individually rational budget balanced mechanisms and allocation of surplus abstract we investigate the issue of implementation via individually rational ex post budget balanced bayesian mechanisms we show that all decision rules generating a nonnegative expected social surplus are implementable via such mechanisms if and only if the probability distribution of the agents type profiles satisfies two conditions the well known condition of cremer and mclean 1988 full extraction of the surplus in bayesian and dominant strategy auctions econometrica 56 1247 1257 and the identifiability condition introduced in this paper we also show that these conditions are necessary for ex post efficiency to be attainable with budget balance and individual rationality and that the expected social surplus in these mechanisms can be distributed in any desirable way lastly we demonstrate that like cremer mclean condition the identifiability condition is generic if there are at least three agents

implementation in differential information economies abstract we consider the problem of implementation of social choice correspondences in differential information economies we provide necessary conditions for implementation and slightly stronger conditions which are sufficient to guarantee implementation

informational smallness and the scope for limiting information rents abstract for an incomplete information model of public good provision with interim participation constraints we show that efficient outcomes can be approximated with approximately full surplus extraction when there are many agents and each agent is informationally small the result holds even if agents payoffs cannot be unambiguously inferred from their beliefs the contrary result of neeman z neeman the relevance of private information in mechanism design j econ theory 117 2004 55 77 rests on an implicit uniformity requirement that is incompatible with the notion that agents are informationally small because there are many other agents who have information about them

on the failure of core convergence in economies with asymmetric information in interim economies with asymmetric information we show that the coarse core of wilson 1978 does not converge to price equilibrium allocations as the economy is replicated this failure of core convergence is a basic consequence of asymmetric information and extends to any reasonable notion of either interim core or price equilibrium

dynamic yardstick mechanisms abstract this paper shows that the inability of principals to commit to long term contracts is irrelevant when dealing with several agents whose private information is correlated this sharply contrasts with the dynamics of contracting without such correlation the paper also explores what limitations on yardstick mechanisms can justify the use of long term contracts we found that the inability of a principal to commit not to renegotiate long term contracts is without consequence even if there is a bound on transfers that an agent can be asked to pay in contrast short term contracting fails to implement the commitment solution with constraints on transfers second absent current yardstick the possibility of using correlated mechanisms in the future allows the principal to implement the first best with a renegotiation proof long term contract whereas this cannot be achieved with short term contracting

the ex ante incentive compatible core in the absence of wealth effects in a differential information economy with quasi linear utilities monetary transfers facilitate the fulfillment of incentive compatibility constraints the associated ex ante core is generically non empty however we exhibit a wellbehaved exchange economy in which this core is empty even if goods are allocated through random mechanisms

the efficiency of competitive mechanisms under private information we consider the efficiency properties of exchange economies where privately informed traders behave strategically specifically a competitive mechanism is any mapping of traders reports about their types to an equilibrium price vector and allocation of the reported economy in our model some traders may have non vanishing impact on prices and allocations regardless of the size of the economy although truthful reporting by all traders cannot be achieved we show that given any desired level of approximation there is n such that any bayesian nash equilibrium of any competitive mechanism of any private information economy with n or more traders leads with high probability to prices and allocations that are close to a competitive equilibrium of the true economy in particular allocations are approximately efficient a key assumption is that there is small probability that traders behave non strategically

stability in large bayesian games with heterogeneous players bayesian nash equilibria that fail to be hindsight or alternatively ex post stable do not provide reliable predictions of outcomes of games in many applications we characterize a family of large bayesian games with many players in which all equilibria are asymptotically hindsight stable and discuss the consequences of this robustness property in contrast to earlier literature we establish hindsight stability in a class of games in which players are not anonymous and type spaces and action spaces can be infinite

the eonia spread before and during the crisis of 2007 2009 the role of liquidity and credit risk abstract this paper provides an empirical assessment of the factors affecting the spread between the euro overnight index average eonia and the main policy rate of the european central bank ecb up until the period when lehman brothers collapsed in mid september 2008 the spread was small and positive after this point the liquidity surplus that developed from the fixed rate full allotment tendering arrangement in refinancing operations drove the widening of eonia spread trading below the ecb policy rate although other factors also played a significant role this paper explains the drivers of spread across alternative non crisis crisis regimes in addition the paper examines how the eonia spread reacts to shocks imposed on a range of liquidity and credit risk factors in alternative crisis non crisis regimes the results have implications for factors that should be monitored closely across both regimes and also the implications that this may have for steering an unsecured overnight rate in crisis times

the daily market for funds in europe what has changed with the emu this paper shows that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate we reach this conclusion by comparing the behavior of this rate in germany before and after the start of the emu the analysis of the german experience allows us to isolate the effects on the overnight rate of these particular instruments of monetary policy to illustrate that this outcome is a general conclusion and not a particular result of the german market we develop a theoretical model of reserve management which is able to reproduce our empirical findings

full implementation and belief restrictions we introduce a framework to study the problem of full implementation under general restrictions on agents beliefs which we call implementation first we provide a characterization of the properties of the mechanisms that achieve implementation these conditions relate the possibility of achieving full implementation to the strength of the strategic externalities induced by the mechanism we then study how to achieve full implementation via the design of simple transfer schemes in these context the general conditions for implementation suggest a simple design principle in which belief restrictions are used to weaken the strategic externalities induced by the baseline transfers of the belief free benchmark importantly our results require minimal information on agents beliefs which regard simple moments of the distribution of types these moment conditions arise naturally in applications and in practical problems of mechanism design

macroeconomic modeling for assessing sustainability of bioethanol production in thailand abstract the development of bioethanol can bring about socio economic and environmental impacts to support the sustainability analysis of bioethanol development and the decision making on bioethanol promotion in thailand this study aims at assessing the socio economic and environmental effects of bioethanol production using recursive dynamic computable general equilibrium cge modeling the assessment is carried out based on the bioethanol production targets in thailand s alternative energy development plan aedp 2015 capturing cassava ethanol and molasses ethanol simulation scenarios are set up to incorporate the role of bioethanol support policies such as tax reduction production efficiency improvement and widening the price gap between gasoline and gasohol into the analysis the results show that increasing bioethanol production together with improving the efficiency of feedstock cultivation is the most efficient way to enhance economic growth however the higher production and consumption would also lead to more irrigation water demand and air emissions the presentation of bioethanol support policies role in promoting bioethanol along with widespread socio economic and environmental effects focus are novel not only are the results useful for the decision making towards sustainable bioethanol development the methods presented in this study should also be a guideline for other socio economic and environmental impact assessment schemes

asymptotic efficiency in large exchange economies with asymmetric information the authors provide conditions on an exchange economy with asymmetric information that guarantee that when the economy is replicated sufficiently often there will be an allocation that is incentive compatible individually rational and nearly efficient the main theorem covers both the case in which aggregate uncertainty remains when the economy is replicated and the case in which replication eliminates aggregate uncertainty in addition the authors demonstrate how their theorem does or does not apply to standard asymmetric information problems such as the buyer s bid double auction problem akerlof s lemons problem and insurance with asymmetric information copyright 1992 by the econometric society

combining bottom up and top down abstract we motivate the formulation of market equilibrium as a mixed complementarity problem which explicitly represents weak inequalities and complementarity between decision variables and equilibrium conditions the complementarity format permits an energy economy model to combine technological detail of a bottom up energy system with a second best characterization of the over all economy our primary objective is pedagogic we first lay out the complementarity features of economic equilibrium and demonstrate how we can integrate bottom up activity analysis into a top down representation of the broader economy we then provide a stylized numerical example of an integrated model within both static and dynamic settings finally we present illustrative applications to three themes figuring prominently on the energy policy agenda of many industrialized countries nuclear phase out green quotas and environmental tax reforms

on the persistence of the eonia spread abstract the european overnight rate eonia signals the monetary policy stance of the european central bank controllability of the eonia requires that the persistence of the spread between the eonia and the key policy rate remains sufficiently low we apply fractional integration techniques to examine its changing persistence

correlated information and mechanism design in models of asymmetric information possession of private information leads to rents for the possessors this induces mechanism designers to distort away from efficiency the authors show that this is an artifact of the presumption that information is independently distributed rent extraction in a large class of mechanism design games is analyzed and a necessary and sufficient condition for arbitrarily small rents to private information is provided additionally the two person bargaining game is shown to have an efficient solution under first order stochastic dominance and a hazard rate condition similar conditions allow full rent extraction in milgrom weber auctions

testing for codependence of cointegrated variables we analyse nonstationary time series that do not only trend together in the long run but restore the equilibrium immediately in the period following a deviation while this represents a common serial correlation feature the framework is extended to codependence allowing for delayed adjustment we show which restrictions are implied for the moving average ma and vector error correction model vecm representations and put forward a generalized method of moments gmm test in addition for cases where the constraints can be uniquely imposed on a vecm a likelihood ratio test is proposed we apply the concept to us and european interest rate data examining the capability of the federal reserve bank fed and european central bank ecb to control overnight money market rates

pivotal players and the characterization of influence a player s influence relative to a mechanism and opponents strategies is the maximum difference his action can make in the expected value of a collective outcome a player is pivotal if his influence exceeds a threshold we provide tight bounds on the number of pivotal players and on average influence these bounds are uniform over all mechanisms and action profiles and are achieved at mechanisms that take the form of a majority rule we illustrate our analysis with an example of provision of a public good where each individual compares the private cost of his contribution with its influence on the collective outcome journal of economic literature classification numbers d62 d89 h41

perfect competition in asymmetric information economies compatibility of efficiency and incentives the idea of perfect competition for an economy with asymmetric information is formalized via an idiosyncratic signal process in which the private signals of almost every individual agent can influence only a negligible group of agents and the individual agents relevant signals are essentially pairwise independent conditioned on the true states of nature thus there is no incentive for an individual agent to manipulate her private information the existence of incentive compatible ex post walrasian allocations is shown for such a perfectly competitive asymmetric information economy with or without common values consequently the conflict between incentive compatibility and pareto eciency is resolved exactly and its asymptotic version is derived for a sequence of large but finite private information economies

college assignment as a large contest abstract we develop a model of college assignment as a large contest wherein students with heterogeneous learning costs compete for seats at vertically differentiated colleges through the acquisition of productive human capital we use a continuum model to approximate the outcomes of a game with large but finite sets of colleges and students the continuum approximation lends tractability to a rich model for studying investment incentives in rank order competitions by incorporating two common families of affirmative action mechanisms into our model admissions preferences and quotas we can show that legal admissions preference schemes and illegal quotas have the same sets of equilibria including identical outcomes and investment strategies

optimal voting rules we study dominant strategy incentive compatible dic and deterministic mechanisms in a social choice setting with several alternatives the agents are privately informed about their preferences and have single crossing utility functions monetary transfers are not feasible we use an equivalence between deterministic dic mechanisms and generalized median voter schemes to construct the constrained efficient optimal mechanism for an utilitarian planner optimal schemes for other welfare criteria such as say a rawlsian maximin can be analogously obtained

the information content of eonia swap rates before and during the financial crisis abstract before august 2007 implied forward rates in the overnight interest swap rates closely reflected market expectations about the future path of the eonia and therefore about the future course of the ecb s monetary policy stance nevertheless this link was weakened considerably during the most acute episode of the financial crisis using the expectations hypothesis of the term structure as a benchmark model for the determination of the overnight interest swap rates we find that after may 2010 the monetary transmission mechanism was partially restored when the ecb implemented various unconventional measures in response to the financial crisis on the contrary liquidity and credit risks are still present in unsecured deposit markets distorting the pricing and transmission of the ecb monetary policy stance along the euribor rates these results should be of interest for regulators financial institutions and researchers in european money markets

information aggregation in a large multi stage market game abstract a three stage market game mechanism is devised that is simple actions are quantities and outcomes are determined by arithmetic operations that do not depend on details of the economy and achieves efficiency in a two divisible good pure exchange setting with potential information aggregation after an entry stage agents make offers which are provisional for all but a small randomly selected group then those offers are announced and everyone else makes new offers with payoffs determined by a shapley shubik market game for a finite and large number of players there exists an almost ex post efficient equilibrium conditions for uniqueness are also provided

monetary policy implementation and overnight rate persistence overnight money market rates are the predominant operational target of monetary policy as a consequence central banks have redesigned the implementation of monetary policy to keep the deviations of the overnight rate from the key policy rate small and short lived this paper uses fractional integration techniques to explore how the operational framework of four major central banks afiects the persistence of overnight rates our results suggest that a well communicated and transparent interest rate target of the central bank is a particularly important condition for a low degree of overnight rate persistence

economy wide impacts of biofuels in argentina abstract argentina is one of the world s largest biodiesel producers and the largest exporter using soybeans as feedstock using a computable general equilibrium model that explicitly represents the biofuel industry this study carries out several simulations on two sets of issues i international markets for biofuel and feedstock such as an increase in prices of soybean soybean oil and biodiesel and ii domestic policies related to biofuels such as an introduction of biofuel mandates both sets of issues can have important consequences to the argentinean economy the simulations indicate that increases in international prices of biofuels and feedstocks would increase argentina s gross domestic product and social welfare increases in international prices of ethanol and corn also can benefit argentina but to a lesser extent the domestic mandates for biofuels however would cause small losses in economic output and social welfare because they divert part of biodiesel and feedstock from exports to lower return domestic consumption an increase in the export tax on either feedstock or biodiesel also would lead to a reduction in gross domestic product and social welfare although government revenue would rise

informational size and incentive compatibility we examine a general equilibrium model with asymmetrically informed agents the presence of asymmetric information generally presents a conflict between incentive com patibility and pareto efficiency we present a notion of informational size and show that the conflict between incentive compatibility and efficiency can be made arbitrarily small if agents are of sufficiently small informational size the incompatibility of pareto efficiency and incentive compatibility is a central theme in economics and game theory the issues associated with this incompatibility are particularly important in the design of resource allocation mechanisms in the presence of asymmetrically informed agents where the need to acquire information from agents in order to compute efficient outcomes and the incentives agents have to misrepresent that information for personal gain come into conflict despite a large literature that focuses on these issues there has been little work aimed at understanding those situations in which informational asymmetries are quantitatively important virtually every transaction is characterized by some asymmetry of information any investor who buys or sells a share of stock generally knows something rel evant to the value of the share that is not known to the person on the other side of the transaction in order to focus on more salient aspects of the problem many models rightly ignore the incentive problems associated with informa tional asymmetries in the belief that for the problem at hand agents are infor mationally small however few researchers have investigated the circumstances under which an analysis that ignores these incentive problems will yield results similar to those obtained when these problems are fully accounted for in this paper we study a class of mechanism design problems our goal is to formalize informational size in a way that when agents are informationally small 1 early versions of this paper circulated under the titles informational smallness and pareto effi ciency and informational smallness and incentive compatibility we thank jacques cremer dean foster andreu mas colell stephen morris david schmeidler and particularly faruk gul for help ful conversations and rajiv vohra for a very careful reading we also thank the numerous partici pants in seminars at which this paper was presented for helpful comments we also thank an editor and the referees for very helpful comments and thank ichiro obara for pointing out an error in an earlier version postlewaite gratefully acknowledges support from the national science foundation

efficiency of large double auctions we consider large double auctions with private values values need be neither symmetric nor independent multiple units may be owned or desired participation may be stochastic we introduce a very mild notion of a little independence we prove that all nontrivial equilibria of auctions that satisfy this notion are asymptotically efficient for any alpha 0 inefficiency disappears at rate 1 n 2 alpha

informational robustness of competitive equilibria abstract consider an exchange economy with complete information we perturb this economy by assuming that each agent s observation about the true state of the world is noisy the paper investigates the robustness of equilibria of the complete information economy with respect to incomplete information we provide conditions under which complete information equilibria are limits of equilibria of the economies with incomplete information as the noise in the signal converges to zero journal of economic literature classification numbers d51 d82

informational size incentive compatibility and the core of a game with incomplete information we study the ex ante incentive compatible core and provide conditions under which the ex ante incentive compatible core is nonempty when agents are informationally small in the sense of mclean and postlewaite 2002a econometrica 70 2421 2453