declining values and the afternoon effect evidence from art auctions we study the order of sale in art auctions the final bid relative to the auctioneer s estimated price declines throughout the course of an auction a theoretical model shows that in an auction ordered by declining valuation even in the presence of risk neutral strategic bidders the price received relative to the estimate for later items in an auction should be less than the price relative to the estimate for earlier items furthermore ordering heterogeneous items by value maximizes revenue for the auctioneer

the spread of municipal reform temporal spatial and social dynamics the adoption of commission and managerial administrative structures and their subsequent abandonment by the 267 largest american cities during the period 1900 1942 is studied using event history methods full period equations show no significant direct effect of percentage catholic culture clash or population size hierarchical diffussion and only a modest impact of city age modernization a strong effect from average annual manufacturing wages is found but in a direction contrary to that posited by the class conflict hypothesis the variable affecting transition rates most strongly appears to be regional adoption percentages an indicator of neighborhood diffusion these findings suggest revisions of the conventional image of the municipal reform experience

local government structure and the quality of minority neighborhoods one of the most long standing and controversial issues surrounding local government structure in the united states is how reformed political institutions have impacted minority neighborhoods a common belief is that reformism has harmed these neighborhoods but there is no empirical evidence on this issue drawing upon capital asset pricing theory this paper empirically investigates the effects of two reforms the council manager form of government and at large councilor elections on the quality of nonwhite neighborhoods quality is found to be higher in majority white places with at large as opposed to district based elections quality is not found to be affected by the form of government

mitigating underinvestment through an it enabled organization form technology it enables a new refinement of the horizontal network organization we show that it can be applied to a hybrid form of market and hierarchy franchis ing and demonstrate how the resulting horizontal network organization can be an improved organization form specifi cally we use it enabled ownership of customers to refine the horizontal network organization and show how that re finement can alleviate the problem of franchise underinvest ment in traditional franchising in traditional franchising each franchise underinvests relative to investments in an integrated firm because the benefits that accrue to other franchises from its investment horizontal externalities are not accounted for in its investment decision ownership of customers is a combination of identifying individual cus tomers with individual franchises monitoring customer trans actions across franchises and transferring benefits between franchises based on those transactions because ownership of customers rewards franchises for the beneficial horizontal externalities generated by their investments the levels of investment that are chosen by franchises may be increased although not to the levels that would occur in an integrated firm as long as it costs are covered the franchisor is always more profitable and if necessary the franchisor and fran chisees can be jointly more profitable consequently if prof its can be redistributed in lump sum form then the fran chisor and franchisees can be individually more profitable the analysis applies to all horizontal organizations where ownership of customers is feasible and where there are sufficient transactions between units for ownership of cus tomers to be worthwhile

local government type and municipal bond ratings what s the relationship abstractthere is an extensive literature analysing the executive branch within local u s government jurisdictions this has largely revolved around the differences between elected mayors and appointed city managers much of the academic work has considered the potential efficiency gains that may be associated with either form of government and comparative analyses between the two however the empirical literature has been divided regarding the relative efficiency of either form this article attempts to add to that literature by considering how bond markets may perceive potential efficiencies that emerge from one executive type over the other by evaluating bond ratings for a sample of large municipal governments in the united states overall the results suggest that municipalities headed by a city manager are associated with increased bond ratings and thus lower borrowing costs which may lend support that this form of administration is on some margin relatively more efficient than others these re

auction guarantees for works of art abstract this paper addresses the question of whether auction guarantees change the bidding environment and whether they cause a change in price once the value of an item is taken into account we analyze both the cases of third party guarantees and in house guarantees we use two datasets one of christie s and sotheby s contemporary and impressionist evening sales from january 2010 to february 2012 and another larger dataset consisting of all items auctioned at christie s from 2001 to may 2011 while more expensive items are more likely to have guarantees we find little empirical evidence to suggest an effect on price from the guarantee itself once the value of the item is taken into account

the influence of the number of statewide legislative referendums on voter participation in the us this empirical study seeks to broaden the interpretation of the rational voter model so as to include the potential effects of the number of statewide legislative referendums this study tests the hypothesis that greater numbers of such referendums increase voter turnout because they elevate the expected gross benefits egb of voting by empowering voters while not significantly increasing the expected gross costs egc of voting using state level data for the 2006 general election in the us as well as the 2004 us presidential election and after allowing for a variety of economic and demographic factors this study finds compelling evidence that the number of statewide legislative referendums does significantly increase voter turnout

local institutions and the politics of urban growth this article uses a political market framework to analyze how the structure of local political institutions affects the relative political influence of development and environmental interests in the context of urban growth using panel data from 406 florida cities from 1998 to 2003 the empirical analysis finds important interaction effects between the structure of city executive branch institutions and interest group variables the economic and political forces driving urban growth do not operate identically in all cities they vary as a function of institutional context institutional structure helps determine which interest groups have their preferences reflected in local land use changes and development patterns the resulting patterns suggest a sustainability paradox wherein richer environmental interests push for the preservation of environmental amenities while at the same time accelerating the number of residential units built in a community

does the sun shine on art prices this paper examines how variation in mood influences subjective risk and hence auction prices for art in london during the period 1990 2007 the private value of an object is closely related to taste and mood which is proxied for by the variation in weather using a unique data set that includes presale estimates for paintings sold through sotheby s and christie s auction houses as well as weather data for london from the british atmospheric data centre we find that the lower part of the price distribution is populated with paintings with a relative high private value whereas in the upper part prices are driven primarily by the common value characteristics our findings have important implications for collectors and investors in the art market

initial shareholdings and overbidding in takeover contests within the context of takeovers this paper shows that in private value auctions the optimal individually rational strategy for a bidder with partial ownership of the item is to overbid i e to bid more than his valuation this strategy however can lead to i an inefficient outcome and ii the winning bidder making a net loss further the overbidding result implies that the presence of a large shareholder increases the bid premium in single bidder takeovers at the expense of reducing the probability of the takeover actually occurring

distributive politics ward representation and the spread of zoning this analysis examines two alternative explanations for the adoption of comprehensive zoning ordinances in the years immediately following its initial adoption in new york city the market failure explanation predicts zoning adoption in cities where externality problems represented by heavy incidence of manufacturing exist the distributive policymaking model treats zoning as a form of regulation that is most likely to be found in cities where local legislators are elected from geographically concentrated constituencies e g wards and therefore try to target policy benefits to their own constituencies while spreading the policy costs over all constituencies some support is found for each model especially striking is the interactive effect of ward representation and of economic interest i e levels of home ownership

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

diffusion of regulatory impact analysis among oecd and eu member states with the exception of few comparative case studies the literature on regulatory reform and regulatory impact analysis ria tends to focus on internal political actors activities and processes furthermore empirical analyses of new public management have overlooked the dynamics of communications among networks of administrative reformers this article fills these gaps presenting results of an event history analysis on the diffusion of ria it probes rationales for the origin of ria and administrative capacity explanations in combination with variables referring to international and transnational communication channels of administrative reforms a hypothesis based on legal origin is also tested the findings show that the decision to adopt ria rests on transnational networks as well as administrative variables such as government expenditure and legal origin

government procurement and international trade abstract we model the bidding for a government contract in which there is imperfect competition each bidder is better informed about his own costs than either his rival bidders or the government and the distribution of the domestic firms costs differs from the distribution of foreign firms costs because of comparative advantage effects we find that the government minimizes its expected procurement cost by operating a price preference policy not necessarily purchasing from the lowest bidder

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

secret reserve prices in a bidding model with a re sale option this paper presents an auction model in which the seller may choose not to sell in spite of receiving a bid above the announced reserve price such behavior is seen frequently in auctions yet would be suboptimal within most existing models here the seller uses resale to signal information about the object s value that could not be easily communicated via a reserve price announcement the model predicts that bids for reauctioned objects increase relative to initial bids and that on average prices of both reauctioned items and those sold at initial auction rise as delay in reauctioning increases copyright 1997 by american economic association

auctions with price proportional benefits to bidders after some auctions including amish estate sales and buyer rings knockout auctions each bidder receives a share of the revenue generated by the auction we show that in the symmetric case equilibrium bids in both first price sealed bid auctions and oral auctions increase as each bidder s share increases in the case of independent signals oral auctions result in higher expected equilibrium prices than do first price sealed bid auctions journal of economic literature classification number d44

non global social contracts a note on inefficient social institutions this paper explores some perverse features that can emerge when social contracts are moved from a social vacuum to a setting of social interdependence in particular we note incentives that might exist in conjunction with externality problems that yield situations in which 1 social contracts reduce social wealth 2 sub global social contracts are pareto inferior to the absence of social contracts 3 there are no incentives for global social contracts while previous works emphasized the benefits of contracts this paper focuses on their costs a conclusion reached is that perhaps justice and efficiency demand not a single global social contract but rather a rich melange of sub global contracts with appropriate interstices of anarchy

vested interest and biased price estimates evidence from an auction market this study employs a new data set from art auctions to examine the relationship between auctioneer presale price estimates and the long term performance of artworks we find that the price estimates for expensive paintings have a consistent upward bias over a long period of 30 years high estimates at the time of purchase are associated with adverse subsequent abnormal returns moreover the estimation error for individual paintings tends to persist over time these results are consistent with the view that auction house price estimates are affected by agency problems and that

an empirical look at franchising as an organizational form franchise contracts are identified as a hybrid form of economic organization motives for the dominance of franchise arrangements are identified by examining the theoretical literature on franchising and related literatures on the theory of the firm firm growth managerial and employee selection a nd brand name capital empirical tests are performed on the incidence of franchise contracts across states for three industries in which f ranchising is prominent and data are readily available the results s uggest that both principal agent incentives and informational incenti ves favor the use of franchise arrangements copyright 1988 by the university of chicago

information technology and organization design locating decisions and information we study the impact of information technology it on the profitability of individual organization designs and on the relative profitability of different organization designs we develop models where organization design is defined by the location of investment decision authority we consider global and local investment when there is an information asymmetry between a central authority and decentralized nodes decentralized nodes make better local investment decisions because of their local knowledge we define three separate organization designs a hierarchy where all investments are made by a central authority a market where all investments are made by the decentralized nodes and a mixed mode where global investments are made by a central authority and local investments are made by decentralized nodes because of complementarities between global and local investment we show that there is under investment relative to first best in all three organization designs we also find that it can be used to mitigate that underinvestment either by bringing information to the decision maker or by redesigning the monitoring and incentive structure we demonstrate that it does not necessarily favor decentralized organization designs and we show how the costs of coordination may resultin the mixed mode being dominated by one or both of the alternative organization designs thus collocation of investment decision rights and information that results in decisions that require coordination might not be optimal when the costs of not synchronizing global and local investment are high

the choice of municipal government structure and public expenditures numerous empirical studies have attempted to measure the effect of varying government structures on public expenditures i argue that these prior may have produced biased estimates as they are predicated on the assumption that government structures are exogenous

guarantees in auctions the auction house as negotiator and managerial decision maker the multimillion dollar price guarantees that an auction house can offer for paintings have already had a large impact on auction house profits and place new demands on the auctioneer s decision making and negotiating skills yet auctioneers have not been studied as independent entities and decision makers to create a price guarantee the auction house and the seller must negotiate both the guarantee amount and the extra commission the seller pays if the auction price exceeds the guarantee we present a normative model of negotiations and find the frontier of guarantee and commission that is the nash bargaining solution we also determine the optimal reserve that the auctioneer should place on guaranteed property we find that guarantees decrease the auction house s expected revenue compared to a conventional auction but do allow it to attract business which might otherwise be lost guarantees benefit sellers increasing the expected value and lowering the variance of their auction revenue the auctioneer s optimal strategy depends not only on the distribution of the artwork s auction price but also the price it will bring if it fails to sell at auction in the latter case the auction house must pay the seller the guarantee and then sell the artwork which it now owns in a private secondary market where buyers regard the property as damaged goods and lower their offers although all points on the frontier produce equal expected revenue several frequently used decision making rules suggest that both parties may prefer a guarantee arrangement where the seller pays no additional commission and the guarantee has the lowest value on the frontier

the mechanisms of policy diffusion local policy adoptions provide an excellent opportunity to test among potential mechanisms of policy diffusion by examining three types of antismoking policy choices by the 675 largest u s cities between 1975 and 2000 we uncover robust patterns of policy diffusion yielding three key findings first we distinguish among and find evidence for four mechanisms of policy diffusion learning from earlier adopters economic competition among proximate cities imitation of larger cities and coercion by state governments second we find a temporal component to these effects with imitation being a more short lived diffusion process than the others third we show that these mechanisms are conditional with larger cities being better able to learn from others less fearful of economic spillovers and less likely to rely on imitation

demographic factors affecting constitutional decisions the case of municipal charters after decades of studying municipal charters largely by looking for patterns in the data we have a good basis for proceeding more formally with testable theories the political significance of demographic change becomes apparent by looking at its impact on political conflict in combination with the biases in social choice rules the theory of civil rights provides a framework for doing this it suggests identifying 1 the distribution of civil rights conveyed to citizens by alternative charters and 2 the bases for political conflict such as different demands for services and the unequal command of economic resources to satisfy them charters then become political tools simple statistical tests fail to refute this

the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

social network effects on the extent of innovation diffusion a computer simulation of innovation diffusion no longer focus exclusively on explaining the rate at which innovations diffuse or the sequence in which they are adopted they also focus on explaining why certain innovations diffuse extensively be coming de facto standards whereas others do so partially or not at all many of these theories specify a bandwagon process a positive feedback loop in which increases in the number of adopters create stronger bandwagon pressures and stronger bandwagon pressures in turn cause increases in the number of adopters factors affecting if and how many times this feedback loop cycles explain if and how many potential adopters jump on a bandwagon we argue that one important factor has not yet been incorporated into theories explaining bandwagons extent the structure of social net works through which potential adopters of innovations find out information about these innovations which can cause them to adopt these innovations we advance a theory of how the structure of social networks affects bandwagons extent we propose that both the number of network links as well as small seemingly insignificant idiosyncracies of their structures can have very large effects on the extent of an innovation s diffusion among members of a social network

privatisation of waste collection services in response to fiscal stress in times of crisis according to the conventional theoretical framework fiscal stress is an explanatory factor of privatisation since the latter can provide economies of scale and cost savings as indicated by the theory of public choice however urban planning theories suggest that public choice does not take into account the collective needs of those receiving public services the present study aims to clarify two major issues firstly in the presence of fiscal stress do public managers really privatise and secondly does privatisation harm the public interest to investigate these questions we constructed and analysed a discrete time survival model which was applied to the period 2000 2010 to reflect the effects of the current global financial crisis on the fiscal stress privatisation relationship with respect to urban waste collection services the results obtained indicate that when certain aspects of financial condition worsen the likelihood of public services being privatised increases this was the case dur

the buchanan tullock model some extensions in their seminal work the calculus of consent 1962 buchanan and tullock develop a decision model which embodies fundamental relation ships relevant to institutional choices however the buchanan tullock model remains general thus inviting others to specify details and to develop extensions the present paper seeks to explicate this important model so as to clarify the framework in certain important ways and then to extend the model by introducing explicit considerations of such dimensions as group size and group preference heterogeneity as explicit variables

sovereignty relinquished explaining commitment to the international human rights covenants 1966 1999 this article examines whether the content of the international human rights covenants and the costs associated with their ratification influence the decision of countries to join the author evaluates three theoretical perspectives rationalism world polity institutionalism and the clash of civilizations with data for more than 130 countries between 1966 and 1999 rationalists contend that treaty ratification is tightly coupled with internal sovereignty arrangements human rights practices and ideological commitments all of which become more important as treaty enforcement strengthens world polity institutionalists expect ratification to be loosely coupled with a country s conduct or its political ideological or cultural commitments although this gap narrows as compliance is more effectively enforced a civilizations approach predicts tight coupling between ratification and cultural values regardless of the mechanisms in place for enforcing compliance results lend partial support to rationalism a

competing for global capital or local voters the politics of business location incentives the competition for global capital has led to interjurisdictional competition between countries states and cities as to who can offer the most attractive incentives to firms in this study we examine the domestic politics of this competition by focusing on incentive use in the united states from 1999 to 2012 we define incentives as the targeted tax deductions or exemptions that are used to lure businesses into a locality drawing on data from municipal incentive programs we examine how electoral competition shapes the use and oversight of targeted incentives we find evidence that cities with elected mayors provide larger incentives than non elected city managers by taking advantage of exogeneity in the assignment of city government institutions and a database of over 2000 investment incentives from 2010 to 2012 we also find that elected mayors enjoy more lax oversight of incentive projects than their appointed counterparts our results have important implications for the study of interjurisdictional competition and the role of electoral institutions in shaping economic policy

hierarchical accountability in government abstract this paper studies a setting where a relatively uninformed voter holds a policymaker accountable through an informed intermediary in equilibrium the voter uses the intermediary to insulate the policymaker from pandering incentives when the voter s policy expertise is low or the policymaker s congruence is high the voter can thus enjoy the benefits of bureaucratic expertise without forfeiting electoral responsiveness we examine the model s predictions using u s city level data and find that hierarchically accountable managers reduce popular city employment and adjust it more flexibly than electorally accountable mayors the estimated incentive effects are smaller in cities with high voter expertise and larger during election years and are robust to instrumentation by precipitation shocks that influenced early 20th century manager government adoptions for reasons obsolete today

on the strategic choice between capital and labor mobility abstract this paper analyzes the strategies of two governments when choosing between capital and labor mobility for each type of factor mobility the nash equilibria under both income taxes and quotas on factor flows are derived from each country s point of view an income tax dominates a quota the paper also shows that in a strategic environment ramaswami s result that a country prefers the restricted inflow of a scarce factor to the restricted outflow of an abundant factor continues to hold for some initial factor endowments but the opposite result may obtain for other factor endowments