inducing liquidity in thin financial markets through combined value trading mechanisms asset pricing theory hypothesizes that investors are only interested in portfolios individual securities are evaluated only in terms of their contribution to portfolio risk and return yet standard financial market design is that of parallel unconnected markets whereby investors cannot submit orders in one market conditional on events in others when markets are thin this exposes them to substantial execution risk fear of ending up with unbalanced portfolios after trading may even keep investors from submitting orders further eroding liquidity and the ability of markets to equilibrate the suggested solution is a portfolio trading mechanism referred to as combined value trading cvt investors are allowed to submit orders for packages of securities and the system matches trades and computes prices by optimally combining portfolio orders in an open book we study the performance of the cvt mechanism experimentally and compare it to the performance of parallel unconnected double auctions in experiments with similar parametrization and either a similar number of subjects or substantially thicker markets we present evidence that our portfolio trading mechanism facilitates equilibration to the extent that the thicker markets do inspection of order submission and trade activity reveals that subjects manage to exploit the direct linkages between markets enabled by the cvt system

food price transmission and economic development in this paper we challenge the conventional wisdom that the world s poorest countries are also the most vulnerable to spikes in international food prices we derive an inverted u shaped relationshi

poverty effects of food price escalation the importance of substitution effects in mexican households abstract recent food price increases reportedly caused significant numbers of households to fall into poverty particularly in the developing world most research into the welfare effects of these food price changes assumes constant demand or approximates second order substitution effects poverty forecasts with these assumptions may overestimate or underestimate the effect of food price increases in a nation where most households consume diverse food baskets we account for full substitution by calculating a theoretically consistent food demand system accounting for household responses to food price changes by decreasing some food purchases and increasing other food purchases we use mexican data to confirm the mitigation of adverse welfare effects from food price increases after accounting for country specific dietary preferences in modeling demand in comparison to previous literature our welfare measures predict theoretically consistent numbers of mexican households entering poverty due to recent food price changes

ten little treasures of game theory and ten intuitive contradictions this paper reports laboratory data for games that are played only once these games span the standard categories static and dynamic games with complete and incomplete information for each game the treasure is a treatment in which behavior conforms nicely to predictions of the nash equilibrium or relevant refinement in each case however a change in the payoff structure produces a large inconsistency between theoretical predictions and observed behavior these contradictions are generally consistent with simple intuition based on the interaction of payoff asymmetries and noisy introspection about others decisions

does size matter reassessing the relationship between aquaculture and poverty in bangladesh abstract aquaculture has long been promoted by development institutions in bangladesh on the understanding that it can alleviate poverty most of this attention has focused on forms of the activity commonly referred to as small scale this article draws on concepts from the literature on agricultural growth and elaborates a typology of aquaculture based on relations of production which suggests that in bangladesh quasi capitalist forms of aquaculture may possess greater potential to reduce poverty and enhance food security than the quasi peasant modes of production generally assumed to do so the implications of this conclusion are explored

price discovery and learning during the preopening period in the paris bourse before the opening of the paris bourse traders place orders and indicative prices are set this offers a laboratory to study empirically the t tonnement process through which markets discover equilibrium prices since preopening orders can be revised or canceled before the opening indicative prices could be noise we test this against the hypothesis that preopening prices reflect learning early in the preopening the noise hypothesis is not rejected as the opening gets closer the informational content and efficiency of prices increase and the learning hypothesis is not rejected we also propose a gmm based estimate of the speed of learning

did the commodity price spike increase rural poverty evidence from a long run panel in bangladesh we assess the effects of the dramatic rise in agricultural commodity prices during 2007 2008 on income dynamics and poverty among rural households in bangladesh a unique panel data set allows us to put the effects of recent events in the context of long run trends in income and poverty we use data from a nationally representative longitudinal survey of rural households in bangladesh collected in four waves in 1988 2000 2004 and 2008 nargis and hossain nargis n hossain m 2006 income dynamics and pathways out of rural poverty in bangladesh 1988 2004 agric econ 35 425 435 analysed income dynamics and poverty incidence for the first three waves finding a declining trend in both the incidence and severity of poverty aided in particular by human capital development and off farm employment opportunities we update and extend the analysis to include data collected in 2008 at the height of a spike in agricultural prices we find that the price of a balanced food basket increased by more than 50 during 2000 2008 while household income rose only 15 as a result the incidence and severity of rural poverty in bangladesh sunk to pre 2000 levels during 2004 2008 thus the price spikes in 2007 2008 helped push an additional 13 million people into poverty in rural bangladesh moreover we find that the determinants of poverty have not been time invariant in particular agricultural production which had previously been associated with a higher incidence of poverty served as a hedge against higher food prices during 2004 2008

a reality check for game theory there is a tendency for some economists who are less familiar with game theory gt to comment that it has never fulfilled its early promise and that it essentially has little to offer as a tool to understand predict and guide human social and economic behaviour for instance in sylvia nasar s book a beautiful mind she recounts the remarkable controversy that surrounded the award of a nobel prize for gt including one committee member apparently asking for a single major example that game theory had any empirical validity whatsoever p 371 an excellent reply to such sceptics would be to present them with a copy of colin camerer s new book behavioral game theory this is not to say that his book catalogues an unbroken string of successes for the theory as we shall see neither gt nor human behaviour emerges unscathed from the body of work reported therein

a cross country comparison of rural income generating activities summary this paper uses a newly constructed cross country database composed of comparable income aggregates to examine the full range of income generating activities carried out by rural households the analysis paints a clear picture of multiple activities across rural space in countries on all four continents though less so in the included african countries for most countries the largest share of income stems from off farm activities and the largest share of households has diversified sources of income diversification not specialization is the norm nevertheless agricultural sources of income remain critically important for rural livelihoods in all countries

trading volume and asset liquidity since the depth and liquidity of a market depend on the entry decisions of all potential participants each trader assesses them according to conjectures about entry by others if trade is equally costly across markets this externality leads to the concentration of trade on one market if not it can produce multiple conjectural equilibria some where trade concentrates on one market and others where large traders resort to a separate market or to search for a trading partner while fragmentation is welfare reducing in the two market case no such ranking is possible if it involves off exchange search

the impact of the 2005 2010 rice price increase on consumption in rural bangladesh this article studies the impact of the rice price increase between 2005 and 2010 on consumption in rural bangladesh using the household income and expenditure survey hies data we compare net rice buyers and sellers to self sufficient households to identify the effect of rice price changes on household consumption of rice nonrice food and nonfood items we employ a difference in differences did technique our findings indicate that the surge in domestic rice prices between 2005 and 2010 reduced the nonrice food consumption of net rice buyer households by 7 compared to the households who are self sufficient in rice production however it did neither affect their rice nor their nonfood consumption in contrast while we find no significant effect of rice price increases on the rice consumption of net rice sellers we observe a 9 increase in their nonrice food consumption in such situation a subsidy on low quality rice may be effective in fulfilling the nutritional requirement of low income households

food energy intake and cost of basic needs measuring poverty in bangladesh past estimates of poverty in bangladesh based on the food energy intake method found decreasing poverty over time and similar poverty in urban and rural areas using the cost of basic needs method we find increasing poverty for 1984 92 and higher poverty in rural than urban areas examples of lack of consistency in past estimates are highlighted a method is introduced to assess the gap narrowing and re ranking impacts on poverty measures of changes in poverty lines the article also estimates the marginal impact of household characteristics such as household size education occupation and land ownership on the probability of being poor

imperfect competition in financial markets an empirical study of island and nasdaq the competition between island and nasdaq at the beginning of the century offers a natural laboratory to study competition between and within trading platforms and its consequences for liquidity supply our empirical strategy takes advantage of the difference between the pricing grids used on island and nasdaq as well as of the decline in the nasdaq tick using the finer grid prevailing on their market island limit order traders undercut nasdaq quotes much more than they undercut one another the drop in the nasdaq tick size triggered a drop in island spreads despite the island tick already being very thin before nasdaq decimalization we also estimate a structural model of liquidity supply and find that island limit order traders earned rents before nasdaq decimalization our results suggest that perfect competition cannot be taken for granted even on transparent open limit order books with a very thin pricing grid

income dynamics and pathways out of rural poverty in bangladesh 1988 2004 bangladesh has made considerable progress in alleviating poverty in the recent past using data from a nationally representative longitudinal survey of rural households in bangladesh conducted in three waves in 1988 2000 and 2004 this article relates the dynamics of rural poverty reduction to the structural shift in income generation mechanism from farm to nonfarm activities changing household factor endowments and the adoption of improved agricultural technologies over time 1 the findings show that the occupational shift from the farm to the nonfarm sector such as trade business and services as well as the expansion of cultivated areas through tenancy enhance income growth geographic mobility overseas migration in particular makes a significant contribution to income growth as well the reduction in poverty appears to be vitally dependent on the enhancement of the endowment of human and physical capital that augments the poor households capability to better exploit income generating opportunities and place the households on a sustainable route out of poverty

microdeterminants of consumption poverty growth and inequality in bangladesh using household data from five successive national surveys the author analyzes the microdeterminants of and changes in consumption poverty growth and inequality in bangladesh from 1983 to 1996 education demographics land ownership occupation and geographic location all affect consumption and poverty the gains in per capita consumption associated with many of these household characteristics tend to be stable over time returns to demographics variables in household size have the greatest impact on growth perhaps because of improving employment opportunities for women education in urban areas and land in rural areas contribute most to measures of between group inequality location takes second place in both urban and rural areas the author introduces the concept of conditional between group inequality existing group decompositions of the gini index along one variable do not control for other characteristics correlated with that variable conditional between group ginis avoid this pitfall he also shows how to use unconditional and conditional between group ginis for simulating policies

the east end the west end and king s cross on clustering in the four player hotelling game nicolaas j vriend i introduction despite the popularity of simple location models in industrial economics and voting theory in the tradition following hotelling 1929 and despite the recent rise of the experimental method in economics there have been only few experimental tests of such models brown kruse et al 1993 and brown kruse and schenk 1999 study models with elastic demand while collins and sherstyuk 2000 focus on the simpler case which we address too where demand is inelastic collins and sherstyuk implement a model with three agents who choose locations on a line segment with a uniform density of consumers who due to the assumption of inelastic demand can also be seen as voters with one vote each it is well known that this game has no pure strategy equilibrium see eaton and lipsey 1975 normalizing the line segment to the unit interval the unique mixed strategy equilibrium prescribes uniform randomization over the middle two quarters for all firms see shaked 1982 as it is a well established fact that experimental subjects have difficulties in randomizing see for example rapoport and budescu 1997 it is not very surprising that collins and sherstyuk do not find strong support for the equilibrium hypothesis their empirical distribution of choices is m shaped and has a considerably larger support than the equilibrium distribution in this study we analyze the case of four agents with uniform consumer density and inelastic demand as the equilibrium of this case implies that two firms locate at the edge of the first and second quarters and the other two at the edge of the third and fourth quarters this setup seems ideal for the investigation of various matters first there is no other number of agents where the equilibrium prediction has a better chance to be valid 1 with three competitors the unique symmetric equilibrium is mixed with five the unique equilibrium configuration is asymmetric and implies unequal payoffs and with six and more agents the equilibrium configurations cease to be unique thus only the two and the four agent cases yield unique pure and symmetric equilibrium configurations that give identical payoffs to all agents second the equilibrium in the four agent case has a property that makes it interesting from a behavioral and empirical point of view not only the focal midpoint is empty but the whole middle segment of the linear city is empty as well that is notwithstanding the nice theoretical properties the equilibrium is not entirely intuitive and is also conflicting with casual empirical evidence there are no cities without shops in the center nor are there democracies without parties located in the political middle ground the picture we will discern in our experimental data can be summarized in the following experimental result in the four seller case the equilibrium prediction is of substantial but limited help about one third of all choices are clustered around the equilibrium locations but in no session do we observe convergence to equilibrium at the same time the focal midpoint exerts a considerable attraction with almost 10 of all choices clustered around it consumers profit from this considerably in the form of lower transportation costs the remainder of the article is organized as follows in section ii we give a theoretical account of the model we implement in section iii we present the experimental design in section iv we analyze the results and explain the data and section v concludes ii theory consider a linear city in which four firms produce a good at constant marginal cost the price of the good is fixed due to some unmodeled features of the market consequently costs can be normalized to zero and the price to one to sell the goods the firms simultaneously choose a location on the unit interval 0 1

estimating utility consistent poverty lines with applications to egypt and mozambique abstract a fundamental premise of absolute poverty lines is that they represent the same level of utility through time and space disturbingly a series of recent studies in middle and low income economies show that even carefully derived poverty lines rarely satisfy this premise this article proposes an information theoretic approach to estimating cost of basic needs cbn poverty lines that are utility consistent applications to date illustrate that utility consistent poverty measurements derived from the proposed approach and those derived from current cbn best practices often differ substantially with the current approach tending to systematically overestimate underestimate poverty in urban rural zones

opening and closing the market evidence from the london stock exchange we investigate the performance of call markets at the open and close using a unique natural experiment provided by the london stock exchange where traders can choose between a call and an off exchange dealership system although the call market dominates dealers in terms of price discovery it suffers from a high failure rate to open and close trading especially when trading conditions are difficult the call s trading costs increase with asymmetric information slow trading order flow imbalances and uncertainty traders resort to use of call auctions is negatively correlated with firm size implying that the call may not be the optimal method for opening and closing trading of medium and small sized stocks

equilibrium play and adaptive learning in a three person centipede game the two person centipede game is one of the most celebrated paradoxes of backward induction in complete information extensive form games an experimental investigation of a three person centipede game shows that the paradoxical results are strongly affected by the size of the stakes when the number of players in the game is increased from two to three and the game is played for unusually high stakes with group composition being randomly changed from trial to trial the paradox is considerably weakened as players approach equilibrium play with multiple iterations of the stage game when the game is played with low stakes there is no evidence for equilibrium play or learning across iterations of the stage game an adaptive learning model that assumes updating of the individual probabilities of choice outperforms alternative static and dynamic models in accounting for the major results observed in the high stake experiment

measuring changes in poverty a methodological case study of indonesia during an adjustment period analysis of the effects of policy changes on the poor is often hindered by the difficulties inherent in measuring poverty and comparing levels of poverty before and after policy changes this article outlines two techniques which can overcome many of these measurement problems stochastic dominance conditions which can facilitate a robust poverty ranking of distributions of living standards and a decomposable poverty index which allows measured changes in aggregate poverty to be disaggregated into their various components such as the changes among population subgroups and growth and redistributive components these techniques can be applied to a wide range of indicators of economic well being and poverty lines and to assumptions about the poor the approaches are illustrated using household survey data from indonesia before and after external shocks and the subsequent structural adjustment program in the mid 1980s the study finds that favorable initial conditions and pro poor pattern of growth enabled indonesia to maintain its momentum in poverty alleviation during the period

incorporating a stochastic element into decision theories abstract recent papers by harless and camerer 1994 and hey and orme 1994 have employed two rather different models of errors in decision making under uncertainty the present paper develops a third approach and shows how different stochastic specifications of the same deterministic core theory may generate very different and sometimes surprising hypotheses

anatomy of a crisis the causes and consequences of surging food prices although the potential causes and consequences of recent rising international food prices have attracted widespread attention many existing appraisals are superficial and or piecemeal this article attempts to provide a more comprehensive review of these issues based on the best and most recent research as well as on fresh theoretical and empirical analysis we first analyze the causes of the current crisis by considering how well standard explanations hold up against relevant economic theory and important stylized facts some explanations turn out to hold up much better than others especially rising oil prices the depreciation of the u s dollar biofuels demand and some commodity specific explanations we then provide an appraisal of the likely macro and microeconomic impacts of the crisis on developing countries we observe a large gap between macro and micro factors which when identifying the most vulnerable countries often point in different directions we conclude with a brief discussion of what ought to be learned from this crisis

the speed of information revelation in a financial market mechanism abstract the paper studies the rate at which dispersed private information about the value v of a risky financial asset is incorporated into prices in an information adjustment mechanism the mechanism in the presence of competitive market makers aggregates the information of risk averse agents at a rate of n 1 2 where n is the number of rounds of the adjustment process without market makers convergence of prices to v is much slower in any case the asymptotic precision of prices is negatively related to the degree of risk aversion and the amount of noise in the system journal of economic literature classification numbers d83 g14

cheap talk coordination and entry we show how costless nonbinding nonverifiable communication cheap talk can achieve partial coordination among potential entrants into a natural monopoly industry where the payoffs are qualitatively like the battle of the sexes the analysis would apply equally in other economic situations with such payoffs for example bargaining under complete information or choosing compatibility standards while cheap talk helps achieve asymmetric coordination in a symmetric mixed strategy equilibrium it cannot achieve complete coordination if the game involves even a small amount of conflict

why have some indian states done better than others at reducing rural poverty the unevenness of the rise in rural living standards in the various states of india since the 1950s allowed the authors to study the causes of poverty they modeled the evolution of average consumption and various poverty measures using pooled state level data for 1957 91 they found that poverty was reduced by higher agricultural yields above trend growth in nonfarm output and lower inflation rates but these factors only partly explain relative success and failure in reducing poverty initial conditions also mattered states that started the period with better infrastructure and human resources with more intense irrigation greater literacy and lower infant mortality rates had significantly greater long term rates of consumption growth and poverty reduction by and large the same variables that promoted growth in average consumption also helped reduce poverty the effects on poverty measures were partly redistributive in nature after controlling for inflation the authors found that some of the factors that helped reduce absolute poverty also improved distribution and none of the factors that reduced absolute poverty had adverse impacts on distribution in other words there was no sign of tradeoffs between growth and pro poor distribution

the importance of the savings device in precautionary savings empirical evidence from rural bangladesh we test if precautionary behavior in the consumption decisions of rural households differs across the forms of savings using monthly panel data from bangladesh we find that on average the savings device does not matter but that the effect of income on savings indeed depends on the savings device precautionary savings in the form of staple grain are relatively constant across income quartiles while nongrain precautionary savings vary across income quartiles previous studies which treat these two types of savings devices as fungible misdiagnose the reasons for and by extension the market failures behind a large percentage of the precautionary savings held by rural households

poverty in bangladesh measurement decomposition and intertemporal comparison this article using the methodology developed by foster greer and thorbecke to measure and decompose poverty provides estimates of the levels of poverty in rural and urban areas in bangladesh it investigates in the context of bangladesh the most powerful effect of poverty in terms of a shortfall in food for daily calorie intake by the poor it provides intertemporal comparison of poverty and its decomposition among subgroups it also makes comparisons between the results obtained in this study with those currently available the results of the study show a significant improvement in poverty situations in rural areas from 1982 to 1986 the article also discusses the policy implications of its findings

equilibrium discovery and preopening mechanisms in an experimental market we experimentally analyze how to design preopening mechanisms facilitating coordination on high equilibrium liquidity and gains from trade we allow a call auction to be preceded by a preopening or not preopening orders to be binding or not and the opening time to be deterministic or random when the preopening is nonbinding traders place manipulative orders reducing the credibility of preplay communication random market opening deters manipulation but also hinders communication by making it costly gains from trade are maximized when preopening orders are binding this enables some traders to place early limit orders attracting further liquidity data as supplemental material are available at http dx doi org 10 1287 mnsc 2013 1787 this paper was accepted by wei xiong finance

anchoring in experimental asset markets we investigate the relationship between anchoring and the emergence of bubbles in experimental asset markets we show that setting a visual anchor at the fundamental value fv in the first period only is sufficient to eliminate or to significantly reduce bubbles in laboratory asset markets if no fv anchor is set bubble crash patterns emerge our results indicate that bubbles in laboratory environments are primarily sparked in the first period if prices are initiated around the fv they stay close to the fv over the entire trading horizon our insights can be related to initial public offerings and the interaction between prices set on pre opening markets and subsequent intra day price dynamics

implications of higher global food prices for poverty in low income countries in many poor countries the recent increases in prices of staple foods raise the real incomes of those selling food many of whom are relatively poor while hurting net food consumers many of whom are also relatively poor the impacts on poverty will certainly be very diverse but the average impact on poverty depends upon the balance between these two effects and can only be determined by looking at real world data results using household data for ten observations on nine low income countries show that the short run impacts of higher staple food prices on poverty differ considerably by commodity and by country but that poverty increases are much more frequent and larger than poverty reductions the recent large increases in food prices appear likely to raise overall poverty in low income countries substantially

price hike of staple food nutritional impact and consumption adjustment evidence from the 2005 2010 rice price increase in rural bangladesh this paper studies the nutritional impact of the rice price increase between 2005 and 2010 on households in rural bangladesh and their resulting adjustment in consumption of rice non rice food and

agricultural wages in bangladesh what do the figures really show using new data and a different model palmer jones 1993 has questioned the conclusions of boyce and ravallion 1991 concerning the evolution over time of agricultural wages in bangladesh i argue that palmer jones s model is unconvincing and that the main conclusions of boyce and ravallion are far more robust than he suggests wages respond sluggishly to rice prices bangladesh s limited agricultural growth has not raised the real wage rate which was on a downward trend for most of the 1960s and 1970s the mid 1980s saw higher real wages though this cannot yet be deemed a reversal of the previous trend

the robustness of poverty profiles reconsidered poverty measures and profiles are used increasingly to guide antipoverty policies in low income countries an essential element in these analyses is the specification of a poverty line however there are many different methods for setting poverty lines and different methods can yield strikingly different results with correspondingly different policy implications using recent household survey data from mozambique this paper explores the differences that occur using the most common poverty line methodologies the food energy intake fei and the cost of basic needs cbn methods over different levels of geographic specificity we find that regional and provincial rankings of foster greer and thorbecke poverty indices are not robust to the method of poverty line determination but that the characteristics of the poor are reasonably similar under all methods the fei poverty lines often yield counterintuitive results whereas the family of cbn poverty lines was more robust food consumption patterns of the poor show a high degree of substitution among basic staples from one region to another which is consistent with observed differences in relative food prices indicating that cbn poverty lines that allow for regional variation in the food consumption bundle may be most appropriate in these settings

mixed fortunes a study of poverty mobility among small farm households in chile 1968 86 this study is based on a panel sample of small farm households drawn from eight rural communities in chile interviewed in 1968 and 1986 the incidence and intensity of poverty based on primary income increased over this period however after including earnings from the minimum employment programmes and public transfers both the headcount ratio and squared poverty gap fell markedly between the two surveys mobility analysis showed more households moving out of than into poverty of those households who became impoverished around half may have suffered a transitory decline in income in 1986 the other half experienced pauperisation as a result of investing in projects with negative rates of return investing in the accumulation of human capital by their children sustaining a large rise in the household s dependency ratio or suffering political discrimination in the labour market per capita income was positively related to schooling of the household head in 1968 land ownership in 1986 and living in