imperfect competition and the keynesian cross abstract this paper presents a simple general equilibrium model in which the only non walrasian feature is imperfect competition in the goods market the model is shown to exhibit various keynesian characteristics in particular as competition in the goods market becomes less perfect the fiscal policy multipliers approach the values implied by the textbook keynesian cross

umbrella branding with imperfect observability and moral hazard abstract in a framework of repeated purchase experience goods with seller s moral hazard and imperfect monitoring umbrella branding may improve the terms of the implicit contract between seller and buyers whereby the seller invests in quality and buyers pay a high price in some cases umbrella branding leads to a softer punishment of product failure which increases the seller s value in other cases umbrella branding leads to a harsher punishment of product failure which allows for a reputational equilibrium that would otherwise be impossible on the negative side under umbrella branding one bad signal may kill two revenue streams not one combining costs and benefits i determine the set of parameter values such that umbrella branding is an optimal strategy

can tax loss selling explain the january seasonal in stock returns this paper analyzes the tax loss selling hypothesis as an explanation of the january seasonal in stock returns and argues that rational tax loss selling implies little relation between the january seasonal and the long term loss empirical results show that the january seasonal is as strongly related to the long term loss as it is to the short term loss the evidence is inconsistent with a model that explains the january seasonal by optimal tax trading

unemployment and rationality the explanation of persistent excess labor supply is a challenge to macroeconomic theorists in a purely competitive framework it may be argued that unemployment is transitory since wages will react if excess supply is persistent enough for the economy to be driven towards full employment nevertheless classical tatonement models do not support this view since excess demand functions are arbitrary see shafer and sonnenschein 1982 and convergence to the walrasian equilibrium cannot be guaranteed fixed price theory accounts for unemployment at the cost of total indeterminacy of equilibrium allocations many efforts have been made in order to narrow down this set roughly speaking these attempts can be classified into two groups i the conjectural approach cf benassy 1976 negishi 1974 grandmont and laroque 1976 and hahn 1977 1978 ii the game theoretical approach cf hart 1982 madden 1983 and silvestre 1988 in this paper we want to contribute to the first tine of thinking by applying the rationality notion developed for a conjectural equilibrium model in trujillo 1985 to a standard three goods fixed price model both kinds of equilibria are equivalent see john 1985 the motivation behind our approach is that when agents set prices they have to respect the rules of the mechanism for instance in hahn s rationality approach agents may change prices even if they are not constrained however the assumed mechanism is such that this behavior is not allowed see below therefore agents must be cheating le hahn s notion is one of incentive compatibility and it is not surprising that he obtained negative results in our approach agents may change prices if they are conjecturable in the following sense if buyers are rationed they can increase conjecture higher prices and if sellers are constrained

size seasonality and stock market overreaction recent research finds that the prior period s worst stock return performers losers outperform the prior period s best return performers winners in the subsequent period this potential violation of the efficient markets hypothesis is labeled the overreaction phenomenon this paper shows that the tendency for losers to outperform winners is not due to investor overreaction but to the tendency for losers to be smaller sized firms than winners when losers are compared to winners of equal size there is little evidence of any return discrepancy and in periods when winners are smaller than losers winners outperform losers

portfolio rebalancing and the turn of the year effect this paper finds that for the 1935 1986 period the market s risk return relation does not have a january seasonal the findings differ from those of other studies due to the use of value weighted rather than equally weighted portfolios inferences are sensitive to the weighting procedure because of the small firm return patterns in january in particular even in those januaries for which the market return is negative small firm returns are positive and they are more positive the higher is beta this is consistent with the portfolio rebalancing explanation of the turn of the year effect since at least 1926 the average return on small firms in january has been unusually high a phenomenon known as the turn of the year effect in this paper we present new evidence regarding the risk return characteristics of small firms in january we find that for small firms there is a positively sloped riskreturn relation in both up and down markets this pattern is difficult to reconcile with the belief that the high return on small firms in january is equilibrium compensation for risk bearing we show how these patterns in small firms returns have led others to conclude that the market s risk return relation has a january seasonal in particular rozeff and kinney 21 and tinic and west 22 23 among others using equally weighted portfolios formed on the basis of historical betas have found a steeper slope for the capm s risk return relation in january than in other months we demonstrate that this pattern exists only for small firms consequently statistical inferences about the risk return relation are heavily dependent upon whether equally weighted or value weighted portfolio returns are used in the estimation we show that for 1935 86 when monthly cross sectional regressions are estimated using value weighted portfolio returns there is no more of a statistically significant difference in the estimated return to risk bearing in january than in the other eleven months of the year the notion that there is a january seasonal in the capm s risk return relation for the us has rapidly become accepted knowledge for example corhay hawawini and michel 6 accept this conclusion and investigate whether other

on the existence of conjectural equilibria with a priori chosen rationing patterns hahn s model of conjectural equilibrium hahn 1978 is investigated a proof of existence of non walrasian conjectural equilibrium for a regular economy is given the method used enables one to choose a priori and within a large class the rationing pattern to emerge in equilibrium for instance an equilibrium with a rationing pattern of general supply rationing is thereby shown to exist also it is possible to select a priori one commodity money which is never rationed these results are valid for the fix price model as well the method of our proof is basically a generalization of gale s method gale 1978

general equilibrium theory with imperfect competition abstract this survey is organized as follows i introduction ii the main issues iii negishi s model iv objective demand in the cournot nash framework v objective demand in the bertrand nash framework vi the assumption of quasi concavity of the profit functions vii compromises between the conjectural and the objective approach viii insights into the notion of perfect competition ix conclusion

brand capital and incumbent firms positions in evolving markets in many advertising intensive industries one observes market share persistence i e firms maintaining lead market shares over long periods of time the author hypothesizes that firms that have the largest stock of well established brands a stock that he terms brand capital are most likely to introduce new products in response to new market information about consumer preferences firms with less brand capital delay their introductions until the uncertainty concerning the market size is reduced the author presents empirical support in a study of new product introductions in the u s beverage industry copyright 1995 by mit press

rational responses and rational conjectures abstract this paper utilizes a pure trade imperfect competition model and discusses the rationality problem arising from the fact that agents have to make conjectures about the markets to set prices optimally the objective is to show that there may be inefficient allocations with the agents behaving rationaly in the same context hahn rev econ stud 45 1978 1 17 proposed a notion of rationality under which the existence results obtained were negative this paper argues that hahn s is a strong notion of rationality that requires the mechanism to be incentive compatible thus an alternative notion that refers exclusively to the rationality of the conjectures is proposed and positive results on existence obtained

day of the week effect in the taiwan foreign exchange market abstract this study uses stochastic dominance with and without risk free assets to examine whether trading days can affect patterns of the day of the week effect in the taiwan foreign exchange market our results generally indicate that higher returns appear on the first three days of the week across different trading day regimes in the taiwan foreign exchange market confirming day of the week effect allocating part of investors assets in risk free assets is useful in distinguishing returns among weekdays for all currencies

risk return and equilibrium a revisit this paper reports the results of tests of the major implications of the two parameter capital asset pricing model the findings indicate that the relationship between stock returns and systematic risk contains important nonlinearities during 1935 82 these nonlinearities cannot be ascribed to previously documented anomalies related to firm size or january seasonality moreover the test results appear to be sensitive to the choice of the proxy for the market portfolio

on multivariate tests of the capm abstract this paper evaluates the power of multivariate tests of the capital asset pricing model the results indicate that when employing an unspecified alternative hypothesis the ability of the tests to distinguish between the capm and other pricing models is poor an upper bound is derived for the distance the alternative distribution of the test statistic can be from the null distribution when the deviations from the capm are due to missing factors this upper bound explains the low power of the tests

accommodating diverse institutional investment objectives and constraints using non linear goal programming abstract institutional portfolio managers face a diverse mix of conflicting investment objectives and constraints such as risk and retum goals institutional liability considerations fund management legal restrictions institutional cash flow requirments and protfolio management performance targets this paper argues that lexicographic goal programming can be used to keep track of an institution s complex investment goals and will provide a best possible solution for the institution s portfolio selection problem three examples illustrate the applicability of non linear goal programming to institutions differing investment requirements

to brand or not to brand a theoretical and empirical question a firm s brand name is a valuable asset that can greatly enhance the demand for its products this fact is widely recognized in both the economics and marketing literatures surprisingly though little rigorous analysis has been devoted by either of these literatures to the question of when a firm will identify one of its new products with an established brand name it is on this question that our research is focused the economics literature in this general area has focused on issues that are related to but quite distinct from the issue we examine the traditional industrial organization literature discusses and attempts to capture empirically the relationships among advertising brand names and market power for some representative work we develop and test a model that predicts 1 whether a multiproduct firm will brand a new product with the established company name and 2 where the new product will be located in relation to the reputation estabished by the firm in other markets hotelling s 1929 model of spatial location serves as the basis for our theoretical investigation however we extend hotelling s model to the case of experience goods whose qualities can only be known with certainty after the product is purchased and consumed the logic that underlies our model is tested on a sample of firms from the u s liquor industry we employ a mixed logit approach to capture the simultaneous decisions that are made by the firms in our sample the views expressed in this paper are our own and not necessarily those of the bell system we are grateful to 0 gur arie the michigan liquor control commission peter ochshorn and srinivasan balakrishnan for valuable assistance with data collection and programming and to the national science foundation for support through grant ist 8315690 the helpful comments of roger klein pablo spiller and an anonymous referee are also gratefully acknowledged any errors are of course our responsibility

second best analysis with markets in disequilibrium public sector pricing in a keynesian regime the paper develops pricing rules for a public sector subject to a budget constraint in an economy where the private sector experiences keynesian unemployment excess supply of labour and of commodities both second best and welfare improving pricing rules are studied it is found that such rules can be defined in operational terms in general they are quite complex involve quantities which are not directly observable reservation wages and prices and require evaluation of income and employment multipliers the general equilibrium approach to second best theory thus involves standard macroeconomic concepts and techniques some discussion of methodological issues and of policy objectives inflation versus unemployment is offered in order to facilitate interpretation the corresponding results for an economy with a competitive private sector are first restated

cost benefit rules in general disequilibrium abstract the consequences of imbalances in markets for goods and factors are the prime issues in many project evaluations this is so in evaluations of measures like migration manpower training programmes and plant locations in the present paper a general disequilibrium model of a small open economy is used to generate evaluation rules to be used when markets do not clear through price adjustments

a remark on conjectural equilibria the notion of a conjectural equilibrium was introduced by hahn 1978 the underlying idea is to explain why prices may not change in a situation where markets do not clear and rationing occurs in a conjectural equilibrium prices are rigid because it is not in the interest of agents to change them more precisely agents conjecture prices at which they can achieve a trade beyond the given quantity constraints such that it is better for them to trade at the observed market prices within the constraints therefore the question of whether an allocation for given prices and quantity constraints is a conjectural equilibrium depends crucially on the agents conjectures in this situation by allowing arbitrary conjectures many such equilibria will exist as has already been claimed by hahn 1977 a 1977b and 1978 in this note it is shown that there are as many conjectural equilibria as there exist fixed price equilibria which satisfy the condition of voluntary exchange only to be more specific we prove that any conjectural equilibrium is a fixed price equilibrium and that for a given economy there are conjectures such that any fixed price equilibrium is a conjectural equilibrium in other words the kind of endogenous price setting described in hahn s model turns out to be equivalent to the fix price approach in the sense that both lead to the same allocations in the economy the result confirms the statement in drazen 1980 that by allowing arbitrary conjectures only one exogenous variable prices has been replaced by another conjectures

the robustness of risk return nonlinearities to the normality assumption in a recent study tinic and west 1986 empirically reexamine the risk return relationship posited by the traditional mean variance capm they find a positive nonlinear relationship between risk and return except during january when the market rewards bearing nonsystematic risk this study examines the hypothesis that nonnormality of re turn distributions may account for some of these anomalous results we compare shalit and yitzhaki s 1984 mean extended gini capm an equilibrium asset pricing relation that is independent of the form of the underlying asset distribution with the traditional capm our results indicate that the nonlinear risk return relationship and the size and january effects are robust to nonnormality of return distributions

the predictive power of january returns in foreign and domestic markets abstract in the post world war ii era cumulative returns from february through december in the us and in other large equity markets relate positively to the preceding january s returns in those markets however in the us the january return in the pre war era is negatively related to the cumulative february december return over the same period thus although risk premia vary over time in a manner that can be predicted ex ante exogenous shocks to the economy e g war can disrupt the relation one is accustomed to observing

measuring abnormal performance do stocks overreact abstract a highly controversial issue in financial economies is whether stocks overreact in this paper we find an economically important overreaction effect even after adjusting for size and beta in portfolios formed on the basis of prior five year returns extreme prior losers outperform extreme prior winners by 5 10 per year during the subsequent five years although we find a pronounced january seasonal our evidence suggests that the overreaction effect is distinct from tax loss selling effects interestingly the overreaction effect is substantially stronger for smaller firms than for larger firms returns consistent with the overeaction hypothesis are also observed for short windows around quarterly earnings announcements

of tournaments and temptations an analysis of managerial incentives in the mutual fund industry we test the hypothesis that when their compensation is linked to relative performance managers of investment portfolios likely to end up as losers will manipulate fund risk differently than those managing portfolios likely to be winners an empirical investigation of the performance of 334 growth oriented mutual funds during 1976 to 1991 demonstrates that mid year losers tend to increase fund volatility in the latter part of an annual assessment period to a greater extent than mid year winners furthermore we show that this effect became stronger as industry growth and investor awareness of fund performance increased over time

japanese investors choice of joint ventures versus wholly owned subsidiaries in the us the role of market barriers and firm capabilities this study analyzes how market barriers and firm capabilities affect multinationals choice of joint ventures versus wholly owned subsidiaries abroad in the study we compile a vector of variables that distinguish between industry specific barriers and firm specific capabilities to analyze japanese investors ownership decisions in the us our results in general support the hypothesis that japanese investors facing high market barriers in the target industry are more likely to choose joint ventures while those possessing strong competitive capabilities are more likely to set up wholly owned subsidiaries specifically marketing variables are more influential than technological factors in determining the choice of partial versus full ownership these findings however vary across sub samples that represent low versus high tech industries and consumer versus industrial products

public production and shadow pricing in a model of disequilibrium in labor and capital markets abstract this paper develops second best rules for public investment and employment in various regimes of disequilibrium on the capital and the labour markets the model used is very simple so as to imply rules which can easily be interpreted and contrasted with the current literature on the subject another issue considered is that of possible changes of regimes within a process of welfare improvement involving adjustments in the public production plan it is dealt with through a numerical example which points out that such changes can indeed occur

shadow prices for public production in an open economy with disequilibrium abstract this paper derives shadow prices for public production employment and imports in a one period one individual small open economy where there is both unemployment and excess supply of some tradeable goods and where there exists a ceiling on the foreign trade balance the model used is made purposely simple so as to yield shadow prices which can be interpreted and contrasted with intuitive understanding and the current literature on the subject

risk and return abstract this paper examines the seasonality in the basic relationship between expected return and risk during 1935 82 the results reveal that the positive relationship between return and risk is unique to january the risk premiums during the remaining eleven months are not significantly different from zero

microeconomic uncertainty and macroeconomic indeterminacy we propose a stylized intertemporal macroeconomic model wherein the combination of decentralized trading and microeconomic uncertainty taking the form of privately observed and uninsured idiosyncratic shocks creates an information problem between agents and generates indeterminacy of the macroeconomic equilibrium for a given value of the economic fundamentals the economy admits a continuum of equilibria that can be indexed by the sales expectations of firms at the time of investment the walrasian equilibrium is one of these possible equilibria but it is reached only if firms are optimistic enough with a weaker degree of optimism equilibrium output employment and real wages will be lower than in the walrasian equilibrium moreover the range of possible equilibria will depend positively on the wage elasticity of the labour supply and on the magnitude of the information problem between buyers and sellers in our case the variance of the idiosyncratic shocks stochastic simulations performed on a calibrated version of the model show that pure demand expectation shocks may generate business cycle statistics that are not inconsistent with the observed ones 2006 elsevier b v all rights reserved

the foreign exchange constraint suppression of the trade deficit and the shadow price of foreign exchange in a fix price economy abstract the foreign exchange gap is analysed as a possible feature of a fix price economy the implications of closing the gap by means of import rationing are then discussed finally a set of shadow rates of exchange is derived these shadow prices are conditional on the prevailing regimes and include the paradoxical possibility of a negative shadow rate of exchange

shadow prices and public policies in a disequilibrium model of an open economy the paper focuses on the interaction between the goals of optimal stabilization and of allocative efficiency in project evaluation in an economy that is small as an exporter which must maintain trade balance and where some disequilibrium may prevail on goods and labour markets the criteria that are developed reflect an aggregation of profitability and reduction of unemployment additional foreign demand foreign currency savings should be evaluated in welfare terms after weighting by the gap between the relevant market and shadow prices the shadow prices also lead to the definition of an optimal taxation system

brand extension as informational leverage the marketing literature refers to the concept of brand capital and provides empirical evidence that firms with a large stock of well established brands have an advantage in introducing new products this paper develops a theory of brand extension as a mechanism for informational leverage in which a firm leverages off a good s reputation in one market to alleviate the problem of informational asymmetry encountered in other markets it is shown that brand extension helps a multi product monopolist introduce a new experience good with less price distortion thus the paper provides a theoretical foundation for the concept of brand capital

a model of imperfect competition with keynesian features the recent literature on the reappraisal of keynes has viewed keynesian equilibria as arising when prices are fixed and effective demands and supplies are equilibrated through the adjustment of quantities one problem with this approach is that it lacks a theory of price determination in particular of why prices are fixed in the present paper we show that a number of keynesian features arise in a model in which prices are fully flexible but where agents have some monopoly power one advantage of this approach is that it provides a theory of the determination of both prices and quantities

are seasonal anomalies real a ninety year perspective in recent years there has been a proliferation of empirical studies documenting unexpected or anomalous regularities in security rates of return in addition to the widely studied relation between firm size and rate of return 1 these include seasonal regularities related to the time of the day harris 1986 the day of the week see ball and bowers 1986 cross 1973 french 1980 gibbons and hess 1981 jaffe and westerfield 1985 keim and stambaugh 1984 and lakonishok and levi 1982 the time of the month ariel 1987 and the turn of the year see haugen and lakonishok 1988 jones pearce and wilson 1987 lakonishok

tax loss selling and the january effect evidence from municipal bond closed end funds this paper provides direct evidence supporting the tax loss selling hypothesis as an explanation of the january effect examining turn of the year return and volume patterns for municipal bond closed end funds which are held mostly by tax sensitive individual investors we document a january effect for these funds but not for their underlying assets we provide evidence that this effect can be largely explained by tax loss selling activities at the previous year end moreover we find that funds associated with brokerage firms display more tax loss selling behavior suggesting that tax counseling plays a role among the numerous stock return anomalies probably none has generated more interest than that of the turn of the year or january effect the phenomenon in which small capitalization stocks realize unusually high returns in early january 1 the literature offers a number of hypotheses to explain this phenomenon including the tax loss selling hypothesis the window dressing hypothesis the insider trading information release hypothesis and the seasonality of the risk return relation hypothesis given existing evidence in some support for the first two hypotheses the debate continues with respect to which of these the tax loss selling of individual investors or the window dressing of

the effect of holdings data frequency on conclusions about mutual fund behavior abstract a number of articles in financial economics have used quarterly or semi annual mutual fund holdings data to test hypotheses about investment manager behavior this article reexamines four well known hypotheses in finance to determine whether the results of prior tests of these hypotheses remain valid when higher frequency monthly holdings data are employed the areas examined are momentum trading tax motivated trading window dressing and tournament behavior we find that the use of monthly holdings data rather than quarterly holdings data or in the case of tournament behavior holdings data rather than monthly return data change and in some cases reverse previous results this occurs because monthly holdings data capture a large number of trades missed by quarterly data 18 5 of the trades and permit a more precise estimation of the timing of trades

can brand extension signal product quality this paper asks whether brand extension can serve as a signal of product quality given that it costs less than a new brand existing literature has assumed either that brand extension is cost neutral or that it costs more i show that it can as a perfect bayesian equilibrium but the argument is unconvincing for one thing the separating equilibrium is not unique a pooling equilibrium also exists in which brand extension signals nothing for another the separating equilibrium relies on off equilibrium beliefs that are poorly motivated in the model i propose a refinement of the perfect bayesian equilibrium that resolves both issues empirical off equilibrium beliefs require that consumers off equilibrium beliefs be justifiable on the basis of their prior beliefs and product performance observations with empirical off equilibrium beliefs two necessary conditions for brand extension to signal product quality are identified i consumers must perceive old and new products of the firm to be positively correlated in quality and ii at least some consumers must identify with brands and not the firm behind the brands even with these conditions in place the signaling argument is fragile firm observability of past performance diminishes brand extension s signaling capability an arbitrarily small probability of failure for good products eliminates it my results suggest that going forward the case for brand extension must rest on foundations other than signaling product quality

the january size effect anomaly or risk mismeasurement 1986 the january size effect anomaly or risk mismeasurement financial analysts journal vol 42 no 6 pp 63 70

umbrella branding as a signal of new product quality an example of signalling by posting a bond i present a signalling model in which a multiproduct firm can use its reputation as a bond for quality by using a brand name for an established product when it introduces a new experience good as out of equilibrium beliefs are specified a false signal may be taken to imply that both the established and the new product are of low quality in contrast the absence of a signal leaves open the possibility that one of the two products is of high quality hence the signal can be credible without excessive sunk costs as long as the bond posted is sufficiently large

the seasonal stability of the factor structure of stock returns this paper investigates the month by month stability of a daily returns and correlation coefficients of stock returns b correlation and covariance matrices c number of return generating factors and d the apt pricing relationship the results show that there is a january effect and a small firm effect in stock returns correlation matrices are more stable than covariance matrices but both types of matrices are not stable across months and across the sample groups the number of return generating factors is rather stable most of the time and for most of the sample groups but there is some significant instability that is related to the average correlation coefficients among stocks the apt pricing relationship does not seem to be supported by the two stage process using the maximum likelihood factor analysis the seasonality of common stock returns has received considerable attention in financial economics research studies by officer 23 rozeff and kinney 29 gultekin and gultekin 11 and others have investigated the stock returns of the u s and other countries on a monthly basis they generally have found that on average january returns are significantly higher than the returns for other months banz 1 and reinganum 25 26 have found abnormally high returns in small market value firms and keim 17 has related this to the first few trading days of january schwert 30 points out the current difficulty of explaining these empirical regularities and the need for further investigations several studies have examined seasonality in risk premiums rozeff and kinney 29 found that seasonality appeared in the risk premiums obtained from a twoparameter capm and that january displayed a relatively large risk premium compared with the other months keim 16 also found seasonality in the risk premiums more recently tinic and west 32 examined the risk premiums of the two parameter capm and observed the previously reported seasonality and high january premium they also found that january is the only month in which there is a consistently positive statistically significant relationship between expected return and risk very recently using the two stage procedure with the

imperfect competition and fixprice equilibria when goods are gross substitutes it is possible in principle that the price quantity pair generated by a model of imperfect competition may satisfy the conditions voluntary trading and absence of frictions for a fixprice equilibrium it is shown that imperfect competitors will typically satisfy voluntary trading provided that appropriate gross substitute assumptions are satisfied hence such assumptions are seen to ensure that the solutions of some well known imperfectly competitive general equilibrium models are indeed fixprice equilibria thus bringing together two important traditions in theoretical microeconomics copyright 1991 by the editors of the scandinavian journal of economics

institutions and individuals at the turn of the year this article evaluates the tax loss selling hypothesis against the window dressing hypothesis as explanations for turn of the year anomalies we examine differences between securities dominated by individual investors versus those dominated by institutional investors and find that the effect is more pervasive in the former controlling for capitalization we find that in early january late december stocks with greater individual investor interest outperform underperform stocks with greater institutional investor interest these results hold for both stocks that previously appreciated in value and stocks that previously depreciated in value the results are most consistent with the tax loss selling hypothesis as an explanation for the turn of the year effect

reputation in an internet auction market i introduction without transmission of credible information asymmetries may lead to underproduction of goods or even market failure reputation mitigates inefficiencies associated with information asymmetries by providing an informative signal of quality 1 the difficulty in quantifying reputation means that few studies can analyze empirically the role of reputation in markets our analysis of a quantified market observed measure of reputation provides direct evidence of the effect of a seller s reputation on the terms of a onetime real world transaction thereby contributing empirical support to a fundamental economic principle this study empirically examines person to person transactions within the internet market known as ebay in this virtual market of unseen participants and products buyers and sellers face the risks of repudiation as the counter party may deny the agreement after the fact buyers assume risks associated with lack of seller integrity and asymmetric information about the particular product as the buyer is typically required to send payment before the seller ships the product in addition for many ebay transactions the cost of enforcing a contract is high relative to the transaction s value resulting in a practical absence of legal enforcement 2 by providing a history of trade execution information ebay benefits market participants by reducing information asymmetries while achieving substantial transaction cost economies market participants relate personal experiences which ebay uses to calculate a numerical reputation measure for each user market participants in turn can use this reputation measure to assess counter party risk and adjust bidding behavior accordingly in a sample of 460 auctions held between january 1998 and july 1998 we find a positive relation between prices and ebay s reputation measure higher reputation sellers experience higher auction prices ceteris paribus our findings suggest that repeat players are rewarded for building reputation consistent with the belief that the high reputation seller s value of future transactions outweighs the value of taking advantage of the buyer in the current transaction buyers are willing to pay more to a higher reputation seller this article contributes to the literature not only by providing quantitative support of long accepted reputation theories but also by illustrating the use of nontraditional markets as a natural laboratory for experiments this article is an example of how a newly formed electronic market can provide the elements necessary for analytical research we find that ebay transactions for this item exhibit characteristics similar to transactions in more conventional markets namely 1 prices are higher when there is less quantity supplied when fewer of the items are available the same day 2 prices are lower during periods of lower demand times less likely to have high traffic 3 sellers with higher shipping and handling costs receive lower prices and 4 sellers failing to provide information about shipping and handling fees i e larger information asymmetries receive fewer bids dramatic innovations in online market structure and increasing availability of online market data should enable researchers to examine directly other traditionally non quantifiable economic ideas this article is organized as follows section ii describes how reputation can be used to facilitate transactions in the presence of asymmetric information section iii describes the ebay market summarizes the listing and bidding processes and discusses the reputation mechanism for this market section iv presents the price and reputation descriptive statistics associated with a consistently auctioned item and reports the empirical findings of how this item s highest bid price varies with the level of the seller s reputation we conclude in section v with a discussion of ebay s continued attempts to add value to the market through recent structural changes

locally consistent oligopolistic equilibria are cournot walras equilibria abstract a kth order locally consistent equilibrium is an imperfectly competitive general equilibrium point at which firms only perceive at kth order taylor expansion of their true demand curves it is shown that the set of kth order locally consistent equilibrium strategies coincides with the set of cournot walras equilibria as soon as k 1 under simple regularity conditions

do hedge funds manage their reported returns f or funds with high incentives and more opportunities to inflate returns we find that i returns during december are significantly higher than returns during the rest of the year even after controlling for risk in both the time series and the cross section and ii this december spike is greater than for funds with lower incentives and fewer opportunities to inflate returns these results suggest that hedge funds manage their returns upward in an opportunistic fashion in order to earn higher fees finally we find strong evidence that funds inflate december returns by underreporting returns earlier in the year but only weak evidence that funds borrow from january returns in the following year jel g10 g19 g23 g30

the elementary economics of social dilemmas a social dilemma is in essence a prisoners dilemma in a continuous strategy space i discuss a number of social dilemmas that have caught my attention offer an elementary diagrammatic synthesis of them and discuss some of the economic insights that the diagrams capture including incentives for pre commitment finally i model pre commitment via delegation and link results to the literature on the evolution of preferences l economie elementaire des dilemmes sociaux un dilemme social est essentiellement un dilemme du prisonnier dans un espace continu de strategie l auteur discute d un certain nombre de dilemmes sociaux qui ont retenu son attention il en propose une synthese graphique elementaire et discute certaines des suggestions economiques qui decoulent de ces diagrammes comme par exemple les incitations a se pre engager finalement l auteur construit un modele de pre engagement par delegation et relie ses resultats a la litterature sur l evolution des references