regret and feedback information in first price sealed bid auctions we investigate the effect of regret related feedback information on bidding behavior in sealed bid first price auctions two types of regret are possible in this auction format a winner of the auction may regret paying too much relative to the second highest bid and a loser may regret missing an opportunity to win at a favorable price in theory under very general conditions being sensitive to winning and paying too much should result in lower average bids and being sensitive to missing opportunities to win at a favorable price should result in higher bids for example the u s government s policy of revealing losing bids may cause regret sensitive bidders to anticipate regret and bid conservatively decreasing the government s revenue we test these predictions in the laboratory and find strong support for both

deviations from rules based policy and their effects abstract rules based monetary policy evaluation has long been central to macroeconomics using the original taylor rule a modified taylor rule with a higher output gap coefficient and an estimated taylor rule we define rules based and discretionary eras by smaller and larger policy rule deviations the absolute value of the difference between the actual federal funds rate and the federal funds rate prescribed by the three rules we use tests for multiple structural changes to identify the eras so that knowledge of subsequent economic outcomes cannot influence the choice of the dates with the original taylor rule monetary policy in the u s is characterized by a rules based era until 1974 a discretionary era from 1974 to 1985 a rules based era from 1985 to 2000 and a discretionary era from 2001 to 2013 with the modified taylor rule the rules based era extends further into the 1970s and there is an additional rules based period starting in 2006 we calculate various loss functions and find that economic performance is uniformly better during rules based eras than during discretionary eras and that the original taylor rule provides the largest loss during discretionary periods relative to loss during rules based periods

labor tying in a poor agrarian economy a theoretical and empirical analysis in this paper we show how tied labor contrary to its common characterization as a feudal relic and as a symptom of economic stagnation may actually be strengthened by capitalist agricultural development we construct a simple two period theoretical model of a two tiered labor market to show how the proportional importance of voluntary labor tying contracts may increase with yield increasing improvements and with a tightening of the labor market we then provide in support of these hypotheses some general historical as well as more detailed econometric evidence from a variety of cross sectional data in rural india

efficiency and equity tradeoffs incentive compatible contracts revisited abstract while the efficiency of certain contractual choices has been well established less attention has been given to the distributional outcomes of contracting in natural resource based industries data from a case study of seed gatherers in honduras demonstrates that workers paid under a relative payment system receive an earnings premium of about 25 of which 40 cannot be explained by observed differences in worker productivity a theoretical agency model is outlined in the appendix to explain why workers under tournaments necessarily enjoy a higher return than those under piece rates implying a more skewed income distribution as suggested in the efficiency wage literature

what makes a good economy evidence from public opinion surveys analysis of 35 years of previously unstudied survey data shows how the american public evaluates the health of the macroeconomy survey responses are multidimensional distinct from indexes of consumer sentiment and based mostly on genuine perceptions of economic conditions not media reports of economic statistics as such they contain unique information about current and future values of these statistics particularly consumption growth a longstanding focus of the literature both intangibles and macroeconomic fundamentals explain substantial variation in the survey data the public equates 2 to 5 percentage points of inflation with 1 percentage point of unemployment jel e32 e27 eo1 i introduction traditional business cycle measurement and theory tends to downplay the role of public perceptions the health of the macroeconomy is evaluated with a lag through formal measurement of fundamentals like gross domestic product gdp growth rather than by the opinion of the public the objective functions employed by models of macro policy derived from theory or prescribed ad hoc are similarly unshaped by public opinion on the attractiveness of various states of the economy for a profession that is enamored of consumer sovereignty and cognizant of the value of idiosyncratic decentralized information this is a little surprising it probably reflects in part a lack of available data in the united states prior research on the macroeconomic perceptions of the public has almost exclusively employed the widely available michigan index of consumer sentiment or its counterpart from the conference board the consumer confidence index to predict future consumption but these measures are not intended to be and have not been interpreted as general assessments of the national macroeconomy they combine responses to a variety of questions about personal finances and the macroeconomy about employment consumption and profitability about current conditions and the change in those conditions these questions are sufficiently disparate that it is unclear what exactly either index measures or how it should be interpreted see merkle langer and sussman 2004 this ambiguity has probably contributed to a decades long debate over the usefulness of such indices which has been compounded by divergent findings on their ability to forecast future consumption see golinelli and parigi 2004 manski 2004 to surmount these data limitations 35 years of responses were assembled from three reputable national u s polls that ask about the current state of the national economy and or whether economic conditions are getting better or worse all are conceptually and we show statistically distinct from indexes of consumer sentiment and none has been previously studied as shown in this article these poll data enrich our understanding of the business cycle in three ways they contain information about fundamental macroeconomic variables which are reported with a lag and often subsequently revised they establish the role of various macroeconomic fundamentals and of intangibles in determining the public s satisfaction with the economy which informs policy and suggests simple summary measures of economic conditions and they reveal the multifaceted nature of consumers macroeconomic perceptions which span four dimensions across a total of nine survey questions section ii introduces these surveys and shows how they relate to each other and to the michigan and conference board indices in section iii we examine how macroeconomic conditions influence the assessments reported therein their predictive power is examined in section iv section v concludes ii polling on the state of the economy for decades american news organizations have asked respondents to assess the national macroeconomy table 1 lists the questions time spans sample periods and response options for each

monetary policy rules work and discretion doesn t a tale of two eras this lecture examines monetary policy during the past three decades it documents two contrasting eras first a rules based era from 1985 to 2003 and second an ad hoc era from 2003 to the present during the rules based era monetary policy in broad terms followed a predictable systemic approach and economic performance was generally good during the ad hoc era monetary policy is best described as a discretion of authorities approach and economic performance was decidedly poor by considering alternative explanations of this policy performance correlation and examining corroborating evidence the paper concludes that rules based policies have clear advantages over discretion this abstract was borrowed from another version of this item

interlocking transactions obstacles precursors or instruments of agrarian capitalism abstract rural labor arrangements often change rapidly and in ways that prevailing theories cannot explain explicit understanding of the exercise of power in rural society sheds considerable light on how and why rural labor arrangements change in the course of economic development this paper shows how different labor tying arrangements embody exclusionary mechanisms that can serve as instruments of both labor management and social control macro political and economic conditions shape the ways in which these mechanisms operate and are in turn influenced by them viewing labor arrangements in this way helps resolve problems confronted by the prevailing theories and allows for a broader understanding of dynamic processes

pricing substitutable products under consumer regrets abstract since many firms provide consumers with substitutable products which may be launched sequentially over several periods strategic consumers need to make their purchase or wait decisions at the beginning of the first period however they may face second period valuation uncertainty when such decisions are made and decisions made under uncertainty may lead to regrets ex post lots of empirical studies show that consumers anticipate these regrets and take anticipated regrets into consideration this paper studies the impact of valuation uncertainty and consumer anticipated regrets on consumer purchasing behavior firm s prices and pricing strategy we consider a firm selling two substitutable products over two periods one product for one period in a selling season the firm announces all its prices at the beginning of the selling season price commitment or announces each price at the beginning of each period dynamic pricing besides a consumer may experience purchase regret from missing a better choice if she chooses to buy in the first period and otherwise wait regret if she chooses to wait consumers make decisions based on the firm s prices and strategies and the anticipated regrets we find that a firm may need to set a lower price in the first period even when the average valuation in this period is higher second with price commitment the impact of each type of regret on the optimal second period price can be opposite and depends on the value of the uncertainty and regret parameters finally we show that price commitment dominates dynamic pricing and the value of price commitment depends on the uncertainty and anticipated regret

dynamic pricing when consumers are strategic analysis of posted and contingent pricing schemes abstract we study dynamic pricing policies for a monopolist selling perishable products over a finite time horizon to strategic buyers buyers are strategic in the sense that they anticipate the firm s price policies it is expensive and administratively difficult for most brick and mortar retailers to change prices placing limits on the number of price changes and the types of pricing policies they can adopt the simplest policy is to commit to a set of price changes a more complex alternative is to let the price depend on sales history we investigate two pricing schemes that we call posted and contingent pricing using the posted pricing scheme the firm announces a set of prices at the beginning of the horizon in the contingent pricing scheme price evolution depends upon demand realization our focus is on the posted pricing scheme because of its ease of implementation counter to intuition we find that neither a posted pricing scheme nor a contingent pricing scheme is dominant and the difference in expected revenues of these two schemes is small limiting the number of price changes will result in a decrease in expected revenues we show that a multi unit auction with a reservation price provides an upper bound for expected revenues for both pricing schemes numerical examples suggest that a posted pricing scheme with two or three price changes is enough to achieve revenues that are close to the upper bound dynamic pricing is only useful when strategic buyers perceive scarcity we study the impact of scarcity and derive the optimal stocking levels for large markets finally we investigate whether or not it is optimal for the seller to conceal inventory or sales information from buyers a firm benefits if it does not reveal the number of units it has available for sale at the beginning of the season or subsequently withholds information about the number of units sold

rural labor legislation and permanent agricultural employment in northeastern brazil abstract permanent annual or longer term agricultural employment declined relative to temporary daily weekly or seasonal employment during the 1960s in a sugar cane producing region in northeastern brazil but increased rapidly during the 1970s predictions from economic theory are combined with observations about the economic forces at work during the period to argue that in the absence of government intervention permanent employment would likely have risen during both decades the argument renders the introduction of the brazilian rural labor statute rls of 1963 a strong candidate explanation for the decline of permanent employment in the 1960s the rls s employment stability provision which required employers to make severance payments to workers with at least one year tenure dismissed without just cause not only increased the expected cost of permanent contracts but also changed the very nature of permanent employment prior to the legislation employers induced permanent workers to be subject to them by giving them premium wage and benefits packages and threatening to dismiss them if caught shirking in subjection severance pay provisions made such threats incredible the elimination of farmers ability to derive subjection benefits from permanent employees reduced even further the incentive to hire workers under permanent contracts

pricing of demand related products can ignoring cross category effect be a smart choice abstract this paper studies pricing strategies of competing retailers offering substitutable products in multiple product categories for such retailers in addition to accounting for within category pricing effects cross category effects can also influence consumers purchase decisions and thereby impact the retailers optimal pricing strategies we model consumers utility for purchasing substitutable products from the same category and from other categories as well we then solve a game theoretic model to identify the retailers optimal prices and profits our results show that accounting for cross category effects largely influences the retailers pricing and profitability in particular cross category effects influence the sensitivity of prices to within category substitution levels while cross category effects have an impact on retailers equilibrium strategies this effect is only relevant when within category substitution effects are present we also find that intentionally ignoring cross category effects leads to lower prices for categories that are either substitutable or highly complementary and to higher prices otherwise when not accounting for the fact that the two categories are demand related implies lower prices than when this information is accounted for then at least one retailer chooses to disregard the cross category effect at equilibrium finally we find evidence for prisoner s dilemma situations where both retailers ignore cross category effect at equilibrium while accounting for it would yield them higher profits

auctions with anticipated regret theory and experiment this paper demonstrates theoretically and experimentally that in first price auctions overbidding with respect to the risk neutral nash equilibrium might be driven from anticipated loser regret felt when bidders lose at an affordable price different information structures are created to elicit regret bidders know they will learn the winning bid if they lose loser regret condition or the second highest bid if they win winner regret condition or they will receive no feedback regarding the other bids bidders in loser regret condition anticipated regret and significantly overbid however bidders in the winner regret condition did not anticipate regret jel d44

anticipated regret and product innovation when a firm introduces a product with new features some consumers may find it difficult to assess their valuations for these new attributes their purchase decisions made under such uncertainty may lead to postpurchase regret it has been experimentally shown that consumers may anticipate their potential postpurchase regret and make their current choices to mitigate or minimize it that is a consumer s anticipated regret can significantly impact his purchase decision given the trend that firms in various markets invoke regret to stimulate sales this paper analytically explores whether and how anticipated regret affects competing firms profits and product innovation our analyses reveal that the presence of anticipated regret can increase or decrease firms profits and foster or hinder product innovation depending on whether it makes the consumer segments more or less polarized in other words anticipated regret has a nonmonotonic effect on firms profits and the entrant s optimal quality therefore

preference heterogeneity power and intrahousehold decision making in rural malaysia abstract this paper examines conjugal household responsibilities roles preference heterogeneity and intrahousehold power relations in rural malay families its three major contributions are to provide an effective initial indicator of separate spheres within the family develop and implement a method for measuring the extent of conjugal preference heterogeneity and illustrate the value of combining this direct measure of preference heterogeneity with a measure of power in estimating household expenditure patterns for three major items food schooling and housing improvement these three measurement innovations applied to the rural malaysia context demonstrate the potential for more direct efforts to model and measure intrahousehold decisions

attached farm labor limited horizons and servility abstract two facets of attached farm labor arrangements the servility often required of attached laborers and employers interest in maintaining such workers limited horizons are described and incorporated into an otherwise standard model of attached and temporary agricultural employment substantially modifying the model s predictions the dependence of workers preferences on reference group behavior which underlies employers interest in limiting horizons may enable employers to drive even freely mobile workers wellbeing below competitive levels may imply that abolishing servility arrangements would benefit all workers gives rise to multiple equilibria in community layout and culture and sheds light on some characteristics of agrarian revolts

optimal price skimming by a monopolist facing rational consumers this paper considers the intertemporal pricing problem for a monopolist marketing a new product the key feature differentiating this paper from the extant management science literature on intertemporal pricing is the assumption that consumers are intertemporal utility maximizers a subgame perfect nash equilibrium pricing policy is characterized and shown to involve intertemporal price discrimination we compare this policy to the optimal policy for a monopolist facing myopic consumers and find that for any given state prices are always lower with rational consumers than with myopic consumers for plausible parameter values the assumption of consumer rationality can be shown to lead to large differences in optimal prices moreover if a monopolist facing rational consumers implements the optimal myopic consumer pricing policy profits can be significantly less than if the monopolist follows the equilibrium pricing policy for rational consumers

applying regret theory to investment choices currency hedging decisions we apply regret theory an axiomatic behavioral theory to derive closed form solutions to optimal currency hedging choices investors experience regret of not having chosen the ex post optimal hedging decision hence investors anticipate their future experience of regret and incorporate it in their objective function we derive a model of financial decision making with two components of risk traditional risk volatility and regret risk we find results that are in sharp contrast with traditional expected utility loss aversion or disappointment aversion theories we discuss the empirical implications of our model and its ability to explain observed hedging behavior

attaching workers through in kind payments external shocks may cause a decline in the productivity of fixed capital in certain regions of an economy exogenous obstacles to migration make it hard for workers in those regions to reallocate t

advance selling when consumers regret we characterize the effect of anticipated regret on consumer decisions and on firm profits and policies in an advance selling context where buyers have uncertain valuations advance purchases trigger action regret if valuations turn out to be lower than the price paid whereas delaying purchase may cause inaction regret from missing a discount or facing a stockout consumers whom we describe as emotionally rational act strategically in response to the firm s policies and in anticipation of regret in this context regret explains two types of behavioral patterns inertia delayed purchase and frenzies buying early at negative surplus we show how firms should optimally respond to consumer regret and also characterize a normative regret threshold above which they should not advance sell action regret reduces profits as well as the value of advance selling and booking limit policies for price setting firms inaction regret has the opposite effects these effects are diminished by capacity constraints and are reversed for firms facing price pressure in the advance period owing e g to competition or market heterogeneity regret heterogeneity explains premium advance selling for the capacity constrained firm which may benefit from larger shares of regretful buyers finally we show how the negative effects of regret on profits can be mitigated by regret priming marketing campaigns and by offering refunds or options or allowing resales our results highlight the importance of assessing the relative strength of regret within and across market segments and of accounting for these factors in pricing and marketing policies this paper was accepted by christian terwiesch operations management

markdown or everyday low price the role of behavioral motives we study a seller s optimal pricing and inventory strategies when behavioral nonpecuniary motives affect consumers purchase decisions in particular the seller chooses between two pricing strategies markdown or everyday low price and determines the optimal prices and inventory level two salient behavioral motives that impact consumers purchase decisions and the seller s optimal strategies are anticipated regret and misperception of product availability regret arises when a consumer initially chooses to wait but encounters stockout later or when the consumer buys the product at the high price but realizes that the product is still available at the markdown price in addition consumers often perceive the product s future availability to be different than its actual availability we determine and quantify that both regret and availability misperception have significant operational and profit implications for the seller for example ignoring these behavioral factors can result in up to 10 profit

monopoly production and pricing of finitely durable goods with strategic consumers fluctuating willingness to pay abstract demand volatility and production lead time oblige manufacturers of made to stock goods to use economic forecasts in deciding on production quantities manufacturers of finitely durable goods face an additional complication in making production decisions they must consider not only the uncertainty in demand for new goods but also how the future sales will be affected by the older goods that will become available via a secondhand market using a model of an infinite horizon sequential game between a monopolistic producer of durable goods and strategic consumers we investigate how demand volatility affects producers production and pricing decisions we formulate the problem of a monopolist durable goods producer as a discrete time markov decision process and prove certain structural properties of the sales and production policy these structural properties facilitate an efficient computational algorithm which we use in running numerical experiments to explicate the producer s strategy and to conduct equilibrium comparative statics analysis we show that a simple myopic policy is optimal when each period s demand is independent and identically distributed i i d when demand is correlated across periods the producer s optimal production and sales policy is not myopic and in some states when the economy is poor the producer withholds some of the new goods inventory our numerical results suggest that in equilibrium the producer who is dealing with myopic rather than with forward looking consumers is more likely to sell some of these held back goods later as vintage goods

attaching workers through in kind payments theory and evidence from russia external shocks may cause a decline in the productivity of fixed capital in certain regions of an economy exogenous obstacles to migration make it hard for workers in those regions to reallocate to more prosperous regions in addition firms may devise attachment strategies to keep workers from moving out of a local labor market when workers are compensated in kind they find it difficult to raise the cash needed for migration this endogenous obstacle to migration has not yet been considered in the literature the article shows that the feasibility of attachment depends on the inherited structure of local labor markets attachment can exist in equilibrium only if the labor market is sufficiently concentrated attachment is beneficial for both employers and employees but hurts the unemployed and the self employed an analysis of matched household firm data from the russian federation corroborates the theory

exploitation alternatives and socialism how can one understand the formation of inequality strata and classes and perhaps exploitation in socialist society among marxists there is no widely accepted materialist theory of the development of classes and inequality under socialism perhaps more noticeably there is no widely accepted theory of the political behaviour of socialist states indeed the response of many or most marxists to wars between socialist states for example is that at least one of the countries involved is not socialist this argument is tautological and not scientific since two socialist countries could never fight each other therefore the major premise that they are both socialist must be false the example of wars between socialist countries is given to point out the nature of a crisis in marxian theory that theory formulated in the late nineteenth century to explain the development of nineteenth century capitalism does not seem useful when applied to late twentieth century socialism and capitalism perhaps marxists cannot for instance agree on the nature of soviet society is it socialist capitalist state capitalist or transitional what definitions might one give to decide taking a cue from the marxian approach to capitalism one might seek to define a notion of exploitation relevant to socialist society from such a beginning could follow a theory of class and finally a political theory of socialist society as corollary to the theory of class this paper is an attempt to approach this set of problems in the way indicated by proposing a general theory of exploitation of which socialist exploitation will be a special case the task of providing a tlheory of exploitation relevant to socialist economies has much in common with the problem marx faced in providing a theory of exploitation for capitalist economies the economic problem for marx was to explain how the gross inequities of capitalism could be reproduced in an economy characterised by voluntary exchange in feudal and slave economies there was no mystery to the locus of surplus appropriation since the institution of labour exchange was coercive one could clearly speak of serf and slave labour as being forcibly expropriated due to those social relations under capitalism where the institution for labour exchange is noncoercive how could one speak of exploitation or expropriation of any commodity including labour power marx s effort was to re solve this paradox by providing a theory of value which claimed that despite the non coerciveness of the institution of labour exchange that exchange was exploitative thus he claimed that exploitation was a phenomenon which was robust when one

purchasing pricing and quick response in the presence of strategic consumers we consider a retailer that sells a product with uncertain demand over a finite selling season the retailer sets an initial stocking quantity and at some predetermined point in the season optimally marks down remaining inventory we modify this classic setting by introducing three types of consumers myopic consumers who always purchase at the initial full price bargain hunting consumers who purchase only if the discounted price is sufficiently low and strategic consumers who strategically choose when to make their purchase a strategic consumer chooses between a purchase at the initial full price and a later purchase at an uncertain markdown price in equilibrium strategic consumers and the retailer make optimal decisions given their rational expectations regarding future prices availability of inventory and the behavior of other consumers we find that the retailer stocks less takes smaller price discounts and earns lower profit if strategic consumers are present than if there are no strategic consumers we find that a retailer should generally avoid committing to a price path over the season assuming such commitment is feasible committing to a markdown price or to not mark down at all is often too costly inventory may remain unsold even in the presence of strategic consumers the better approach is to be cautious with the initial quantity and then mark down optimally furthermore we discuss the value of quick response the ability to procure additional inventory after obtaining updated demand information albeit at a higher unit cost than the initial order we find that the value of quick response to a retailer is generally much greater in the presence of strategic consumers than without them on average 67 more valuable and as much as 558 more valuable in our sample in other words although it is well established in the literature that quick response provides value by allowing better matching of supply with demand it provides more value often substantially more value by allowing a retailer to control the negative consequences of strategic consumer behavior