competitive equilibria and the core of overlapping generations economies this paper analyzes whether the well known result that for arrow debreu economies all competitive equilibria belong to the core holds true in overlapping generations economies in these economies competitive equilibria are not a subset of the core we define the classical set as the set of all those competitive allocations which cannot be affected by a monetary tax transfer policy then we demonstrate that every competitive equilibrium in the classical set belongs to the core of the economy further we show that for large economies no monetary equilibrium belongs to the core journal of economic liferature classification numbers 021

the incompatibility of valued money and equilibrium policy abstract in an overlapping generations economy an equilibrium is defined such that at each date the young agent determines values for that period s monetary and fiscal instruments a proposition showing money cannot have value in any such equilibrium is proved

equilibrium policy in an overlapping generations economy abstract this paper offers a mechanism for reducing the number of stationary equilibria that arise in a simple two period lived overlapping generations economy since each equilibrium is associated with a different combination of monetary and fiscal policies i assume that at each date the agent in his second period of life determines how that period s monetary and fiscal instruments will be set i show that the set of stationary equilibria where this occurs is a proper and nonempty subset of the set of stationary competitive equilibria and that at least one such equilibrium is a pareto optimum

why do defaults affect behavior experimental evidence from afghanistan we report on an experiment examining why default options impact behavior by randomly assigning employees to different varieties of a salary linked savings account we find that default enrollment increases participation by 40 percentage points an effect equivalent to providing a 50 matching incentive we then use a series of experimental interventions to differentiate between explanations for the default effect which we conclude is driven largely by present biased preferences and the cognitive cost of thinking through different savings scenarios default assignment also changes employees attitudes toward saving and makes them more likely to actively decide to save after the study concludes

paying not to go to the gym how do consumers choose from a menu of contracts we analyze a novel dataset from three u s health clubs with information on both the contractual choice and the day to day attendance decisions of 7 752 members over three years the observed consumer behavior is difficult to reconcile with standard preferences and beliefs first members who choose a contract with a flat monthly fee of over 70 attend on average 4 3 times per month they pay a price per expected visit of more than 17 even though they could pay 10 per visit using a 10 visit pass on average these users forgo savings of 600 during their membership second consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year this is surprising because monthly members pay higher fees for the option to cancel each month we also document cancellation delays and attendance expectations among other findings leading explanations for our findings are overconfidence about future self control or about future efficiency overconfident agents overestimate attendance as well as the cancellation probability of automatically renewed contracts our results suggest that making inferences from observed contract choice under the rational expectation hypothesis can lead to biases in the estimation of consumer preferences

on equilibrium for overlapping generations organizations a necessary feature for equilibrium is that beliefs about the behavior of other agents are rational and indi viduals maximize we argue that in stationary olg environments this implies that any future generation in the same situation as the initial generation must do as well as the initial generation did in that situation we conclude that the existing equilibrium concepts in the literature do not satisfy this condition we then propose an alternative equilibrium concept organizational equilibrium that satisfies this condition we show that equilibrium exists it is unique and it improves over autarky without achieving optimality moreover the equilibrium can be readily found by solving a maximization program rios rull thanks the national science foundation for grant sbr 9309514 and the university of pennsylvania re search foundation for their support prescott thanks the national science foundation for grant sbr 9996201 we thank julio davila igor livshits larry jones dan silverman and attendants at seminars in the penn macro lunch group federal reserve bank of minneapolis cornell penn state university macro theory conference the univer sity of rochester ucla and the 1999 midwest theory meetings for comments the views expressed herein are those of the authors and not necessarily those of the federal reserve bank of minneapolis or the federal reserve system

economies with many commodities we discuss the two fundamental theorems of welfare economics in the context of the arrow debreu mckenzie model with an infinite dimensional commodity space as an application we prove the existence of competitive equilibrium in the standard single agent growth model

libertarian paternalism information production and financial decision making we develop a theoretical model to analyze the effects of libertarian paternalism on information production and financial decision making individuals in our model appreciate the information content of the recommendations made by a social planner this affects their incentive to gather information and in turn the speed at which information spreads across market participants via social learning or formal advice channels we characterize situations in which libertarian paternalism improves welfare and contrast them with scenarios in which this policy is suboptimal because of its negative impact on the production and propagation of information the author 2013 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

nudging the poor and the rich a field study on the distributional effects of green electricity defaults abstract choice defaults are an increasingly popular public policy tool yet there is little knowledge of the distributional consequences of such nudges for different groups in society we report results from an elicitation study in the residential electricity market in switzerland in which we contrast consumers actual contract choices under an existing default regime with the same consumers active choices in a survey presenting the same choice set without any default we find that the default is successful at curbing greenhouse gas emissions but it leads poorer households to pay more for their electricity consumption than they would want to while leaving a significant willingness to pay for green electricity by richer households untapped

short run core equivalence in an overlapping generations model abstract this essay establishes the equality between the set of competitive equilibrium allocations and the set of allocations which belong to the cores of a sequence of short run economies for an overlapping generations model a short run economy is a finite period economy obtained by truncating the original economy so that the truncated economy is irreducible

ec trade protection law produmping or antidumping this paper argues that the anticipation of protection can have astimulating effect on exports instead of the commonly claimed effect of harassment if protection serves market cartelization by fixing export quantities or prices exporters may have an incentive to increase their sales abroad in order to secure a large share of the expected rent which is brought about by the anticipated import restriction this may even result in sales below marginal costs or dumping the effect of the protectionist threat may then be the reverse of what is intended it can raise the speed of import penetration and it can provoke dumping a formal model and a supportive institutional analysis of ec trade protection is supplemented by preliminary empirical evidence

the chilling trade effects of antidumping proliferation advocates of antidumping ad laws downplay their negative effects by arguing that the trade flows that are subject to ad are small and their distortions negligible but while the adverse effect of ad on product level trade has long been established the question remains whether there are trade effects at the aggregate level the recent proliferation wave of ad laws and their use provides us with a unique policy change to estimate the true trade effects of adopting and enforcing ad laws for this purpose we estimate the effect of ad on bilateral trade flows between the new adopters of ad laws and their trade partners using a gravity model of annual observations 1980 2000 our estimates show that ad has trade chilling effects on aggregate import volumes but the impacts are heterogeneous across sectors we find that new tough users experience a chilling of their aggregate imports of 14 billion us a year or 5 9 as a result of ad measures for some countries like mexico and india the dampening effects of ad laws on trade flows are found to substantially offset the increase in trade volumes derived from trade liberalization

who is more rational we report on the results of a large scale field experiment that enables us to test for consistency with utility maximizing behavior and to investigate the correlation between individual behavior and demographic and economic characteristics we conducted the experiment with the centerpanel a representative sample of over 2 000 dutch households using procedures similar to those used by choi et al 2007b in a setting with risk we find a high level of consistency in the individual level decisions there is also considerable heterogeneity in subjects consistency scores high income and high education subjects display greater levels of consistency men are more consistent than women and young subjects are more consistent than those who

procrastination and obedience in this lecture i shall focus on situations involving repeated decisions with time inconsistent behavior although each choice may be close to maximizing and therefore result in only small losses the cumulative effect of a series of repeated errors may be quite large thus in my examples decision makers are quite close to the intelligent well informed individuals usually assumed in economic analysis but cumulatively they make seriously wrong decisions that do not occur in standard textbook economics this lecture discusses and illustrates several pathological modes of individual and group behavior procrastination in decision making undue obedience to authority membership of seemingly normal individuals in deviant cult groups and escalation of commitment to courses of action that are clearly unwise in each case individuals choose a series of current actions without fully appreciating how those actions will affect future perceptions and behavior the standard assumption of rational forwardlooking utility maximizing is violated the nonindependence of errors in decision making in the series of decisions can be explained with the concept from cognitive psychology of undue salience or vividness for example present benefits and costs may have undue salience relative to future costs

the role of pensions in the labor market a survey of the literature because employer sponsored group pension plans entail agreements between workers and their employers explicitly linking future payment and employment they offer an unusual window into long term employment relationships this review of recent research on pensions explores how pensions influence employee compensation retirement turnover and other matters central to the determination of labor s price and quantity over time the authors also outline some unanswered questions and difficult to reconcile findings because the pension promise involves an explicit and relatively well documented set of statements regarding future contingent payment and employment an examination of the design and operation of employersponsored group pension plans can yield important insights into the long term employment relationship specifically pension research illuminates some important labor market questions in two ways it offers insight into an important element of compensation in its own right and it furthers our understanding of labor markets in which long term

costly transfer institutions and the core in an overlapping generations model we examine an overlapping generations economy with no pre existing intergenerational transfers and study the set of transfer institutions in the core of the economy that is institutions that would be admissible for the first generation to create and would not be rejected by any future generation institution building is assumed to be costly we allow the cost of creating a new institution to vary with the size of the transfer it institutes and show that all institutions in the core must cost as much to build as they transfer in fact the core set is nonempty if and only if the institution that supports the golden rule transfer costs as much to create as it transfers the core set is characterized for various cost functions we conclude that costs associated with the creation of transfer institutions are essential to make intergenerational transfers socially viable but they may induce the choice of institutions making suboptimal transfers

the economic importance of financial literacy theory and evidence this paper undertakes an assessment of a rapidly growing body of economic research on financial literacy we start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population next we draw on recent surveys to establish how much or how little people know and identify the least financially savvy population subgroups this is followed by an examination of the impact of financial literacy on economic decision making in the united states and elsewhere while the literature is still young conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps a final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy jel a20 d14 g11 i20 j26

earnings quality evidence from the field abstract we provide insights into earnings quality from a survey of 169 cfos of public companies and in depth interviews of 12 cfos and two standard setters cfos believe that i above all high quality earnings are sustainable and repeatable specific characteristics include consistent reporting choices backing by actual cash flows and absence of one time items and long term estimates ii about 50 of earnings quality is driven by non discretionary factors such as industry and macro economic conditions iii in any given period about 20 of firms manage earnings to misrepresent economic performance and for such firms 10 of eps is typically managed iv earnings manipulation is hard to unravel from the outside but peer comparisons and lack of correspondence between earnings and cash flows provide helpful red flags in addition cfos disagree with current standard setting on a number of issues including the sheer number of promulgated rules the top down approach to rule making the neglect of the matching principle and the emphasis on fair value accounting they indicate that a rules based culture makes the audit function centralized and mechanical and hinders the development of audit professionals a summary impression from our work is that cfos view earnings quality as more of a single and unconditional characteristic in contrast to current research where measures of earnings quality are strongly conditional on the decision setting this cfo view is related to their idea of one number a single earnings metric that shapes both their interactions with external stakeholders and internal decision making

overlapping generations intermediation and the first welfare theorem abstract the first welfare theorem fails to hold for standard pure exchange overlapping generations economies because no agent exploits the profit opportunities which can arise from mediating intertemporal trade this paper modifies the standard economy by introducing an optimizing corporate intermediary which distributes net earnings back to consumer shareholders the pareto inefficient no trade state which is a stationary equilibrium for the standard economy cannot be an equilibrium for this modified brokerage economy because the intermediary perceives unbounded earnings opportunities if the intermediary seeks to maximize the minimum dividend per share distributed over time then there is a unique pareto efficient stationary equilibrium for the brokerage economy

cascading contingent protection abstract this paper extends the literature on the incentive effects of contingent protection by identifying and analyzing the vertical linkages that may exist across instances of contingent trade policy it is shown that the accessibility of contingent protection in a downstream industry may provide additional inducement for upstream suppliers of intermediate inputs to pursue contingent protection as well in general access to instruments of contingent protection at more than one stage of the production stream enhances the opportunity for components producers to engage in indirect rent seeking contingent protection may be pursued precisely because of the likelihood of downstream injury and cascading protection

preference dynamics in sequential consumer choice with defaults this research examines the impact of defaults on product choice in sequential decision settings whereas prior research has shown that a default can affect what consumers purchase by promoting choi

behind the scenes the corporate governance preferences of institutional investors we survey institutional investors to better understand their role in the corporate governance of firms consistent with a number of theories we document widespread behind the scenes intervention as well as governance motivated exit these governance mechanisms are viewed as complementary devices with intervention typically occurring prior to a potential exit we further find that long term investors and investors that are less concerned about stock liquidity intervene more intensively finally we find that most investors use proxy advisors and believe that the information provided by such advisors improves their own voting decisions

individual investor perceptions and behavior during the financial crisis combining monthly survey data with matching trading records we examine how individual investor perceptions change and drive trading and risk taking behavior during the 2008 2009 financial crisis we find that investor perceptions fluctuate significantly during the crisis with risk tolerance and risk perceptions being less volatile than return expectations during the worst months of the crisis investors return expectations and risk tolerance decrease while their risk perceptions increase towards the end of the crisis investor perceptions recover we document substantial swings in trading and risk taking behavior that are driven by changes in investor perceptions overall individual investors continue to trade actively and do not de risk their investment portfolios during the crisis

a characterization of the core in overlapping generations economies abstract in this paper we characterize the set of consumption allocations that belong to the core and show that for the case of one agent per generation and one good no monetary equilibrium is in the core for economies with many goods we give bounds on the value of money transactions for competitive equilibria to belong to the core

decision making approaches and the propensity to default evidence and implications abstract this paper examines heterogeneity in the responsiveness to default options in a large state retirement plan focusing on individuals decision making approaches as well as their economic and demographic characteristics analyses of a survey of plan participants show that procrastination and the need for cognitive closure are important determinants of the likelihood of default this paper also explores an important implication of defaulting individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan the desire to change plans is also correlated with numerous economic and decision making characteristics including procrastination

edgeworth equilibria in production economies abstract an edgeworth equilibrium is an allocation that belongs to the core of every n fold replica of the economy in this work we study the properties of edgeworth equilibria for economies with production and infinite dimensional commodity spaces under some relatively mild conditions we establish among other things that 1 edgeworth equilibria exist 2 every edgeworth equilibrium is a quasi equilibrium and 3 an allocation is an edgeworth equilibrium if and only if it can be decentralized by a price system

estimating the impact of anti dumping and anti cartel actions using intervention analysis intervention analysis is proposed as a method for estimating the effects of anti dumping actions in the presence of a domestic cartel data requirements and modelling effort compare favourably with traditional structural model approaches the method is applied to an antidumping action brought to the european commission and in which the european producers of the product were fined after an anti cartel action by the commission covering an overlapping period intervention analysis is applied to distinguish the effects of the anti dumping action from those of changes in cartel behaviour it has been argued that in the post uruguay round world anti dumping ad actions as with other contingent protection measures may become an instrument of choice in place of tariffs to restrict international trade messerlin and reed 1995 some reasons for this may be found in the political economy literature tharakan 1991 1995 where it is argued that such measures which are typically non transparent quasijudicial gatt legal and capable of being targeted at the level of an individual supplier may prove very tempting to both policymakers and those lobbying for protection if economists are to have an effective input to the debate on such measures then it is essential to be able to estimate the consequences of such protection preferably in a way that provides reasonable estimates without the need of onerous data or logistical requirements in this paper we propose a tractable time series based method that requires minimal data the unit value and volume of imports data series we illustrate the technique by reporting estimates of the costs to the united kingdom of the price undertaking that resulted from the successful ad action brought to the european commission in 1982 and directed at four japanese suppliers of polypropylene pp film the illustration is also of interest because a subset of those european pp producers bringing the ad action were the subject of an anti trust ruling that resulted in fines for collusive behaviour messerlin 1990 the anti cartel judgement covered the period during which the industry lodged the complaint of dumping and secured minimum price undertakings from thejapanese producers anti dumping actions in the european union may be resolved in favour of the complainants by the imposition of ad duties adds or more commonly by the foreign suppliers targeted in the actions voluntarily giving an under

withdrawals of anti dumping complaints in the eu a sign of collusion the study looks at a possible relation between the withdrawals of anti dumping ad complaints and the price increases and quantity decreases in the eu imports such a positive relationship is a sign of a tacit collusion terminated cases without withdrawals are taken as a benchmark in the second part of the analysis the dataset covered the ordinary new investigations only to eliminate the impact of different ad protection measures and different types of investigations the coefficients were estimated with cross case time series feasible gls regressions with heteroscedastic case time series and case specific autocorrelation ar 1 current and lagged nominal exchange rates were used as control variables the collusive impact both on prices proxied by unit values and quantities volumes was detected

an overlapping generations model core equivalence theorem we show that in the overlapping generations model an allocation is a walrasian equilibrium if and only if the allocation belongs to the short term core of every replication of the olg economy and hence we establish a core equivalence theorem for the overlapping generations model

what explains the proliferation of antidumping laws a recent phenomenon is the rapid spread of antidumping ad laws mainly amongst developing countries i e china india mexico between 1980 and 2003 the number of countries in the world with an ad law more than doubled going from 36 to 97 countries this proliferation of trade protection laws amongst developing countries is likely to have substantial implications for trade as recently shown by vandenbussche and zanardi 2007 the purpose of this paper is to use a duration analysis to investigate the determinants leading a country to adopt an ad law we also analyze the related question of what explains the heterogeneity between countries that can be observed in terms of the time between adoption and their first use of the ad law we find strong evidence that retaliatory motives are at the heart of the proliferation decision as countries that were targeted by ad actions of traditioal users in the past i e us eu are much more likely to adopt an ad law also our evidence suggests that past trade liberalization substantially increases the probability of a country to adopt an ad law in addition we find that the size of the chemicals sector and the extent of steel imports are positively correlated with the probability to adopt the amount of inward fdi on the other hand has a clear negative effect on the probability to adopt while short term macroeconomic factors like gdp growth and exchange rate volatility seem to matter less for adoption asymmetric regional shocks and the development level of a country seem to raise the probability of starting to use an ad law our results are robust to several specifications of duration models

trading as entertainment among 1 000 german brokerage clients for whom both survey responses and actual trading records are available investors who report enjoying investing or gambling turn over their portfolio at twice the rate of their peers including entertainment attributes as additional explanatory variables in cross sectional regressions of portfolio turnover on objective investor attributes more than doubles the fraction of the total variation of portfolio turnover that can be explained the results are robust to controlling for gender and proxies for overconfidence constructed from survey responses nonpecuniary benefits of trading thus appear to offer a straightforward explanation of the excessive trading puzzle

the bounded core of an overlapping generations economy the bounded core is the set of allocations which are not improved upon by any bounded set of agents we submit that the bounded core does not serve as a criterion for the efficiency of allocations in an overlapping generations economy for it may include allocations which are not even short run pareto optimal we also submit that the bounded core is a weak criterion for the robustness of allocations in an overlapping generations economy for it may not shrink to the set of competitive equilibrium allocations as the individual agents become negligible

valuation and optimality in the overlapping generations model we present versions of the fundamental theorems of welfare economics for the overlapping generations model with an infinite dimensional commodity space given samuelson s example one cannot hope for a version of the welfare theorems in terms of pareto optimality however we show that for malinvaud optimality both welfare theorems as formulated by debreu do hold the main result of this paper asserts that in an olg model an allocation is malinvaud optimal if and only if it is a valuation equilibrium a fundamental concern of general equilibrium theory dating at least from adam smith s wealth of nations is the optimality of the market mechanism the relationship between competitive behavior and the efficient allocation of resources has its clearest and most satisfying formulation in the two welfare theorems of k j arrow 1951 and g debreu 1954

optimal defaults and active decisions defaults often have a large influence on consumer decisions we identify an overlooked but practical alternative to defaults requiring individuals to make an explicit choice for themselves we study such active decisions in the context of 401 k saving we find that compelling new hires to make active decisions about 401 k enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt in enrollment procedure producing a savings distribution three months after hire that would take 30 months to achieve under standard enrollment we also present a model of 401 k enrollment and derive conditions under which the optimal enrollment regime is automatic enrollment i e default enrollment standard enrollment i e default non enrollment or active decisions i e no default and compulsory choice active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences are highly heterogeneous financial illiteracy however favors default enrollment over active decision enrollment