forecasting recessions the puzzle of the enduring power of the yield curve for over two decades researchers have provided evidence that the yield curve specifically the spread between long and short term interest rates contains useful information for signaling future recessions despite these findings forecasters appear to have generally placed too little weight on the yield spread when projecting declines in the aggregate economy indeed we show that professional forecasters are worse at predicting recessions a few quarters ahead than a simple real time forecasting model that is based on the yield spread this relative forecast power of the yield curve remains a puzzle the appendix is included online as supplementary material

bidding behavior at sequential first price auctions with out supply uncertainty a laboratory analysis abstract we report on a series of experiments that test the effects of an uncertain supply on bidding behavior and prices in sequential first price auctions with private independent values and unit demands supply is assumed uncertain when buyers do not know the exact number of units to be sold i e the length of the sequence we observe an important overbidding in all but the last stage of a sequence no matter whether supply is certain and a non monotone behavior when supply is certain yet the data qualitatively support most stage to stage bid predictions and the price trend predictions for risk neutral bidders

sequential auctions price trends and risk preferences abstract we analyze sequential auctions in a general environment where bidders are heterogeneous in risk exposures and exhibit non quasilinear utilities we derive a pure strategy symmetric equilibrium for the sequential dutch and vickrey auctions respectively with an arbitrary number of identical objects for sale when bidders are risk averse preferring the equilibrium price sequences must be downward upward drifting the declining price anomaly is thus evidence of bidder risk aversion in this general environment these results derive from a key assumption that bidders marginal utilities are log supermodular in payment and type

sequential auctions with informational externalities and aversion to price risk decreasing and increasing price sequences a large body of empirical research has shown that prices of identical goods sold sequentially sometimes increase and often decline across rounds this article introduces a tractable form of risk aversion called aversion to price risk and shows that declining prices arise naturally when bidders are averse to price risk when there are informational externalities there is a countervailing effect which pushes prices to raise along the path of a sequential auction even if bidder s signals are independent the article shows how to decompose the effect of aversion to price risk from the effect of informational externalities

daily monetary policy shocks and new home sales abstract the conventional notion of a monetary policy shock as a surprise change in the fed funds rate is misspecified the primary news for market participants is not what the fed just did but is instead new information about the fed s future intentions revisions in these anticipations show up instantaneously in long term mortgage rates home sales do not respond until much later this paper attributes this delay and hence much of the hump shaped response of economic activity to monetary policy to cross sectional heterogeneity in search times this framework allows one in principle to measure policy impacts at the daily frequency

sequential auctions theory and evidence from the seattle fur exchange we develop a model that incorporates salient features of the seattle fur exchange identical lots of furs are auctioned sequentially bids must be raised by specified increments and the winner of a lot has the privilege of beginning the bidding on the subsequent lot predictions of the theory are consistent with the data revenue implications of the theory are also explored

why does the yield curve predict output and inflation the slope of the yield curve has been shown empirically to be a significant predictor of inflation and real economic activity but there is no standard theory as to why the relationship exists this article constructs an analytical rational expectations model to investigate the reasons for the empirical results the model suggests that the relationships are not structural but are instead influenced by the monetary policy regime however the yield curve should have predictive power for output and inflation in most circumstances various implications of the theoretical model are tested and confirmed empirically

evaluating predictions of change this article applies a technique developed by robert c merton 1981 and roy d henriksson and robert c merton 1981 for evaluating the market timing of financial managers to macroeconomic predictions of change this methodology may be used to determine whether the predictions may be of value to the user as an illustration the methodology is applied to a set of real gross national product forecasts copyright 1990 by the university of chicago

standard auctions with financially constrained bidders we develop a methodology for analyzing the revenue and efficiency performance of auctions when buyers have private information about their willingness to pay and ability to pay we then apply the framework to scenarios involving standard auction mechanisms in the simplest case where bidders face absolute spending limits first price auctions yield higher expected revenue and social surplus than second price auctions the revenue dominance of first price auctions over secondprice auctions carries over to the case where bidders have access to credit these rankings are explained by differences in the extent to which financial constraints bind in different auction formats

catalogue vs order of sale effects in sequential auctions theory and evidence from a rare book sale we examine bidding in a rare book sequential auction that has features of a natural experiment lots were arranged in alphabetical order the reserve set non strategically and half the bids placed by mail in bidders we distinguish between the effects induced by the print order of the catalogue from those by the sequential nature of the sale we document the existence of distinct catalogue effects on prices number of bids and price variability and determine their causes we demonstrate that these catalogue effects also influence floor bidder behaviour we derive a theoretical model that generates key aspects of floor bidder behaviour copyright 2004 royal economic society

do financial indicators have directional predictability for us home sales abstractthis study investigates the directional predictability of financial indicators for home sales across tranquil 1984 2005 and volatile 1972 1983 and 2006 2013 periods we find that the mortgage rate has directional predictability for both existing and newly built home sales for up to 2005 the federal funds rate generally has directional predictability for existing newly built home sales in 1984 2005 1972 1983 the term spread has directional predictability for home sales in 1972 1983 but generally not in the tranquil period of 1984 2005 further unlike mortgage and federal funds rates the term spread has directional predictability for home sales in 2006 2013 and thus can help the fed with useful information assuming that this trend continues

equilibrium reserve prices in sequential ascending auctions abstract we study a model where bidders have perfectly correlated valuations for two goods sold sequentially in two ascending price auctions the seller sets a reserve price before the beginning of each auction despite the lack of commitment by the seller we characterize an equilibrium and study its properties strategic non disclosure of information takes the form of non participation in the early auction by low valuation bidders while high valuation bidders bid up to their true valuations some buyers who would profitably buy at the reserve price refrain from participating in order to decrease the second auction reserve price

retailers and consumers in sequential auctions of collectibles we analyse an independent private value model where heterogeneous bidders compete for objects sold in sequential second price auctions in this heterogeneous game bidders may have differently distributed valuations and some have multi unit demand with decreasing marginal values retailers others have a specific single unit demand consumers by examining equilibrium bidding strategies and price sequences we show that the presence of consumers leads to more aggressive bidding from the retailers on average and heterogeneous bidders is a plausible explanation of the price decline effect the study of the expected revenue of the seller confirms the interest of auctioneers in inviting different types of bidders nous analysons un modele a valeurs privees independantes dans lequel des encherisseurs heterogenes sont en concurrence pour des objets vendus lors d encheres sequentielles au second prix dans ce jeu heterogene les encherisseurs tirent leurs evaluations de distributions qui peuvent differer et certains les revendeurs ont des demandes multi unitaires avec des evaluations marginales decroissantes alors que les autres les consommateurs ont une demande individuelle specifique l examen des strategies d equilibre et des sequences de prix montrent que la presence de consommateurs conduit en moyenne a des encheres plus agressives de la part des revendeurs et que la presence d encherisseurs heterogenes constitue une explication plausible a la decroissance des prix l etude de l esperance du revenu du vendeur confirme l interet des commissaires priseurs a inviter differentes categories d acheteurs

predicting severe simultaneous recessions using yield spreads as leading indicators abstract severe simultaneous recessions are defined to occur when at least half of the countries under investigation australia canada germany japan united kingdom and united states are in recession simultaneously i pose two new research questions that extend upon stylized facts for us recessions one are the occurrences of simultaneous recessions predictable two does the yield spread predict future occurrences of simultaneous recessions i use the indicator for severe simultaneous recessions as the explained variable in probit models the lagged yield spread is an important explanatory variable where decreasing yield spreads are a leading indicator for severe simultaneous recessions both us and german yield spreads act as leading indicator for severe simultaneous recessions

predicting u s recessions financial variables as leading indicators this paper examines the out of sample performance of various financial variables as predictors of u s recessions series such as interest rates and spreads stock prices and monetary aggregates are evaluated individually and in comparison with other financial and nonfinancial indicators the analysis focuses on out of sample performance from one to eight quarters ahead results show that stock prices are useful with one to three quarter horizons as are some well known macroeconomic indicators beyond one quarter however the slope of the yield curve emerges as the clear individual choice and typically performs better by itself out of sample than in conjunction with other variables

bidders choice auctions raising revenues through the right to choose sales of multiple real estate properties are often conducted via a sequence of ascending auctions giving the winner at each stage the right to choose one of the available lots we show that when bidders are risk averse such bidders choice auctions raise more revenues then standard simultaneous or sequential ascending auctions we also report the results of laboratory experiments to investigate the effectiveness of bidders choice auctions vis a vis the simultaneous ascending auction the revenue superiority of the bidders choice auction is corroborated by the experimental data finally we compare observed bidders choice auction is corroborated by the experimental data finally we compare observed bidding behavior in the experiments with theoretically predicted bids to estimate a common risk aversion parameter from the data

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

equilibrium price paths in sequential auctions with stochastic supply abstract in many sequential auctions supply is unknown ex ante consequently price formation depends on information regarding supply uncertain supply reduces the option value and yields declining prices however prices increase if it becomes known that supply falls short of expectations

right to choose in oral auctions abstract oral right to choose auctions raise higher revenue when buyers are risk averse when standard sequential and right to choose auctions allocate the objects in the same fashion this means that sellers prefer the latter

directional forecasts of gdp and inflation a joint evaluation with an application to federal reserve predictions many studies have undertaken separate analyses of the fed s forecasts of real gross domestic product gdp growth and inflation this article presents a method for jointly evaluating the direction of change predictions of these variables we conclude that some of the inflation forecasts examined separately were not valuable however the joint pattern of gdp and inflation projections was generally in accord with the economy s movements directional forecasting is now an increasingly popular metric for forecasting performance pesaran and timmermann 2004 414

order variability in perishable product supply chains abstract empirical research has shown that the degree of order variability in supply chains is significantly influenced by product and industry specific factors this paper analyzes the impact of perishability on order variability and the bullwhip effect in supply chains we decompose the ordering process of a retailer into a sales and an outdating process and quantify their short and long term variability and correlation we find differences to non perishable product supply chains driven by the impact of the inventory depletion policy stock out management and retailers service level requirement these three factors significantly affect the retailer s order variability and thus the decision making process and the profitability of the upstream supply stage for the majority of instances the perishable nature of a product results in the ordering process having a lower variability than the demand process only when inventory depletion is dominated by last in first out in high service level environments variability amplification can be observed we propose a dynamic ordering policy for the upstream supply stage taking into account negative correlation of retailer orders between periods this dynamic policy may lead to substantial performance improvements in a sensitivity analysis we investigate the impact of shelf life lead time and demand correlation

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

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

crisis and responses the federal reserve in the early stages of the financial crisis in summer 2007 u s and global financial markets found themselves facing a potential financial crisis and the u s federal reserve found itself in a difficult situation it was becoming clear that banks and other financial institutions would ultimately lose tens or even hundreds of billions of dollars from their exposure to subprime mortgage market loans bank lending is closely tied to bank capital or net worth specifically bank regulators require that loans not exceed a certain multiple of capital thus the federal reserve faced the danger of a sharp contraction in credit and bank lending in a way that threatened a deep recession or worse when this kind of event happens the job of the central bank is to assure that financial institutions have the necessary funds to conduct their daily business that they have the liquidity they need to make timely payments and transfers modern financial institutions need to replenish their funding every day in the united states alone literally trillions of dollars are transferred between banks each day to support the 50 trillion credit outstanding in the economy as a whole commercial banks require funds to initiate the mortgages auto loans and credit card debt they then sell into financial markets while investment banks finance much of their activity with daily borrowing in the early stages of the crisis the situation often arose in which a wellcapitalized bank was forced to make sudden large loans based on previously committed lines of credit in this circumstance central bank actions can ease

auctions and the price of art the value of most important works of art is established by public auction either directly by an actual sale or indirectly by reference to other sales how the auction system works is thus a critical determinant of how the public s preferences are translated into the evaluation of artistic work the auction system is central in the determination of the incentives for artistic work and the efficiency of the auction system is a key determinant of the cost of creating and distributing works of art this paper contains a review of the burgeoning new research of the last decade that has been designed to shed light on how the art auction system actually works what it indicates about price formation and how well it performs we begin our discussion in section 2 with a short description of the mechanics of the auction system and then organize the remainder of our discussion around two major topics the first topic concerns how auction prices can be used to determine and compare overall price movements within the art market and other markets and the second topic concerns how the auction mechanism influences prices we

predicting u s recessions with dynamic binary response models abstract we develop dynamic binary probit models and apply them for predicting u s recessions using the interest rate spread as the driving predictor the new models use lags of the binary response a recession dummy to forecast its future values and allow for the potential forecast power of lags of the underlying conditional probability we show how multiperiod ahead forecasts are computed iteratively using the same one period ahead model iterated forecasts that apply specific lags supported by statistical model selection procedures turn out to be more accurate than previously used direct forecasts based on horizon specific model specifications

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

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

signal jamming in a sequential auction abstract in a sequence of first price auctions with stable private values bidders strategically conceal their private information until the last auction we characterize equilibrium bidding and explore how such signal jamming affects the dynamics of equilibrium prices

ordering revenue and anchoring in art auctions we estimate the effect of ordering by value on revenues in sequential art auctions held by sotheby s and christie s we exploit a pre determined rotation of which of these two houses holds their auction first during auction week in new york city when the house that goes first has relatively expensive paintings compared to the other house we find that the sale premium for the week is around 21 higher relative to the mean sale premium and the fraction of paintings sold during the week is around 11 higher we provide evidence that this is due to an anchoring effect

budget constrained sequential auctions with incomplete information i study a budget constrained private valuation sealed bid sequential auction with two incompletely informed risk neutral bidders in which the valuations and income may be non monotonic functions of a bidder s type multiple equilibrium symmetric bidding functions may exist that differ in allocation efficiency and revenue the sequence of sale affects the competition for a good and therefore also affects revenue and the prices of each good in a systematic way that depends on the relationship among the valuations and incomes of bidders the sequence of sale may affect prices and revenue even when the number of bidders is large relative to the number of goods if a particular good say is allocated to a strong bidder independent of the sequence of sale then auction revenue and the price of good are higher when good is sold first

sequential auctions of endogenously valued objects two completely informed but possibly asymmetric bidders buy or sell identical claims in sequential auctions they subsequently receive monetary prizes that depend upon the final allocation of claims iterated elimination of weakly dominated strategies leaves a unique nash equilibrium for any prize schedule prices weakly decline as the auctions progress and points of strict decline have a simple characterization for one class of prize schedules which arises naturally if duopolists bid for a scarce input the equilibrium is completely characterized many initial allocations generate the same final unequal division of claims which may be interpreted as the natural market structure journal of economic literature classification numbers d43 d44 l11

the declining price anomaly in dutch dutch rose auctions in symmetric independent private value auctions of a single object with risk neutral bidders the english second price auction has strategic simplicity it is optimal for bidders to reveal their valuation of the object and make bids accordingly in that case the auction is won by the person with the highest valuation who pays a price equal to the second highest valuation in a dutch first price auction this simplicity vanishes here winning bidders have to pay their bid to make a profit they shade their bids and bid below their valuation of the object somewhat loosely one may state that an english auction is truth revealing whereas a dutch auction requires strategic behavior the simple structure of the one unit english auction vanishes if two identical objects are auctioned sequentially now in the first round it is optimal for bidders to shade their bids to account for the option value of participating in the subsequent second round robert j weber 1983 bidders with a higher valuation also have a higher option value therefore they shade their bids in the first round by a greater amount than do bidders with a lower valuation as the auction proceeds the number of bidders decreases over the sequence of auctions the number of objects decreases as well the first fact has a negative effect on the competition for an object and the second has a positive effect both effects cancel out and prices follow a martingale as a result all gains to waiting are arbitraged away and the expected prices in both rounds are the same the latter result also holds for sequential auctions of more than two objects and does not depend on whether the auction is english or dutch this neat theoretical result is not supported by empirical research which usually finds price declines orley ashenfelter 1989 found a mild price decrease in sequential auctions of identical units of wine mcafee and daniel vincent 1993 also present empirical evidence on sequential wine auctions they found that on average the second unit of wine was sold at a price 1 4 percent lower than the price of the first unit victor ginsburgh 1998 uses data from wine auctions in which the auctioneer acted as an agent for bidders who were not present at the auction he found price declines but apparently the absent bidders entered bids that did not fit with the theory empirical studies by ashenfelter and david genesove 1992 see also jean jacques laffont 1997 and alan beggs and kathryn graddy 1997 concern heterogeneous objects they also detected price declines because of the contradiction between theory and empirical studies the declining price phenomenon is regarded to be an anomaly

outside options another reason to choose the first price auction abstract in this paper we study equilibrium and experimental bidding behaviour in first price and second price auctions with outside options we find that bidders do respond to outside options and to variations of common knowledge about competitors outside options however overbidding in first price auctions is significantly higher with outside options than without first price auctions yield more revenue than second price auctions this revenue premium is significantly higher with outside options in second price auctions the introduction of outside options has only a small effect

sequential auctions with synergies an example abstract an equilibrium in an example of a two unit sequential ascending price auction where some bidders have superadditive values is presented the equilibrium is in pure strategies in equilibrium the expected price declines from the first to the second auction