but who will monitor the monitor suppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations what about the monitor s deviations to address this question i propose a contract that makes the monitor responsible for monitoring and thereby provides incentives even when the monitor s observations are not only private but costly too i also characterize exactly when such a contract can provide monitors with the right incentives to perform in doing so i emphasize virtual enforcement and suggest its implications for the theory of repeated games jel c78 d23 d82 d86

comment general competitive analysis in an economy with private information prescott and townsend 1984 extend the literature on general equilibrium theory to economies in which agents have private information about their preferences they examine the extent to which the classical welfare theorems carry over in this environment the existence of nonverifiable information imposes limits on the economy s contract structure contracts cannot be written to require an agent to reveal information unless truthful revelation is optimal incentive compatiblity constraints typically nonlinear are thereby introduced into the corresponding planner s problem as a result the space of feasible deterministic allocations is typically not convex the authors circumvent this problem by allowing for random allocations where the planner is choosing over the space of probability distributions of consumption allocations the incentive compatibility constraints in this space are linear in the planner s choice variables rendering the set of feasible consumption allocations convex some of the attainable random allocations pareto dominate the set of incentive feasible allocations attainable via deterministic allocation rules randomized allocations have two functions they convexify the planner s choice set and they may allow for pareto superior allocations to be achieved prescott and townsend s presentation may leave readers with the misleading conclusion that the nonconvexity of the choice set under deterministic allocations is necessary for random allocations to be pareto superior but one can attain pareto superior allocations with lotteries even when the choice set under deterministic allocation rules is convex this note demonstrates that prescott and townsend s own example has this property

fishing effort its testing specification and internal structure in fisheries economics and management abstract the concept of fishing effort is central to fisheries economics and management however effort is an aggregate index of inputs which can be consistently formed only under the condition on production technology of homothetic separability of inputs this paper develops the conditions under which effort can be consistently formed it then provides the first empirical test for effort and jointness in inputs in a fishery by estimating a multiproduct function for the new england otter trawl fleet after not rejecting input output separability and rejecting nonjointness in inputs the construction of a superlative index for effort is demonstrated through estimating a translog production function the implications of effort s internal structure for fisheries management are then considered

firm behavior under quantity controls the theory of virtual quantities the theory of virtual quantities the dual to virtual prices provides a framework to analyze competitive multiproduct firm behavior under multiple quantity controls on inputs and outputs including command and control quotas and transferable property rights the framework addresses the firm s reactions to regulatory controls impacts of adding or dropping quantity controls inferring unrationed from rationed production and conversion from command and control quotas to cap and trade systems with transferable property rights and secondary market behavior the paper develops reasons for failure of quasi concavity of technology extends the elasticity of intensity s properties and integrates the virtual price and virtual quantity frameworks virtual quantities are applied to assess potential firm responses to quantity controls and a potential transferable property right in a malaysian fishery

technology and competitiveness this paper reviews the literature on technology and competitiveness first the concept of the international competitiveness of a country and various theoretical approaches on the relationship between trade and growth are discussed then a number of empirical studies of the impact of technology as evidenced by r d patents etc on exports are examined the final section summarizes the evidence and considers the lessons for policy copyright 1996 by oxford university press

lotteries sunspots and incentive constraints we study a prototypical class of exchange economies with private information and indivisibilities we establish an equivalence between lottery equilibria and sunspot equilibria and show that the welfare and existence theorems hold to establish these results we introduce the concept of the stand in consumer economy which is a standard convex finite consumer finite good pure exchange economy with decreasing absolute risk aversion and no indivisibilities we prove that no lotteries are actually used in equilibrium we provide a simple numerical example with increasing absolute risk aversion in which lotteries are necessarily used in equilibrium we also show how the equilibrium allocation in this example can be implemented in a sunspot equilibrium

prices versus quantities in fisheries models this paper discusses the conditions for generalizing the analysis in weitzman 1974 to fisheries it is shown that it is straightforward to generalize the analysis if the cost function is direct additively separable in stock size and catches this leads to the conclusion that the analysis holds for a schooling fishery with and without search costs but it might not hold for a search fishery a further result is that for a schooling fishery without search costs where the marginal cost function is steeper than the marginal benefit function taxes are likely to be preferred over individual transferable quotas

introduction to sunspots and lotteries abstract this introduces the symposium on sunspots and lotteries two stochastic general equilibrium concepts sunspot equilibrium se and lottery equilibrium le are compared it is shown that for some general pure exchange economies which allow for consumption nonconvexities or moral hazards the set of le allocations is equivalent to the set of se allocations provided that the randomizing device can generate events of any probability journal of economic literature classification numbers d51 d82 d84 e32

an empirical analysis of production distortions in the mid atlantic surf clam and ocean quahog fishery this paper presents empirical evidence of production distortions under controlled access management in the mid atlantic surf clam and ocean quahog fishery results indicate that vessels harvested multiple clam species even though the harvest technology exhibits diseconomies of scope vessels also operated in a region of the production surface where the marginal product of vessel capital services was negative these distortions are explained by perverse regulations which restricted vessel capital replacement and severely limited fishing times

r d and manufacturing production specialization in developed economies a study of the relation between technology and manufacturing production specialization in a series of developed economies is performed by means of models relating indicators of revealed symmetric comparative advantage of value added and exports to similar measures of comparative performance of r d expenditure capital intensity total factor productivity and wage costs the production and r d specialization are shown to be substantial and sticky this contrasts with the evidence of a substantial degree of convergence in the patterns of the other variables regression estimates show that although all variables play their part the impact of comparative r d efforts on production specialization is by far the strongest this impact is found to be stronger in the smaller economies and it is especially important in research intensive industries the influence of comparative wages is moreover found to be positive here suggesting the dominance of a labour skill and efficiency wage effect over a wage cost comp

a dual characterization of incentive efficiency we show that incentive efficient allocations in economies with adverse selection and moral hazard problems can be determined as optimal solutions to a linear programming problem and we use duality theory to obtain a complete characterization of the optima our dual analysis identifies welfare effects associated with the incentives of the agents to truthfully reveal their private information because these welfare effects may generate non convexities incentive efficient allocations may involve randomization other properties of incentive efficient allocations are also derived

the role of technology in market shares dynamics the paper presents the estimation of an empirical model of market share dynamics for five industrialized countries and 18 industries the emphasis is put on the importance of non price factors of competitiveness whereas most traditional explanations rest on the influence of relative prices among the former type of factor the role of variables reflecting technological advantage is privileged in particular the role of innovations has received considerable attention in the literature on international trade as well as the literature on endogenous growth in this spirit the paper introduces patent counts and investment as explanatory variables for the export market share the results show that non price variables have an important impact on the determinations of long run competitiveness

efficient competitive equilibria with adverse selection do walrasian markets function orderly in the presence of adverse selection in particular is their outcome efficient when exclusive contracts are enforceable this paper addresses these questions in the context of a rothschild stiglitz insurance economy we identify an externality associated with the presence of adverse selection as a special form of consumption externality consequently we show that competitive equilibria always exist but are not typically incentive efficient however as markets for pollution rights can internalize environmental externalities markets for consumption rights can be designed to internalize the consumption externality due to adverse selection with such markets competitive equilibria exist and incentive constrained versions of the first and second welfare theorems hold

technological competition and trade performance this paper estimates a demand system for oecd exports differentiated by country of origin for two isic industries non electrical machinery electrical machinery and for total manufacturing exports it develops a generalized form of the aids demand system in which research and development r d effort enters in a number of ways to affect a particular supplier s competitiveness r d activity relative to competitors affects on the one hand relative cost competitiveness and on the other hand the producer s position in the quality spectrum of products offered on international markets one of the interesting insights gained from the study is that effectiveness of r d effort can differ much across different economies it is conjectured that a country s position in an international catching up process may be partly responsible for such differences as well as labour market dynamics which link increased labour costs to cost and quality improvements

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

serial correlation and the fixed effects model this paper generalizes the durbin watson type statistics to test the ols residuals from the fixed effects model for serial independence also generalized are the tests proposed by sargan and bhargava for the hypothesis that the residuals form a random walk a method for efficient estimation of the parameters is also developed finally an earnings function is estimated using the michigan survey of income dynamics in order to illustrate the uses of the tests and the estimation procedures developed in this paper

stock size harvesting costs and the potential for extinction the case of sealing starting in the 1960s considerable opposition to the canadian and norwegian harp seal hunt off newfoundland developed it was alleged that the seal hunt was unethical and that the seal population had been seriously depleted the purpose of this paper is to analyze the production function for the seal hunt based on data for the norwegian seal hunt particular attention is paid to the question whether free entry to the fishery will cause overexploitation this depends critically on the characteristics of the production function in particular the extent to which harvesting costs depend on stock size

the role of innovation in bilateral oecd trade performance this paper tests an empirical model of the determinants of bilateral oecd trade with particular emphasis on the role of innovation variation in the relationship across countries and sectors is analysed two innovation proxies and actual data on innovations are used a positive relationship is found between relative innovation and bilateral trade performance at an aggregate level and for a number of manufacturing sectors sectors are also categorized as either net users or producers of innovations differences in innovation appear to have more of an impact on trade performance for the net producers of innovations than the net users of innovations

competitive markets with endogenous health risks we study an economy where agents productivity and labor endowment depend on their health status and indivisible occupational choices affect individual health distributions we show that pareto efficiency requires cross transfers across occupations moreover workers with relatively less safe jobs must get positive transfers whenever labor supply is not very reactive to wages a condition in line with the findings of a large empirical literature in these instances compensating wage differentials equalizing the utilities of ex ante identical workers in different jobs undermine ex ante efficiency moreover competitive equilibria where only assets with deterministic payoffs are traded are not first best finally we show that simple transfer schemes implemented through linear subsidies to health insurance enhance efficiency

long run profit functions for multiproduct firms a long run specification of the multiproduct profit function is developed from the restricted profit function the multiproduct restricted profit function and the envelope condition are used to estimate the optimal long run levels of the quasi fixed factor formulas for long run marshallian elasticities of substitution and transformation economies of scope product specific and overall economies of scale and economic measures of capacity utilization are developed for the translog functional form the methodology is illustrated by a case study of the new england otter trawl industry

transferable quotas enforcement costs and typical firms an empirical application to the norwegian trawler fleet an alternative to traditional regulations of fisheries to avoid rent dissipation is the use of individual transferable quotas itqs where prices in the quota market provide the necessary information to owners of harvest rights to contract with each other however even under such a decentralized regime information on the underlying technology of the fishing vessels is also necessary first since most fisheries consist of many interrelated production processes in order to avoid rent dissipation by discarding wrong output mix etc the structure of production in the multispecies fishery must be known to design a proper quota system second an itq system may create incentives for misreporting by understating the actual catch this may especially be the case where the expected degree of self enforcement is low the paper proposes a way to reduce the information requirements under regulation with asymmetric information by constructing a typical firm and comparing performance for the other vessels to this firm based on the typical firm and if the industry is relatively homogenous the performance and hence catch of any other firm in the industry can be predicted within a certain range further the paper applies this idea to the norwegian trawler fleet to assess the production structure in terms of jointness input output separability and the supply and demand elasticities for the fishing firms this information characterizes the fishery and thus how the quota system may be designed and how to construct a yardstick in order to reduce the enforcement cost under a decentralized regulation of itqs

classical competitive analysis of economies with islands arrow debreu competitive equilibrium analysis is extended to environments with information sets differing in space as well as in time and with people moving between locations equilibrium is shown to exist and to be optimal and the equilibrium price system is characterized such environments include many of those studies in the sectoral reallocation literature

testing for input substitution in a regulated fishery input restrictions are commonly used to prevent rent dissipation in fisheries this paper examines whether these schemes are successful by calculating the degree of input substitution between restricted and unrestricted inputs conventional elasticities of substitution cannot be used when the firm faces controls on the use of some inputs in this case the appropriate measure of substitution the elasticity of intensity must be used data from the british columbia salmon fishery provide evidence of input substitution possibilities for two vessel types these results call into question the usefulness of input control schemes

estimating the elasticity of substitution between restricted and unrestricted inputs in a regulated fishery a probit approach abstract catch effort vessel and skipper characteristic data for a sample of boats involved in the tasmanian rock lobster fishery in the 1983 1984 season are used to estimate a fishing effort production function nested in a cobb douglas fishery production function the initial effort function is translog but tests suggest that the ces form cannot be rejected the vessel s choice of fishing ground is modeled by a probit equation the output from which is included in the ols estimation of the production function the elasticity of substitution between the inputs which are restricted by regulation and the other inputs is of particular interest as it determines whether input restriction is an efficient form of regulation for the fishery the results suggest a value significantly less than unity

multi output nonfrontier primal measures of capacity and capacity utilization this article implements an econometric approach for generating primal capacity output and utilization measures for fisheries in situations where regulatory environmental and resource conditions affect catch levels but are not independently identified in the data frontier based capacity models may interpret such impacts as production inefficiency however if such inefficiencies are unlikely to be eliminated the implied potential output increases may be unrealistic we develop a multi output multi input stochastic transformation function framework that permits various assumptions about how output composition may change when operating at full capacity we apply our model to catcher processor vessels in the alaskan pollock fishery

efficient allocations with hidden income and hidden storage we consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources we provide a simple characterization of the unique efficient allocation of consumption in cases in which the rate of return on storage is sufficiently high or alternatively in which the worst possible outcome is sufficiently dire we show that unlike in environments without unobservable storage the symmetric efficient allocation of consumption is decentralizable through a competitive asset market in which individuals trade riskfree bonds among themselves in this paper we consider an environment in which individuals have random income and can accumulate assets through a storage technology their income realizations and their asset position are private information given these informational frictions we provide a simple characterization of the unique efficient allocation of consumption in cases in which the rate of return on storage is sufficiently high or alternatively in which the worst possible outcome is sufficiently dire we show that the symmetric efficient allocation of consumption is decentralizable through a competitive asset market in which individuals trade risk free bonds among themselves there is a large prior literature which examines the characteristics of efficient risksharing in dynamic settings in the presence of private information unlike our paper this literature generally finds that efficient allocations do not coincide with the equilibrium allocations of any economy with a competitive bond market see atkeson and lucas 1992 in particular the key difference between our paper and these preceding ones is that the earlier literature assumes either that agents cannot accumulate resources over time or that if they can this accumulation is observable in contrast we assume that both agents incomes and their stored resources are private information it is this combination of assumptions that leads to our result our findings are reminiscent of allen s 1985 he considers a dynamic principalagent relationship in which the agent is risk averse and has hidden stochastic income the

public regulation and the structure of production in multiproduct industries an application to the new england otter trawl industry this article considers the problem of managing multispecies fishing industries as one of regulating the production of individual multiproduct firms the multispecies new england otter trawl industry is examined within this framework empirical results derived from estimating a multiproduct profitfunction indicate that management consistent with the structures ofmultiproduct production and costs would directly regulate inputs little support is provided for applying the traditional bioeconomic model to the fishery studied

an analysis of the efficient production frontier in the fishery implications for enhanced fisheries management the transformation relationship between factor inputs and outputs the efficient production frontier epf contains important information for fisheries managers a directional technology distance function model of the harvesting technology is used to measure changes in the epf over time frontier shifts are summarized with input and output based frontier indicators that are interpreted as measures of bioeconomic productivity change the model is applied to the mid atlantic surf clam and ocean quahog fishery

fishing effort validation and substitution possibilities among components the case study of the viii division european anchovy fishery command and control regulation programmes particularly input constraints typically fail to achieve stated objectives because fishermen may substitute unregulated for regulated inputs it is thus essential to have an understanding of the internal structure of production technology a primal formulation is used to estimate a translog production function at the vessels level that includes fishing effort and fisherman s skill the flexibility of the selected functional permits the analysis of the substitution possibilities among inputs by estimating the elasticity of substitution with no prior constraints particular attention is paid to the empirical validation of fishing effort as an aggregate input which implies either the acceptance of the joint hypothesis that inputs making up effort are weakly separable from the inputs out of the subgroup or considering that effort is an intermediate input produced by a non separable two stage technology cross sectional data from the spanish purse seine fleet op

resource rent in individual quota fisheries traditional fisheries management schemes generate incentives for vessels to maximize catch resulting in rent dissipation and overcapacity individual vessel quota management schemes change the incentives to maximize profit and have the potential to generate resource rent and reduce capacity an interesting question is whether it is the changed incentives due to individual quota or the capacity reduction due to transferability of individual quota that is most important in generating rent in this study a cost function approach is used to model and measure rent generated and potential rent in a fishery managed with individual vessel quotas

cost structure and capacity in the norwegian pelagic fisheries the parameters of the short run cost function are estimated for three vessel types taking part in the norwegian pelagic fisheries purse seine vessels trawlers and coastal vessels the generalized translog functional form is used estimates of returns to scale are calculated and the results indicate that there are substantial economies of scale in all vessel classes it is further investigated whether excess capacity varies with vessel size and age the analysis suggests increased quotas per vessel to avoid rent dissipation with the total allowable catch given the number of participating vessels must be reduced

explaining non compliance in the norwegian coastal cod fishery an application of the multinomial logit establishing motive is central to the analysis of criminal behaviour this article analyses the range of motives for noncompliant behaviour among coastal cod fishermen a multinomial logit model is employed to analyse the reasons that underlie various motives the four motives compared in this study are economic technological and social and motives caused by bureaucracy and legitimacy problems the economic motive is found to be most important for coastal fishermen however the cross sectional data indicate that motives vary with fishing gear vessel length and fishermen s age the results indicate that identifying motives for noncompliant behaviour is not straightforward but is important for reducing the extent of infringements of the regulations fishermen who use gill net seine and long line for example are more often motivated to noncompliance by technical problems and bureaucracy than hand jig fishers the study suggests that in order to prevent noncompliance behaviour the authorities manageme