investment and market dominance we analyze a model of oligopolistic competition with ongoing investment special cases include incremental investment patent races learning by doing and network externalities we investigate circumstances under which a firm with low costs or high quality will extend its initial lead through investments to this end we derive a new comparative statics result for general games with strategic substitutes which applies to our investment game finally we highlight plausible countervailing effects that arise when investments of leaders are less effective than those of laggards or in dynamic games when firms are sufficiently patient

deciding between competition and collusion we develop an approach to identify and test for bid rigging in procurement auctions first we introduce a general auction model with asymmetric bidders second we study the problem of identie cation in our model we state a set of conditions that are both necessary and sufe cient for a distribution of bids to be generated by a model with competitive bidding third we discuss how to elicit a prior distribution over a e rm s structural cost parameters from industry experts given this prior distri bution we use bayes s theorem to compare competitive and collusive models of industry equilibrium finally we apply our methodology to a data set of bidding by construction e rms in the midwest the techniques we propose are not computationally demanding use e exible functional forms and can be programmed using most standard statistical packages

what has driven oil prices since 2000 a structural change perspective abstract this paper characterizes weekly international oil price fundamentals since 2000 by analyzing the transformation of the market mechanism based on structural change perspective using endogenously determined break tests that allow for changes in both level and trend we divide the price fluctuations in the international oil market after 2000 into three stages relatively calm market period january 07 2000 to march 12 2004 the bubble accumulation period march 19 2004 to june 06 2008 and the global economic crisis period june 13 2008 to september 11 2009 the results show the existence of structural breaks refutes the utility of investigation of the full sample period as a whole and in different structural periods the main drivers of oil price changes and their way of influence and degree are significantly distinct then we demonstrate the evolving process of market mechanism since 2000 through establishing comparative models we also quantitatively measure the roles of speculation and episodic events in oil price fluctuations

cross national differences in cooperative decision making in mixed motive business contexts the mediating effect of vertical and horizontal individualism based on the institutional vs the individual view of culture and the theory of individualism collectivism in explaining the in group outgoup distinction that people make in different cultures we predicted that chinese people would make less cooperative decisions than australians in mixed motive business situations in which no formal or informal sanction systems were in place we also predicted that chinese would be less cooperative with foreigners than with fellow chinese when they were in a foreign territory whereas australians would be equally cooperative with members of both groups data from two cross national experiments provided general support for these predictions moreover the results of study 2 showed that the nation effects on cooperative decision making were mediated by individual cultural orientation on vertical and horizontal individualism the theoretical and practical implications of these findings are discussed in the context of cross cultural business settings

investigating bid preferences at low price sealed bid auctions with endogenous participation abstract at procurement auctions with bid preferences qualified firms are treated special a common policy involves scaling the bids of preferred firms by a discount factor for the purposes of evaluation only introducing such an asymmetry has three effects first preferred firms may inflate their bids yet still win the auction second nonpreferred firms may bid more aggressively than in the absence of preferences third the preference policy can affect participation for different cost distributions we solve numerically for the equilibrium bid functions under different discounts and then simulate behaviour our approach allows us to quantify the relative importance of the three effects we find that the participation effect is relatively unimportant and in most cases a positive cost minimizing preference rate exists download download video 34mb video 1

can oil prices forecast exchange rates an empirical analysis of the relationship between commodity prices and exchange rates we show the existence of a very short term relationship at the daily frequency between changes in the price of a country s major commodity export and changes in its nominal exchange rate the relationship appears to be robust and to hold when we use contemporaneous realized commodity price changes in our regression however when we use lagged commodity price changes the predictive ability is ephemeral mostly appearing after instabilities have been appropriately taken into account

optimal nonparametric estimation of first price auctions this paper proposes a general approach and a computationally convenient estimation procedure for the structural analysis of auctioni data considering first price sealed bid auction models within the independent private value paradigm we show that the underlying distribution of bidders private values is identified from observed bids and the number of actual bidders without any parametric assumptions using the theoiy of minimax we establish the best rate of uniform convergence at which the latent density of private values can be estimated nonparametrically from available data we then propose a two step kernel based estimator that converges at the optimal rate

an r d race with knowledge accumulation i develop a model of an r d race with knowledge accumulation my model does not inherit the memorylessness property of the exponential distribution that troubles existing models of r d races hence firms knowledge stocks are no longer irrelevant to their behavior during the r d race and knowledge accumulation has strategic implications in this more general setting i obtain results that stand in marked contrast to the previous literature in particular under some conditions the firm that is behind in the race engages in catch up behavior this pattern of strategic interactions action reaction is consistent with empirical research copyright 2003 by the rand corporation

do global risk perceptions influence world oil prices abstract this paper investigates the information transmission mechanism between world oil gold silver dollar euro exchange rate markets and volatility index vix accommodating for global risk perceptions we find that there is a unique long run equilibrium relationship where gold silver exchange rate and risk perceptions appear as long run forcing variables of world oil prices we uncover that global risk perceptions have a significantly suppressing effect on oil prices in the long run we also discover that global risk perceptions play a less important role in explaining the forecast error variance of oil prices in the short run than prices in the alternative investment markets our results also suggest that a shock in risk perceptions of global investors have a negative but short lived initial impact on oil prices

measuring contagion between energy market and stock market during financial crisis a copula approach abstract in this paper we apply time varying copulas to investigate whether a contagion effect existed between energy and stock markets during the recent financial crisis using the wti oil spot price the s p500 index the shanghai stock market composite index and the shenzhen stock market component index returns evidence was found for a significantly increasing dependence between crude oil and stock markets after the failure of lehman brothers thus supporting the existence of contagion in the sense of forbes and rigobon s 2002 definition moreover increased tail dependence and symmetry characterize all the paired markets this indicates that significant increases in tail dependence are an actual dimension of the contagion phenomenon and that crude oil and stock prices are linked to the same degree regardless of whether markets are booming or crashing during the sample period finally the contagion effect is found to be much weaker for china than the us the empirical results have potentially important implications for risk management

cross cultural variations in climate for autonomy stress and organizational productivity relationships a comparison of chinese and uk manufacturing organizations cross cultural researchers have questioned the extent to which european american management practices can be transported to major markets in asia such as the people s republic of china applying employee involvement theory we examined the relationships between climate for autonomy work demands climate employee stress and organizational productivity in a cross national study of 51 uk and 104 chinese manufacturing organizations we predicted and found that climate for autonomy was positively and negatively related to stress in the chinese and uk contexts respectively the interaction of climate for autonomy and work demands climate was significant climate for autonomy was positively related to organizational productivity only when work demands climate was low

asymmetric private values auctions with application to joint bidding and mergers abstract much of the theoretical auction literature assumes that there are no observable differences between the bidders of an auction in this paper i present an asymmetric auction model where the distribution of a bidder s value depends on some commonly observed characteristics the model is applied to joint bidding and mergers in auction markets the results provide additional evidence that first price auctions are less susceptible to the acquisition and exercise of market power than open auctions

an empirical analysis of entrant and incumbent bidding in road construction auctions this paper explores differences in the bidding patterns of entrants and incumbents in road construction auctions we find that entrants bid more aggressively and win auctions with significantly lower bids than incumbents the differences in their bidding patterns are consistent with a model of auctions in which the distribution of an entrant s costs exhibits greater dispersion than that of an incumbent s and relations of stochastic dominance in the distributions do not persist for the entire range of estimated costs we also find that more efficient firms bid on average more aggressively and firms with greater backlogs bid less aggressively

investment incentives in procurement auctions this paper investigates firms incentives to invest in cost reduction in the first price sealed bid auction a format largely used for procurement two central features of the model are that we allow firms to be heterogeneous and that investment is observable we find that firms will tend to underinvest in cost reduction because they anticipate fiercer head on competition using the second price auction as a benchmark we also find that the first price auction will elicit less investment from market participants and that this is socially inefficient these results have implications for market design when investment is important different market institutions provide different incentives for firms to reduce costs acquire information expand and so on in short to undertake any activity that affects their competitive positions accordingly the performance of these market institutions should be judged not only from a static perspective taking firms competitive positions as given but also from a dynamic perspective auction markets are a natural competitive environment to study because there is a clear sense in which we can design such markets by choosing appropriate rules for competition in this paper we study how the first price auction fpa a format commonly used for procurement affects firms incentives to invest in cost reduction many procurement markets are characterized by a small number of participants heterogeneity among firms and low rates of turnover therefore it is interesting to investigate to what extent the format used for the auction contributes to these characteristics the basic ingredients of our model are as follows there are n firms and one of them has the opportunity prior to the auction to make an investment we model this investment as an improvement in the ex ante distribution of costs for this firm the main question we ask is what are the firm s incentives to invest given that this investment is observed by its competitors clearly the benefits of such investment depend on how the firm s competitors react in other words to determine the firm s incentive to invest we need to compare the equilibrium at the procurement stage if it makes this investment and if it does not in section 3 we derive new comparative statics results for the fpa we find that after the investment the investor s opponents will bid collectively more aggressively this result holds generally when there are only two bidders or when the investor s opponents are symmetric proposition 1 otherwise a sufficient condition is that investment changes market leadership proposition 2 in the language of industrial organization investment has a negative strategic effect in the fpa this erodes 1

standardization preferences a function of national culture work interdependence and local embeddedness both theoretical and empirical studies of professional service employee standardization preferences are relatively scarce using responses from 398 employees of an international public relations firm this study finds that employees from high power distance high uncertainty avoidance and high context cultures prefer greater standardization whereas employees from high individualism cultures prefer less standardization additionally work interdependence is positively associated with standardization preferences whereas local embeddedness is negatively associated with standardization preferences

snow removal auctions in montreal costs informational rents and procurement management using semiparametric and nonparametric estimation techniques we infer cost distributions and informational rents from 457 snow removal contracts o ered for tender by the city of montreal our results are compatible with standard received theory of competitive auctions there is a positive correlation between costs and bids and rents increase with the variance of costs bids and costs have decreased over the sample period while rents remained relatively constant the city deserves credit for these results as it has succeeded in exploiting economies of scale and triggering innovations while maintaining competition further it has been successful in adjusting its reserve prices to keep up with the decreasing cost of snow removal

the cross cultural research imperative the need to balance cross national and intra national diversity this paper provides a brief overview of the evolution of comparative management theories paradigms and highlights the contribution of the cross vergence construct despite progress most studies of work values across countries continue to suffer from two primary limitations the first is the fallacious assumption of cultural homogeneity with nations given the growing diversity of the workforce within country intra national variations can often be as significant as cross national differences the second is the fallacious assumption of cultural stability over time since cultures evolve albeit slowly it is important to take these changes over time into consideration and be aware of the paradoxes inherent within any given society hence the paper calls for the need to balance cross national and intra national diversity in order to truly understand cross cultural phenomena and thus further improve the quality of cross cultural research

do exchange rates respond asymmetrically to shocks in the crude oil market abstract the paper argues that exchange rates respond asymmetrically to different shocks to the crude oil market we apply kilian s 2009 methodology to disentangle shocks to the crude oil market into distinct demand and supply shocks and examine the response of the u s real and nominal trade weighted u s dollar exchange rate indexes as well as six other bilateral exchange rates to these shocks our analysis indicates that oil supply shocks have no significant effects on exchange rates while global aggregate demand and oil specific demand shocks lead to depreciations we further show that exchange rates respond asymmetrically to shocks in the crude market depending on whether the shocks are large versus small or positive versus negative

empowerment effects across cultures three studies examined cross cultural variations in empowerment effects study 1 investigated whether hofstede s power distance scores moderated the effect of job autonomy on job satisfaction using world values survey data on 33 nations study 2 surveyed frontline hotel employees from canada and prc to investigate the moderating role of power distance at the individual level in study 3 hotel management students from canada and prc were asked to play the role of a frontline employee who had to handle a special customer request in a scenario experiment these studies show consistently that the cultural value of power distance moderates the effect of empowerment on job satisfaction moreover willingness to accept and exercise the discretionary power allowed by management and desire to satisfy customer needs and wants are two employee conditions that are essential for the successful implementation of the empowerment approach

on the links between stock and commodity markets volatility this paper investigates the links between price returns for 25 commodities and stocks over the period from january 2001 to november 2011 by paying a particular attention to energy raw materials relying on the dynamic conditional correlation dcc garch methodology we show that the correlations between commodity and stock markets evolve through time and are highly volatile particularly since the 2007 2008 financial crisis the latter has played a key role emphasizing the links between commodity and stock markets and underlining the financialization of commodity markets at the idiosyncratic level a speculation phenomenon is highlighted for oil coffee and cocoa while the safe haven role of gold is evidenced

the manager as mediator of alternative meanings a pilot study from china the usa and u k managers in china the usa and britain were asked to describe the extent to which they used five sources for handling nine managerial events western managers were found to rely more upon their own experience and training while in china rules and procedures were more salient for most events western managers who described themselves as relying on their own experience and training believed that the events had been well handled they reported that events were less well handled to the extent that they referred to their superiors reliance on the superior was associated with role ambiguity among western managers but not in china even though chinese managers relied more upon rules and procedures they too evaluated events more positively when they had relied on their own experience and training the results are discussed in terms of chinese and western cultural values and the prospects for change in managerial practice in china

metal volatility in presence of oil and interest rate shocks abstract this study uses three two factor volatility models of the garch family to examine the volatility behavior of three strategic commodities gold silver and copper in the presence of crude oil and interest rate shocks the results of the standard garch models suggest that gold and silver have almost the same volatility persistence which is greater than that of copper the cgarch estimates indicate that the short run transitory component of volatility converges to zero much faster for copper than for gold and silver in this sequence however the permanent volatility component demonstrates equally strong persistence in the long run for all three metals the egarch results suggest that the leverage effect is present and significant for copper only implying that gold and silver can be good investment in anticipation of bad times past oil shock does not impact all three metals similarly monetary policy and to leaser extent the oil shocks have calming effects on precious metals but not on copper if the t bill rate is used crises such as the 2003 iraq war heighten metal volatility these results have implications for derivatives valuations using gold as a reserve asset risk analysis and for the commodity exporting countries and commodity producing firms

reserve prices in a dynamic auction when bidders are capacity constrained abstract allowing for a reserve price in a dynamic auction with capacity constrained bidders changes the equilibrium in an unexpected way the distribution of winning bids contains a mass point several bidder types bunch at the reserve price

time varying effect of oil market shocks on the stock market abstract a mixture innovation time varying parameter var model is used to examine the impact of structural oil price shocks on u s stock market return time variation is evident in both the coefficients and the variance covariance matrix the standard deviations of the demand side structural shocks reached forty year peaks during the global financial crisis and have remained high since in the real stock return equation the coefficient of global real economic activity has declined since the late 1990s and that of oil market specific demand oil shock has been lower since the early 1990s than before the structural oil shocks account for 25 7 of the long run variation in real stock returns overall with substantial change in levels and sources of contribution over time the contribution of shocks to global real economic activity to real stock return variation rose sharply to 22 in 2009 and remains 17 over 2009 2012 the contribution of oil market specific demand price shocks rose unevenly from 5 in the mid 1970s to about 15 in 2007 with a subsequent decline the contribution of oil supply shocks has trended downward from 17 to 5 over 1973 2012

do oil price shocks matter evidence for some european countries this paper analyzes the oil price macroeconomy relationship by means of analyzing the impact of oil prices on inflation and industrial production indexes for many european countries using quarterly data for the period 1960 1999 first we test for cointegration allowing for structural breaks among the variables second and in order to account for the possible non linear relationships we use different transformation of oil price data the main results suggest that oil prices have permanent effects on inflation and short run but asymmetric effects on production growth rates furthermore significant differences are found among the responses of the countries to these shocks

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

avoiding market dominance product compatibility in markets with network effects as is well recognized market dominance is a typical outcome in markets with network effects a firm with a larger installed base offers a more attractive product which induces more consumers to buy its product which produces a yet bigger installed base advantage such a setting is investigated here but with the main difference that firms have the option of making their products compatible when firms have similar installed bases they make their products compatible in order to expand the market nevertheless random forces could result in one firm having a bigger installed base in which case the larger firm may make its product incompatible we find that strategic pricing tends to prevent the installed base differential from expanding to the point that incompatibility occurs this pricing dynamic is able to neutralize increasing returns and avoid the emergence of market dominance

can affirmative action be cost effective an experimental examination of price preference auctions one of the most controversial questions facing our economy and society in recent years is the question of affirmative action the debate centers around an issue of minority representation in which the rights of the majority are depicted as being compromised by affirmative action programs set up to increase the welfare of minorities implicit in this discussion is the assumption that all affirmative action programs must be cost increasing this result it is claimed follows trivially from economic theory since any interference into the competitive process which prevents the most capable from being chosen must be wasteful and costly in this paper we challenge this claim with experimental results demonstrating that pricepreference auctions in which high cost minority firms are given preferential treatment in the awarding of contracts in such a way that it is possible for these firms to win a contract but not have submitted the lowest bid can be programs that both enhance minority representation and are cost effective in that they decrease the cost of government procurement in the theoretical literature on asymmetric auctions eric maskin and john riley 1995 and the optimal auction literature roger myerson 1981 it has been shown that in asymmetric auctions in which firms draw their costs from

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

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

dynamic auction environment with subcontracting this article provides evidence on the role of subcontracting in the auction based procurement setting with private cost variability and capacity constraints we demonstrate that subcontracting allows bidders to modify their costs realizations in a given auction as well as to control their future costs by reducing backlog accumulation restricting access to subcontracting raises procurement costs for an individual project by 12 and reduces the number of projects completed in equilibrium by 20 the article explains methodological and market design implications of subcontracting availability

is subsidizing inefficient bidders actually costly a widespread practice particularly in public sector procurement and dispersal is to subsidize a class of competitors believed to be at an economic disadvantage arguments for such policies vary but they typically assume that benefits of subsidization must be large enough to outweigh a presumed economic cost of the subsidy when disadvantaged competitors compete in auctions the subsidy serves to make them more competitive rivals other bidders rationally respond by bidding more aggressively we consider a model of procurement auctions and show that a policy of subsidizing inefficient competitors can lower expected project cost and also enhance economic efficiency some subsidy is generally better than no subsidy for a wide range of parameters

the effect of uncertainty on investment evidence from texas oil drilling this paper estimates the response of investment to changes in uncertainty using data on oil drilling in texas and the expected volatility of the future price of oil using a dynamic model of firms investment problem i find that i the response of drilling activity to changes in price volatility has a magnitude consistent with the optimal response prescribed by theory ii the cost of failing to respond to volatility shocks is economically significant and iii implied volatility data derived from futures options prices yields a better fit to firms investment behavior than backward looking volatility measures such as garch jel c58 d92 g13 g31 l71 q31 the real options literature beginning with marschak 1949 and arrow 1968 and developed in bernanke 1983 pindyck 1991 and dixit and pindyck 1994 explains how firms should make decisions about investments that involve sunk costs real options theory views such investments as options in that at any point in time a firm may choose to either invest immediately or delay and observe the evolution of the investment s payoff a key insight is that the option to delay has value when future states of the world with positive returns to investing and states with negative returns are both possible even holding the expected future return constant at its present level thus in the presence of irreversibility and uncertainty a naive investment timing rule proceed with an investment if its expected benefit even slightly exceeds its cost is suboptimal because it does not account for the value of continuing to hold the option instead firms should delay irreversible investments until a significant gap develops between the investments expected benefits and costs moreover as uncertainty increases real options theory tells us that the incentive to delay should grow stronger and the gap between the expected benefit and cost necessary to trigger investment should widen while real options theory therefore prescribes how firms should carry out irreversible investments in uncertain environments it is not empirically well known

exogenous shocks and the spillover effects between uncertainty and oil price this paper evaluates the information spillover between equity related uncertainty and the oil price before and after the 2008 global financial crisis and the effects of exogenous shocks on the pattern of information spillover in particular we investigate mean and volatility spillovers between uncertainty and the oil price with and without exogenous shocks by using a bivariate egarch model there are two main findings in our paper first the evidence ensures significant information transmission between equity related uncertainty and the oil price and shows remarkable differences in transmission patterns before and after the crisis second the results show that exogenous shocks can intensify information transmission between oil prices and uncertainty in terms of both the mean and volatility spillover effects moreover exogenous shocks exhibit direct spillover effects on oil prices

modeling oil price us stock nexus a varma bekk agarch approach abstract this study adds to the existing literature on oil price us stock nexus in three ways first it employs the varma agarch model developed by mcaleer et al 2009 within the context of bekk framework using west texas intermediate wti and brent as proxies for oil market and s p stocks as a proxy for us stock market secondly it modifies the model to include endogenously determined structural break using the general structure for analyzing breaks with unit roots in perron 2006 third it uses the adopted model to compute optimal portfolio weight and hedge ratios between oil price and us stocks using different sample data based on the break date on average our empirical evidence suggests a significant positive return spillover from us stock market to oil market and bi directional shock spillovers between the two markets in addition there is significant own asymmetric shock effect in both markets while volatility spillover from oil market to stock market became pronounced after the break which coincides with the period of global economic slowdown similarly the results of portfolio management differ across the sample data more importantly we find that ignoring structural break when it exists may exaggerate hedging effectiveness

uniqueness of equilibrium in sealed high bid auctions abstract for the case of two buyers we show that equilibrium in the sealed high bid auction is unique when i buyers reservations prices are drawn independently from distributions with finite support and positive mass at the lower endpoint ii buyers have private values and iii buyers preferences are log supermodular for more than two buyers we obtain the same result under the additional assumptions that iv buyers with the same reservation price have the same preferences v buyers are risk neutral or risk averse with non increasing absolute risk aversion and vi the supports of the different buyers distributions of reservation prices have the same upper endpoint

numerical analysis of asymmetric first price auctions abstract we propose numerical algorithms for solving first price auction problems where bidders draw independent valuations from heterogeneous distributions the heterogeneity analyzed in this work is what might naturally emerge when subsets of distributionally homogeneous bidders collude bid functions and expected revenues are calculated for two special cases extensions to more general asymmetric first price auctions are discussed journal of economic literature classification numbers d44 c63 c72 d82

entry decisions and bidding behavior in sequential first price procurement auctions an experimental study abstract though many real life auctions are run independently of each other from the bidders point of view they often form sequences of auctions we investigate how behavior responds to the additional incentives that are present in such auction sequences comparing subjects decisions in single first price procurement auctions with their decisions in a game consisting of two subsequent first price procurement auctions we find that in line with the theoretical prediction entry and bidding behavior is crucially affected by the opportunity cost of early bid submission though entry decisions and average bids in the auction sequence systematically deviate from the perfect bayesian equilibrium prediction while the nature of the opponent human being or computer has no significant effect on these findings giving subjects additional feedback on winners and prices seems to reduce the deviations from the equilibrium prediction

learning by doing organizational forgetting and industry dynamics learning by doing and organizational forgetting have been shown to be important in a variety of industrial settings this paper provides a general model of dynamic competition that accounts for these economic fundamentals and shows how they shape industry structure and dynamics previously obtained results regarding the dominance properties of flrms pricing behavior no longer hold in this more general setting we show that forgetting does not simply negate learning rather learning and forgetting are distinct economic forces in particular a model with learning and forgetting can give rise to aggressive pricing behavior market dominance and multiple equilibria whereas a model with learning alone cannot

does the source of oil price shocks matter for south african stock returns a structural var approach abstract in this paper we investigate the dynamic relationship between different oil price shocks and the south african stock market using a sign restriction structural var approach for the period 1973 01 to 2011 07 the results show that for an oil importing country like south africa stock returns only increase with oil prices when global economic activity improves in response to oil supply shocks and speculative demand shocks stock returns and the real price of oil move in opposite directions the analysis of the variance decomposition shows that the oil supply shock contributes more to the variability in real stock prices the main conclusion is that different oil price shocks affect stock returns differently and policy makers and investors should always consider the source of the shock before implementing a policy and making investment decisions

oil price fluctuations and u s dollar exchange rates adding oil prices to the monetary model of exchange rates we find that oil prices significantly explain movements in the value of the u s dollar usd against major currencies from the 1970s to 2008 our long run and forecasting results are remarkably consistent with an oil exchange rate relationship increases in real oil prices lead to a significant depreciation of the usd against net oil exporter currencies such as canada mexico and russia on the other hand the currencies of oil importers such as japan depreciate relative to the usd when the real oil price goes up

non cooperative and cooperative responses to climate catastrophes in the global economy a north south perspective the optimal response to a potential productivity shock which becomes more imminent with global warming is to have carbon taxes to curb the risk of a calamity and to accumulate precautionary capital to facilitate smoothing of consumption this paper investigates how differences between regions in terms of their vulnerability to climate change and their stage of development affect the cooperative and non cooperative responses to this aspect of climate change it is shown that the cooperative response to these stochastic tipping points requires converging carbon taxes for developing and developed regions the non cooperative response leads to a bit more precautionary saving and diverging carbon taxes we illustrate the various outcomes with a simple stylized north south model of the global economy

piecewise procurement of a large scale project this paper studies the optimal piecewise procurement of a large scale project in the unique markov perfect equilibrium mpe of the dynamic procurement game it is found that 1 unlike the static setting the procurer s optimal strategy depends on the number of suppliers and more importantly it is nonmonotonic as one more supplier participates in the procurement auction the procurer softens competition in the initial stages by including more cost btypesq while increasing competition in the mature stages 2 this in turn implies that existing suppliers might favor participation of additional suppliers 3 absent scheduling and or resource constraints the procurer prefers to procure the project as one piece if the suppliers technology exhibits constant or increasing returns and no additional suppliers are enticed to bid and 4 the optimal dynamic mechanism can be easily implemented via a sequence of dominant strategy auctions of the vickrey type d 2004 elsevier b v all rights reserved

government procurement and international trade abstract we model the bidding for a government contract in which there is imperfect competition each bidder is better informed about his own costs than either his rival bidders or the government and the distribution of the domestic firms costs differs from the distribution of foreign firms costs because of comparative advantage effects we find that the government minimizes its expected procurement cost by operating a price preference policy not necessarily purchasing from the lowest bidder

scale economies and the dynamics of recurring auctions we analyze the dynamics of a game of sequential bidding in the presence of stochastic scale effects either economies or diseconomies of scale we show that economies of scale give rise to declining expected equilibrium prices whereas the converse is not generally true moreover first and second price auctions are not always revenue equivalent economies of scale make second price auctions more profitable for the seller whereas revenue equivalence may be preserved in the case of diseconomies

managing dynamic competition in many important high technology markets including software development data processing communications aeronautics and defense suppliers learn through experience how to provide better service at lower cost this paper examines how a buyer designs dynamic competition among rival suppliers to exploit learning economies while minimizing the costs of becoming locked in to one producer strategies for controlling dynamic competition include the handicapping of more efficient suppliers in procurement competitions the protection and allocation of intellectual property and the sharing of information among rival suppliers jel c73 d44 l10

a study of participation in dynamic auctions this article studies repeated entry and bidding decisions in construction procurement auctions i find evidence in the data that suggests the presence of significant cost savings from entering contracts of the same type i estimate a dynamic auction model to measure the gains to experience for bidders i allow for endogenous entry synergies in entry and unobserved auction heterogeneity i find that a bidder can halve entry costs by focusing on specific contract types an auctioneer can increase competition by awarding contracts of the same type in sequence as a result procurement costs for each contract can be lowered by 7 a saving of 110 000

equilibrium in sealed high bid auctions there is a voluminous theoretical literature on sealed high bid auctions auctions in which bids are sealed and the high bidder pays his bid see for example vickrey 1961 myerson 1981 riley and samuelson 1981 milgrom and weber 1982 matthews 1983 maskin and riley 1984 holt 1980 cox smith and walker 1988 a critical property on which this literature relies is the existence of equilibrium in which buyers bidding strategies are monotonic in their types this enables the analyst to perform comparative statics as the distribution of types changes and to compare the welfare properties of the high bid auction with those of other auction institutions one case in which the existence of monotonic equilibrium is readily established is that in which buyers types are distributed smoothly independently and symmetrically in this case there exists a symmetric equilibrium one in which all bidders share the same bidding behaviour as a function of their valuations and this bid function is the solution to a first order differential equation

dynamic spillovers of oil price shocks and economic policy uncertainty this study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil exporting and net oil importing countries over the period 1997 01 2013 06 to achieve that an extension of the diebold and yilmaz 2009 2012 dynamic spillover index based on structural decomposition is employed the results reveal that economic policy uncertainty oil price shocks responds negatively to aggregate demand oil price shocks economic policy uncertainty shocks furthermore during the great recession of 2007 2009 total spillovers increase considerably reaching unprecedented heights moreover in net terms economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009 while in the post 2009 period there is a significant role for supply side and oil specific demand shocks as net transmitters of spillover effects these results are important for policy makers as well as investors interested in the oil market

bid preference programs and participation in highway procurement auctions we use data from highway procurement auctions subject to california s small business preference program to study the effect of bid preferences on auction outcomes our analysis is based on an estimated model of firms bidding and participation decisions which allows us to evaluate the effects of current and alternative policy designs we show that incorporating participation responses significantly alters the assessment of preferential treatment policies

oil and us dollar exchange rate dependence a detrended cross correlation approach abstract this paper examines the relationship between oil prices and the us dollar exchange rate using detrended cross correlation analysis for a wide set of currencies in the periods before and since the onset of the recent global financial crisis we characterized the oil price exchange rate relationship at different time scales and documented two main findings first the cross correlation analysis indicated that oil price exchange rate correlations were negative and low having in general lower values for longer time scales second negative dependence between oil and the us dollar increased after the onset of the global financial crisis for all time scales thereby providing evidence of both contagion and interdependence this empirical evidence has important implications for monetary and fiscal policies asset management and risk assessment

diagnosing measurement equivalence in cross national research many researchers have pointed out that it is necessary to ensure measurement equivalence in cross national comparative research three aspects of measurement equivalence translation metric and calibration equivalence are necessary to establish the cross national reliability and validity of items used to measure theoretical constructs this paper discusses these issues and proposes two recently developed empirical techniques multiple group lisrel and optimal scaling for use in diagnosing cross national measurement equivalence these techniques are illustrated by reanalysis of a pioneering u s and japanese study the two techniques yield convergent results indicating measurement equivalence for some but not all ordinal level items under consideration the findings demonstrate that the proposed methods are useful diagnostic tools for exploring measurement equivalence several suggestions for reducing the likelihood of problems with measurement equivalence and a number of methods for dealing with items where lack of equivalence persists are also discussed

endogenous asymmetry in a dynamic procurement auction we show how to numerically solve for a markov perfect equilibrium of a dynamic auction game where a procurer repeatedly purchases construction services from capacity constrained firms we find that the procurer is best off scheduling frequent auctions for small project sizes otherwise firm capacity utilization rates become larger and more asymmetric which softens competition and increases procurement costs we also find that forward looking bidding dampens the competition softening effects of asymmetry farsighted firms compete more intensely than myopic ones this can undermine the goal of a bid preference style affirmative action program more farsighted firms respond less to the asymmetry induced via bid preferences

asymmetry in procurement auctions evidence from snow removal contracts differences in cost efficiency and productivity across firms may introduce asymmetries in procure ment auctions relying on a structural approach this article investigates potential asymmetry among firms bidding for snow removal contracts in montrthe empirical results show that firms located in close proximity have a cost advantage relative to other firms in the most urbanised part of montrbecause of prohibitive equipment storage costs the extent of inefficiency due to asym metry is empirically assessed various policy experiments are performed a bidding preference policy shows that the city could expect to reduce its costs for allocating snow removal contracts when bidders willingness to pay depends in part on observable variables the princi pal s interest is not best served by creating a level auction playing field this article studies procurement auctions for snow removal contracts in montrit investigates the degree to which companies in disadvantageous locations should win even if they do not submit the lowest bid from the submitted bids a novel empirical methodology estimates the extent of cost variation across firms along with its variation within loca tion although the dispersion is substantial the gain from treating bidders unequally is limited when observed individual characteristics affect the firms costs and their bidding strategies all bidders cannot be treated alike these differences in characteristics or asymmetries among bidders may arise from their size as noted by laffont et al 1995 their capacity constraints as in jofre bonet and pesendorfer 2003 or the possession of better information as in hendricks and porter 1988 and hendricks et al 1994

culture and congruence the fit between management practices and national culture the financial performance of european and asian work units of one multinational company is examined as a function of the congruence between management practices and national culture using hofstede s five national culture dimensions and analogous management practices we find that work unit financial performance is higher when management practices in the work unit are congruent with the national culture

commodity prices interest rates and the dollar this paper sheds light on recent fluctuations in commodity prices we investigate whether a decline in real interest rates and the us dollar contributes to higher commodity prices and whether commodity prices display overshooting behavior in response to changes in real interest rates we analyze the behavior of real prices of crude oil food metals and industrial raw materials the analysis is based on structural var models estimated on quarterly data over the period 1990q1 2007q4 our results suggest that commodity prices increase significantly in response to reductions in real interest rates moreover oil prices and prices of industrial raw materials tend to display overshooting behavior in response to such interest rate changes the evidence also suggests that a weaker dollar leads to higher commodity prices shocks to interest rates and the dollar are found to account for substantial shares of fluctuations in commodity prices

the impact of oil price shocks on u s bond market returns abstract this paper examines the effect of the demand and supply shocks driving the global crude oil market on aggregate u s bond index real returns a positive oil market specific demand shock is associated with significant decreases in aggregate bond index real returns for 8 months following the shock a positive innovation in aggregate demand has a negative effect on real bond return that is statistically significant and becomes more adverse over 24 months structural shocks driving the global oil market jointly account for 27 1 of the variation in real bond returns at 24 month horizon a spillover index from rolling svar models is used to identify the interdependence between the oil market and bond returns the mean for this spillover index is 0 381 over 2001 01 2011 12 and 0 476 over september through december 2008 during the height of the global financial crisis

bottom fishing and declining prices in sequential auctions abstract we study standard sequential auctions in which the seller chooses the order of sale and right to choose auctions in which the winner chooses her preferred item from the remaining items empirically prices in sequential auctions tend to decline and sellers often hold right to choose auctions in our setting the right to choose format guarantees declining prices and efficiency in the standard auction a buyer may submit a low bid for the first item bottom fishing despite its being her less preferred item an example shows that the standard auction has declining prices is inefficient and gives lower expected revenue than the right to choose journal of economic literature classification numbers d44 d82

time and frequency connectedness among oil shocks electricity and clean energy markets abstract this paper examines the time and frequency connectedness among electricity carbon and clean energy markets and oil price demand and supply shocks in doing so we use the spillover method proposed by diebold and yilmaz 2012 and its extension in the frequency domain by barunik and k ehlik 2018 we find increased connectedness during the global financial crisis as well as in the shale oil revolution period the total connectedness is also higher in the short run compared to the long run due to their low connectedness electricity futures can act as a risk diversifier and safe haven asset against oil shocks net pairwise directional connectedness among oil shocks and the clean energy index is higher during the shale oil revolution these results have important implications for investors with different investment time horizons

oil price asymmetric effects answering the puzzle in international stock markets a bstract although studies have found an asymmetric pattern in the response of aggregate output to oil price changes parallel studies in stock markets have not been conclusive about their existence this paper finds evidence that effects for oil importing and oil exporting countries run in opposite directions oil price hikes have a negative effect on the stock markets of oil importing countries while the impact is positive for the stock markets of oil exporting countries statistical tests support the presence of asymmetric effects only in oil importing countries oil price volatility has a negative impact in stock markets of oil importing countries and positive in oil exporting countries moreover oil volatility seems to be affected asymmetrically by oil price changes oil price drops increase oil volatility more than oil price hikes do overall the evidence seems to support that falls in oil prices do not impact stock markets because their positive effects are offset by negative effects of oil price volatility canceling out effects for oil importing countries

first price auctions in the asymmetric n bidder case i consider the first price auction when the bidders valuations may be differently distributed i show that every bayesian equilibrium is an essentially pure equilibrium formed by bid functions whose inverses are solutions of a system of differential equations with boundary conditions i then prove the existence of an equilibrium i prove its uniqueness when the valuation distributions have a mass point at the lower extremity of the support i give sufficient conditions for uniqueness when every valuation distribution is one of two atomless distributions i establish inequalities between equilibrium strategies when relations of stochastic dominance exist between valuation distributions

capacity constraints and information revelation in procurement auctions i introduction procurement auctions are one of the most widely used mechanisms in modern economies to disburse funds for public works projects a substantial portion of these funds are spent on the construction and maintenance of roads and highways an activity on which the u s government for instance spends 160 billion annually in this article we examine the bidding behavior of experimental participants in order to shed light on the strategic incentives generated by these auctions our investigation is centered on two observations made in the existing literature in a typical state level procurement auction held in the united states firms submit sealed bids for a particular project that has been advertised in advance by the state s department of transportation subject to some qualifications the lowest bidder wins the project and is paid the amount of its bid empirical work analyzing these auctions has found that construction firms suffer from capacity constraints whereby a firm with a larger backlog of preexisting work commitments finds it more costly to add new work to its roster de silva dunne and kosmopoulou 2003 jofre bonet and pesendorfer 2003 1 bidders with larger backlogs therefore tend to submit higher bids and win fewer auctions because a typical department of transportation auctions off hundreds of such projects a year capacity constraints create an intertemporal linkage between adjacent auctions a bidder that wins a given auction incurs an opportunity cost in terms of forgoing expected profits in future auctions on account of its anticipated higher costs our first research question therefore is how does the presence of capacity constraints affect the bidding behavior of experiment participants our second research question is inspired by the fact that procurement markets have been found to be vulnerable to collusion by bidders bajari and ye 2003 porter and zona 1993 in most states contracts are typically won by a small set of firms that interact repeatedly in procurement auctions over the course of the year this can provide an ideal setting for a bid rigging scheme in procurement auctions where firms compete by setting prices observing the prices set by one s rivals can be crucial to the feasibility of any collusive scheme porter 2005 if bidders are not colluding and if past bids are not correlated with current costs then observing a rival s past bids will not lead to observable variation in a firm s bids if however firms are attempting to collude a change in the bid revelation policy of the procurer might lead to a measurable change in bids thus revealing the past bids of players can influence their strategic behavior as it alters the ways in which they can provide information to each other about their strategies even in the absence of explicit collusion when all bids are revealed a firm may be able to signal its desire to tacitly collude by submitting noncompetitive bids 2 this leads us to the question what is the effect of varying the amount of information revealed about past bids on the current bids of experimental participants competing in dynamic auctions the answer to this question may be useful for policy makers given that currently most state departments of transportation in the united states publicize all the bids from past auctions the central contribution of our article is to answer the two questions posed with evidence collected from laboratory economic experiments in the experimental sessions bidders play one shot two round and infinite horizon procurement auction games where winning an auction can increase a bidder s cost in the next auction in half of the experimental sessions only the winning bid is revealed after each auction this is done to restrict the amount of information that is shared between bidders explicit communication is not allowed in the other half of the sessions we reveal winning and losing bids at the conclusion of each auction

are bid preferences benign the effect of small business subsidies in highway procurement auctions abstract bid preferences in procurement auctions allow firms from an identifiable group an advantage in bidding against unfavored firms while economic efficiency is expected to fall as a result of bid preferences government procurement costs may either increase or decrease depending on the competitive response of favored and unfavored firms this paper uses data from california auctions for road construction contracts where small businesses receive a 5 percent bid preference in auctions for projects using only state funds and no preferential treatment on projects using federal aid i show that while firms bidding behavior matches theoretical predictions procurement costs are 3 8 percent higher on auctions using preferences the higher procurement cost in preference auctions is attributed to reduced participation by lower cost large firms structural estimates of latent firm costs are then used to evaluate how efficiency and the division of surplus between firms and the government are impacted by bid preferences firm profits are 3 1 percent lower under bid preferences however this is overwhelmed by the efficiency loss due to reduced large firm participation the efficiency loss conditional on firm participation is estimated to represent around 0 1 percent of overall procurement costs including the adverse effect of preferences on the participation of large firms increases the estimated efficiency loss to 3 6 percent which represents 27 cents for each additional dollar awarded to small businesses through the program counterfactual simulations indicate that if participation were instead inelastic to bid preferences the 5 percent bid preference would be close to the optimal level

oil prices and economic activity an asymmetric cointegration approach the aim of this paper is to study the long term relationship between oil prices and economic activity proxied by gdp to account for asymmetries existing in the links between the two variables we propose an approach based on asymmetric cointegration our empirical analysis concerns the u s economy but also the g7 europe and euro area economies results indicate that while standard cointegration is rejected there is evidence for asymmetric cointegration between oil prices and gdp

how costly is affirmative action government contracting and california s proposition 209 abstract this paper investigates the effect of disadvantaged business enterprise subcontractor goals on the winning bids for highway construction contracts using california s proposition 209 which prohibited the consideration of race or gender in awarding state funded contracts after proposition 209 prices on state funded contracts fell by 5 6 relative to federally funded projects for which preferences still applied most of the price decline after proposition 209 resulted from the mix of subcontractors employed which seems to arise from the higher costs of firms located in high minority areas finally short run barriers to entry and expansion may increase the cost of affirmative action

capacity dynamics and endogenous asymmetries in firm size empirical evidence suggests that there are substantial and persistent differences in the sizes of firms in most industries we propose a dynamic model of capacity accumulation that is consistent with the observed facts the model highlights the mode of product market competition and the extent of investment reversibility as key determinants of the size distribution of firms in an industry in particular if firms compete in prices and the rate of depreciation is large then the industry moves toward an outcome with one dominant firm and one small firm industry dynamics in this case resemble a preemption race contrary to the usual intuition this preemption race becomes more brutal as investment becomes more reversible