more regular bidders in second price auctions and the extent to which these results generalize to ascending price english auctions in an effort to provide insight into when and why one ought to be concerned about such slight asymmetries

optimal auction with resale this paper investigates the design of seller optimal auctions when winning bidders can attempt to resell the good in that case the optimal allocation characterized by myerson 1981 cannot be achieved without resale i find a sufficient and necessary condition for sincere bidding given the possibility of resale in two bidder cases i prove that the myerson allocation can be achieved under standard conditions supplemented with two assumptions with three or more bidders achieving the myerson allocation is more difficult i prove that it can be implemented in special cases in those cases the myerson allocation is generated through a sequence of resale auctions each optimally chosen by a reseller

first price auctions with resale abstract we present a simple model of first price auction with two bidders whose valuations are not identically distributed and where resale is possible between the bidders and given an explicit expression for the equilibrium strategies

an eoq model with stock dependent demand shortage inflation and time discounting abstract this paper develops a finite time horizon deterministic economic order quantity eoq inventory model with shortages where the demand rate at any instant depends on the on hand inventory stock level at that instant the effects of inflation and the time value of money are taken into account considering two separate inflation rates namely the internal company inflation rate and the external general economy inflation rate the results are discussed with a numerical example and particular case of the model is discussed in brief a sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out

second price common value auctions under multidimensional uncertainty the literature has demonstrated that second price common value auctions are sensitive to the presence of asymmetries among bidders in a two bidder model bikhchandani 1988 reputation in repeated second price auctions j econ theory 46 97 119 has shown that if it is common knowledge that one bidder has a disadvantage compared to her opponent that bidder almost surely never wins the auction employing a similar two bidder model this paper shows that this result does not carry over when one allows for two sided uncertainty in such case in every equilibrium the disadvantaged type bidder needs to win the auction with strictly positive probability we then solve for the equilibria in two cases one with two types and another with a continuum of types and we show that they converge to the symmetric equilibria of the corresponding symmetric auctions we thus reestablish a lost linkage in the analysis of common value and almost common value auctions

ford whitman harris and the economic order quantity model ford whitman harris first presented the familiar economic order quantity eoq model in a paper published in 1913 even though harris s original paper was disseminated widely it apparently was unnoticed for many years before its rediscovery in 1988 during this period much confusion developed over the origin of the eoq model this paper explores the early literature on this model and traces the evolution of the confusion it also sketches the remarkable life of harris who made contributions as an engineer inventor author and patent attorney even though he received no formal education beyond high school harris s original 1913 essay is reprinted following this paper

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

the r q inventory policy subject to a compound poisson demand pattern abstract most inventory management models are based upon rather restrictive assumptions e g unit sized demands and the normal distribution for total demand during replenishment time in a majority of inventory management systems circumstances seem to allow these simplifications and inventory policies based upon these assumptions yield satisfying results however in some particular cases these simplifications differ fundamentally from the actual conditions and particle therefore application of the models mentioned above can result in an overinvestment in inventory or in an unacceptable low service level one of the situations in which we cannot rely on these simplified inventory models is studied in this paper we consider an inventory subject to a probabilistic non unit sized demand pattern and we propose an exact and an approximate reorder point calculation method for the r q inventory policy the exact algorithm involves formulas for the discrete distributions of the total demand during replenishment time and the undershoot the approximate method is based on the use of continuous distributions and will be more appropriate when historical data are sparse results of both approaches are compared the algorithms proposed in this study are simple fast and easy to implement in a variety of existing inventory management systems

financial management in inventory problems risk averse vs risk neutral policies abstract in this work we discuss the effect of risk measure selection in the determination of inventory policies we consider an inventory system characterized by the loss function of luciano et al 2003 var as a risk measure for multi period static inventory models international journal of production economics 81 82 375 384 we derive the optimization problems faced by risk neutral quadratic utility mean absolute and cvar decision makers results show that while the global nature of the optimal policy is assured for risk coherent and risk neutral decision makers the convexity of the quadratic utility problem depends on the stochastic properties of demand we investigate the economic and stochastic determinants of the different policies this allows us to establish the conditions under which each type of decision maker is indifferent to imprecision in the distribution families finally we discuss the numerical impact of the choice of the risk measure by means of a multi item inventory the introduction of an approach based on savage scores allows us to offer a quantitative measurement of the similarity discrepancy of policies reflecting different risk attitudes

uncertainty and global sensitivity analysis in the evaluation of investment projects abstract this paper discusses the use of global sensitivity analysis sa techniques in investment decisions global sa complements and improves uncertainty analysis ua providing the analyst decision maker with information on how uncertainty is apportioned by the uncertain factors in this work we introduce global sa in the investment project evaluation realm we then need to deal with two aspects 1 the identification of the appropriate global sa method to be used and 2 the interpretation of the results from the decision maker point of view for task 1 we compare the performance of two family of techniques non parametric and variance decomposition based for task 2 we explore the determination of the cash flow global importance gi for valuation criteria utilized in investment project evaluation for the net present value npv we show that it is possible to derive an analytical expression of the cash flow gi which is the same for all the techniques this knowledge enables us to 1 offer a direct way to compute cash flow gi 2 illustrate the practical impact of global sa on the information collection process for the internal rate of return irr we show that the same conclusions cannot be driven in particular a one has to utilize a numerical approach for the computation of the cash flow influence since an analytical expression cannot be found and b different techniques can produce different ranking these observations are illustrated by means of the application to a model utilized in the energy sector for the evaluation of projects under survival risk the quantitative comparison of cash flow ranking with respect to the npv and irr concludes the paper illustrating that information obtained from the sa of the npv cannot be transferred to the irr

on the value of competition in procurement auctions it is commonly stated that ascending price or second price auctions allocate goods e ciently to those who value them most this implies that the more bidders at the auction stage the more e cient the nal allocation we review this statement when bidders have private information both on a private element and a common element while the nal allocation need not be ex post e cient we show that when bidders are ex ante symmetric more competition at the auction yields higher e ciency on expectation when bidders are ex ante asymmetric in particular with respect to the information on the common element the statement need no longer be true

are disadvanteged bidders doomed in ascending auctions a bidder is said to be advantaged if she has a higher expected valuation of the auction prize than her competitor when the prize has a common value component a bidder competing in an ascending auction against an advantaged competitor bids especially cautiously and hence the advantaged bidder wins most of the time however contrary to what is often argued a disadvantaged bidder still wins with positive probability even if his competitor s advantage is very large and even if the disadvantaged bidder has the lowest actual valuation ex post therefore the disadvantaged bidder has an incentive to participate in the auction and the presence of a bidder with a small advantage does not have a dramatic effect on the seller s revenue

the effect of bidders asymmetries on expected revenue in auctions abstract bidders asymmetries are widespread in auction markets yet their impact on behavior and ultimately revenue and profits is still not well understood this paper defines a natural benchmark auction environment to which to compare any private values auction with asymmetrically distributed valuations the main result is that the expected revenue from the benchmark auction dominates that from the asymmetric auction both in the first price auction and the second price auction moreover for classes of distributions that lend themselves to a quasi ordering of more or less asymmetric configurations we prove that the expected revenue is lower the more asymmetric bidders are these results formalize the idea that competition is reduced by bidders asymmetries applications to merger analysis joint bidding and investment are discussed

partial pooling at the reserve price in auctions with resale opportunities abstract two features common to many auctions are the use of reserve prices and the existence of secondary markets for the goods being sold even in simple symmetric settings the combination of these features can preclude existence of an equilibrium in symmetric separating bidding strategies with a reserve price sufficiently far below the maximum endogenous valuation a symmetric equilibrium still exists but with some types pooling at the reserve the optimal reserve price depends not only on the joint distribution of bidders information before and after the auction but also on how surplus is divided in the secondary market journal of economic literature classification numbers d44 c7 l1 d82

stochastic properties of a production inventory process with planned production using transform methodology abstract we consider a stochastic inventory process in which demand is generated by individual events separated by independent stochastic time intervals whereas production takes place in batches of possibly varying sizes at different points in time the resulting processes are analysed using laplace transform methodology expressions for inventory and stockouts are developed applying the theory of residues an example includes poisson distributed demand intervals assuming costs for set ups for carrying inventory and for stockouts conditions are developed for determining the optimal production policy on the one hand when applying the traditional average cost measure on the other when applying the annuity stream principle

credit markets credibility and economic transformation this paper focuses on the special role that capital markets play in the transformation of centrally planned economies into well functioning market economies we demonstrate that underdeveloped credit markets inhibit the effectiveness of price reform monetary and credit policies and trade liberalization we explore various ways to overcome the difficulties associated with the underdeveloped credit markets in this regard we examine the implications of cleaning the balance sheets of enterprises and banks from nonperforming loans as well as ways to enhance credibility the paper concludes with a brief discussion of sequencing of economic reform measures

global sensitivity analysis in inventory management abstract this paper deals with the sensitivity analysis sa of inventory management models when uncertainty in the input parameters is given full consideration we make use of sobol function and variance decomposition method for determining the most influential parameters on the model output we first illustrate the method by means of an analytical example we provide the expression of the global importance of demand holding costs order costs of the harris economic order quantity eoq formula we then present the global sa of the inventory management model developed by luciano and peccati 1999 capital structure and inventory management the temporary sale problem international journal of production economics 59 169 178 for the economic order quantity estimation in the context of the temporary sale problem we show that by performing global sa in parallel to the modeling process an analyst derives insights not only on the eoq structure when its expression is not analytically known but also on the relevance of modeling choices as the inclusion of financing policies and special orders

a guide to public sector debt and deficits government deficits reinterpreted willem h buiter public sector debt and deficits are a matter of concern to governments throughout the world after presenting data on the public debt and deficits in the uk and abroad this paper considers four key issues first does an increase in the budget deficit today make an increase in inflation in the future more likely in economies like the uk the answer is no because the scope for raising revenue by money creation is limited compared to raising taxes second how does one evaluate the consistency of a given spending and tax programme a number of measures are presented which indicate the adjustment that must be made to spending and tax plans if the government is to remain solvent third it is often argued that an increase in budget deficits will merely crowd out private spending the paper shows that the truth of this proposition depends critically on the state of the economy the time horizon and whether the increased deficit is temporary or permanent finally the question of deriving a suitable measure of fiscal stance is considered developing an index of fiscal impact requires a suitable economic model and a number of different measures are considered and criticized conventional deficit measures whether actual cyclically corrected or inflation corrected are a poor indicator of the government s true fiscal stance

non cooperative bargaining theory an introduction the paper provides an informal introduction to some of the main themes of the recent literature on non cooperative or sequential bargaining models it focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by nash bargaining theory it illustrates the new insights offered by the non cooperative approach by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome finally the difficulties which arise in extending this analysis to two person bargaining with incomplete information and to n person bargaining are discussed this is a revised version of the fourth review of economic studies lecture presented in april 1985 at the joint meeting of the association of university teachers of economics and the royal economic society held in oxford the choice of lecturer is made by a panel whose members are currently professors hahn mirrlees and nobay and the paper is refereed in the usual way this paper aims to provide an informal and elementary introduction to an approach to bargaining which has received a great deal of attention over the past few years the approach involves writing down some particular sequence of moves offers and replies to be made over time in the course of negotiations and then looking for a non cooperative equilibrium in the game thus specified in practice a perfect equilibrium or in games of incomplete information a sequential equilibrium while the approach appears at first sight to be very different in spirit from the traditional axiomatic approach in which a bargaining solution is specified by appealing to a number of general requirements which are deemed appropriate on the basis of some a priori considerations the two approaches are in fact complementary while the

evaluation of capital costs in a multi level inventory system by means of the annuity stream principle abstract in this paper some results obtained from applying the annuity stream principle for evaluating capital tied up in inventory and work in progress and presented this principle departs from the cashflows associated with the production inventory processes considered in contrast to traditional procedures by which the inventory value is determined from physical stock evaluated at costs incurred to date in many situations it appears that the traditional procedure will underestimate the amount of capital tied up in production in this paper the two principles are applied to a multi level inventory system and the capital cost expressions and optimal order quantities are compared

reputation in repeated second price auctions abstract a model in which two bidders take part in a series of second price comon value auctions is examined the question of an optimal auction from an auctioneer s standpoint in a repeated auction setting is partially addressed it is shown that the results from single auction models do not carry over to repeated auctions when one of the bidders is endowed with a reputation for bidding aggressively second price auctions with two bidders are highly susceptible to manipulative behaviour by an aggressive bidder and yield much lower revenues to the auctioneer

differential importance and comparative statics an application to inventory management abstract in this work we deal with the problem of establishing which parameters impact an inventory policy the most a new sensitivity measure is introduced by relating the differential importance d and the comparative statics cs techniques we discuss the properties of the new indicator and show that it shares the additivity property we provide the expression of for optimization models numerical results are offered for the sensitivity analysis of a recently introduced inventory management model

numerical computation of inventory policies based on the eoq σx value for order point systems abstract this paper examines the numerical computation of two control parameters order size and order point in the well known inventory control model an s q system with a safety stock strategy the aim of the paper is to show that the eoq x value is both sufficient for controlling the system and essential for the economic consequences of using approximations in computations of optimal policies in view of the evidence from a number of studies showing that firms use of statistical inventory control lags far behind academic interest in the area this is also an important aspect the determination of optimal values for the control variables even in this very simple inventory control system is a complex task and therefore not suited to practical implementation where one or more of the following issues are neglected the interdependence of order size and order point the difference between stock on hand and net stock and the excess stockout included in the next period we use the determination of optimal values for the control variables as a framework to evaluate the economic consequences of these approximations applied in pratical inventory control

the deterministic eoq and epq with partial backordering at a rate that is linearly dependent on the time to delivery abstract our original models for the eoq and epq with partial backordering assumed that the backordering rate is a constant in this paper we extend those models to allow to increase linearly as the time until delivery decreases we show how those previous models can be adapted to find the optimal decision variable values for this new assumption and develop for each model type a condition that the initial value of must meet for partial backordering to be optimal

auctions with resale markets an application to u s forest service timber sales when bidders anticipate an opportunity for resale trade the value of winning an auction is determined in part by the option values of buying and selling in the secondary market one implication is that a bidder s willingness to pay at an auction increases with the expected level of competition between resale buyers empirical evidence from auctions of timber contracts supports this prediction and rejects standard models that ignore resale the estimated effect is smaller after policy changes expected to diminish the prevalence of resale additional evidence supports the predicted presence of a common value element introduced by the resale opportunity

economic reform in czechoslovakia should we believe in santa klaus czechoslovakia david begg between the wars czechoslovakia was a prosperous market economy important legacies remain but 40 years of planning have caused severe distortions can czechoslovakia again become the jewel in the crown of eastern europe reforms began later than in hungary and poland but are now proceeding apace traditional sequencing of reforms is unwise micro reforms deserve greater priority and themselves affect macro credibility monetary and fiscal policies are intended to be tight but worries remain wage indexation a fuzzy exchange rate commitment and rising unemployment enterprise reform divides into better internal and external incentives privatization will be impeded by restoration of property to former owners and in any case is insufficient problems of corporate control will remain and inadequate attention is being given to incentives for state owned enterprises better external incentives require more foreign competition still limited tougher domestic competition policy still inadequate attention to banks and credit where bankruptcy is hard to enforce and balance sheets should be restructured and a temporary wage subsidy activities with negative value added at world prices should cease other activities would be more efficiently supplied through imports i discuss the principles governing the pace of intelligent restructuring and assess the prospects for its success in czechoslovakia

bidding to lose auctions with resale a losing bidder can still purchase the prize from the winner after the auction we show why a strong bidder may prefer to drop out of the auction before the price has reached her valuation and acquire the prize in the aftermarket a strong bidder may be in a better bargaining position in the aftermarket if her rival won at a relatively low price so it can be common knowledge that in equilibrium a weak bidder will win the auction and even without uncertainty about relative valuations resale will take place the possibility of reselling to a strong bidder attracts weak bidders to participate in the auction and raises the seller s revenue

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

speculation in standard auctions with resale in standard auctions resale creates a role for a speculator a bidder who is commonly known to have no use value for the good on sale we study this issue in environments with symmetric independent private value bidders for second price and english auctions the efficient value bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits first price and dutch auctions have an essentially unique equilibrium and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders the value distribution and the discount factor speculators do not make profits in first price or dutch auctions

sensitivity analysis in investment project evaluation abstract this paper discusses the sensitivity analysis of valuation equations used in investment decisions since financial decision are commonly supported via a point value of some criterion of economic relevance net present value economic value added internal rate of return etc we focus on local sensitivity analysis in particular we present the differential importance measure dim and discuss its relation to elasticity and other local sensitivity analysis techniques in the context of discounted cash flow valuation models we present general results of the net present value and internal rate of return sensitivity on changes in the cash flows specific results are obtained for a valuation model of projects under severe survival risk used in the industry sector of power generation

high bids and broke winners abstract this paper analyzes auctions where budget constrained bidders have options to declare bankruptcy it predicts a bidding equilibrium that changes discontinuously in a borrowing rate available to bidders when the borrowing rate is above a threshold high budget bidders win and the likelihood of bankruptcy is low when the borrowing rate is below the threshold the winner is the most budget constrained bidder and is most likely to declare bankruptcy this result explains the high bids and broke winners anomaly in the c block fcc spectrum auction based on its equilibrium analysis the paper proves that a seller can profit from offering to finance the highest bidder at a below market interest rate even with default risk journal of economic literature classification numbers d44 d45 d82 g33 l96

a theory of debt and equity diversity of securities and manager shareholder congruence this paper shows how the optimal financial structure of a firm complements incentive schemes to discipline managers and how the securities return streams determine the claim holders incentives to intervene in management the theory rationalizes 1 the multipucity of securities 2 the observed correlation between return streams and control rights of securities and 3 the partial congruence between managerial and equity holder preferences over policy choices and monetary rewards as well as the low level of interference of equity in management the theory also offers new prospects for a reappraisal of the earlier corporate finance literature

capital structure and inventory management the temporary sale price problem the paper discusses the use of adjusted present value techniques in a problem of inventory management the temporary sale price problem in the presence of equity or debt financing while traditional net present value approaches produce results very similar to those of the average cost approach our consideration of the capital structure of the firm opens the way to theoretically and numerically different inventory policies