EX ANTE EFFICIENT MECHANISM WITH PRIVATE ENTRY COSTS

This paper studies ex ante efficient resource allocation mechanism in an environment where agents endowed with their private values must incur private entry costs to participate. Due to the nature of this bidimensional screening problem and the difficulty in fully characterizing all implementable endogenous entries, the domain of the related social planner's problem that is essential for establishing the existence of efficient mechanism needs to be carefully designed. We find that a second-price auction among the entrants with a reserve price equal to the seller's valuation is ex ante efficient, and any ex ante efficient mechanism must be ex post efficient. (JEL D44, D61, D82)     

AN OPTIMAL MIDDLEMAN FIRM PRICE ADJUSTMENT POLICY: THE "SHORT-RUN INVENTORY-BASED PRICING POLICY"

This paper examines the optimum pricing policies of middleman firms who carry an inventory of goods bought for resale. Each period the firm in the theoretical model is required to post a price before it observes its realized demand. In disequilibrium situations, the firm's profit-maximizing pricing policy is shown to be a "short-run inventory-based pricing policy" which requires the firm to post a price below the long-run equilibrium price upon observing its actual beginning inventory level above its optimum level, and to post a price above the long-run equilibrium price upon observing its actual inventory level below its optimum level. The final section suggests that the use of such policies by middleman firms will lead to market price adjustments which are both consistent with the "law of supply and demand" and which are based on explicit maximizing behavor.     

MOVING FORWARD BY LOOKING BACK: COMPARING LABORATORY RESULTS WITH EX ANTE MARKET DATA

We compare individual consumer response between ex ante market data collected by a water utility and ex post experimentally generated data. The experimentally generated data are matched to each participant's water bill history, which predates the experiment. This differentiates our research from prior efforts, which analyze market and experimental data with similar chronologies. For roughly 70% of the participants there is no statistical difference between water demand elasticities estimated using laboratory data and those estimated from market data. Our results provide initial support for the use of experimental procedures to generate missing data regarding hypothetical consumer response. (JEL C9, D12, Q25)     

ADJUSTMENT TO PRODUCTION UNCERTAINTY AND THE THEORY OF THE FIRM

This paper considers the behavior of the firm which faces uncertainty in its production process but can adjust its output once the uncertainty is resolved. Ex post adjustment, unlike previous treatments, involves a marginal cost penalty if more output is required and a lowering of price if too much is produced. With ex post adjustment allowed in this fashion, it is found that nonlinear risk preferences do not affect the sign of the firm's marginal risk premium at optimum ex ante output. The firm will produce less output than under certainty whether it is risk averse, risk neutral, or prefers risk.     

Specific Investments, Flexible Adaptation, and Requirement Contracts

In a simple hold-up model with contractible cost-related variables, I show that an optimal requirement contract with "standard cost"–based nonlinear pricing can provide both ex post flexibility for adaptation and ex ante incentives for relationship-specific investments. The result is related to contractual arrangements observed in vertical procurement relationships.     

IN SEARCH OF THE WINNER'S CURSE

Earlier papers on the winner's curse have provided theoretical arguments that winning bidders in an auction will incur ex post losses even when all bidders use reasonable ex ante bidding strategies. This paper demonstrates that these arguments are erroneous: optimal ex ante bidders will never suffer from a winner's curse in an auction where only the winning bid is announced; furthermore, such bidders will on the average not suffer from a winner's curse in an auction where all bids are announced. Thus if a winner's curse is a behavioral reality then bidders are not generally using ex ante optimal strategies.     

AGGREGATE EFFECTIVE DEMAND AND SUPPLY CURVES

This paper provides a systematic and precise microeconomic basis for aggregate effective demand and supply curves. A shadow price framework permits an orderly treatment of effective demand and supply. The shadow price is the monetary amount which one would pay for the right to buy or sell one extra unit of the good at the market price. The analysis supports Keynes's approach to interest rate and investment demand theory.     

OPTIMAL COPYRIGHT LENGTH AND EX POST INVESTMENT: A MICKEY MOUSE APPROACH

This paper considers a theoretical model of copyright protection in which the value of an intellectual work changes over time because of depreciation and value‐enhancing ex post investments. The first main finding is that, in the case of a single project, granting infinitely lived copyright protection maximizes social welfare when the return on ex post investments is high relative to the return on the initial investment. We also provide simulation results of our model for the case of multiple heterogeneous projects that show how social welfare varies with the length of copyright protection and the returns on initial and ex post investments. We then consider what our framework says concerning the social‐welfare effects of the 1998 Copyright Term Extension Act. Here we show that, depending on the importance of ex post investments, the act may have either increased or decreased social welfare. Our final analysis considers the social‐welfare implications of replacing fixed‐length copyright protection with Landes and Posner's (University of Chicago Law Review, 70(2), 2003, 471–518) idea of indefinitely renewable copyright protection. We find that implementing indefinitely renewable copyright protection frequently increases social welfare provided the returns on ex post investments are sufficiently large. We also provide a brief history of Disney's Mickey Mouse and argue that the history of that character matches quite well with the predictions of our theoretical approach. (JEL O34, K00, L82)     

CREDIBLE SIGNALS OF THE RELEASE OF NEW VERSIONS

Prices can credibly signal whether a durable‐goods monopolist will offer an improved good in the future. When the future release of a new version is private information, a monopoly seller will reveal a failure to develop and market a new version with a lower price than he or she would charge in full information. A firm would be willing to pay more to innovate when consumers are uncertain than if they are informed ex ante because a failure to innovate is punished by a low equilibrium price. Consumers' uncertainty about innovation intensifies an unsuccessful innovator's Coasian problem and increases consumer welfare. (JEL D82, L12, L15)     

THE QUANTITY-ADJUSTED VALUE OF LIFE

The traditional compensating differential analysis is extended to reflect the effects on wages of the duration of life at risk and of insurance benefits to the surviving spouse and dependents. The implicit discount rate that workers use in making their life-cycle employment decisions is also estimated. The revealed discount rate ranges from 10 to 12 percent, and the implicit value per year of life is 175,000. There is also evidence of significant wage reductions resulting from higher workers' compensation benefits for fatal and nonfatal injuries, suggesting an important tradeoff between ex ante and ex post compensation for risk.     

DISCOUNT PRICING

We investigate the practice of framing a price as a discount from an earlier price, with information such as “was $200, now $100.” We discuss two reasons why a discounted price—rather than a merely low price—can make a consumer more willing to purchase. First, a high initial price can indicate the seller has chosen to supply a high-quality product. Second, when a seller with limited stock runs a clearance sale, later consumers infer that unsold stock has higher expected quality when its initial price was higher. We also suggest a behavioral explanation, which is that consumers with reference-dependence preferences are more likely to buy if they perceive the price as a bargain relative to the earlier price. Discount pricing is therefore an effective marketing technique, and a seller may wish to deceive potential customers by offering a false discount. The welfare effects of regulation to prevent fictitious pricing are subtle, with potential unintended consequences, and depend on whether consumers are sophisticated or naive. (JEL D18, D42, D83, L15, M31)     

A behavioral model of the dual motive approach to behavioral economics and social exchange

New findings in brain physiology, especially evolutionary neuroscience, have profound implications for behavioral economics. The new findings show that the transactional commercial market evolved from the interplay of our self-preservational (egoistic) and affectional (empathetic) neural circuitries. These fundamental brain circuitries, under homeostatic physiological regulation, are the neural substrate of our human social exchange activity—from sharing in primitive families to the gift exchange economy to the commercial market. Current microeconomic theory is structured on the assumption of a sole primary self-interest motive. The presence of the dual physiological motives, however, is clearly demonstrated in demand, supply, and equilibrium curves as well as in the basic calculus of price theory. This confirmed duality of motives opens the way for new and productive directions in research. The conflict systems neurobehavioral (CSN) model developed by the author in several recent publications expresses the reciprocal interactive dynamic of these circuitries in socio-economic exchange behavior.     

保障房市场与商品房市场关系研究

保障房和商品房在本质上是差异化产品,两者在对应的需求层次、房屋的品质、价格、供给和渠道等方面都存在着巨大的差别。自我国房地产市场化以来,商品房就始终处于市场独大的局面,但随着近年来我国政府加大了对楼市的调控、加快了保障房建设的步伐,房地产市场已朝着保障房市场和商品房市场并重的＂双轨制＂迈进。然而,保障房的大规模兴建和投放市场会对商品房市场乃至整个中国楼市产生什么影响,以及保障房供给体系在运行与管理过程中存在什么问题,目前尚不确定。为此,有必要对其深入分析并寻找对策。     

Learning and the Form of Compensation

Using data from the PSID and an empirical setup similar to the one used in Altonji and Pierret (Q J Econ 116(1):313–350, 2001)’s paper on wages and employer learning, we find that the coefficient of a hard-to-observe correlate of productivity—parents’ educational attainment—in a wage regression increases more rapidly with experience in performance pay jobs than in nonperformance pay jobs. This result is driven entirely by bonus pay jobs as opposed to commission/piece rate jobs. In the latter, there is no evidence that the importance of parental education in the wage determination process increases over time. This is consistent with the notion that explicit pay-for-performance compensation schemes are, by design, revealing workers’ productivities and that employers need not infer anything about worker productivity when the payment is ex post as is the case for commissions and piece rates as opposed to having to set pay ex ante.     

Die Rolle von Vertrag, Macht und Sozialer Einbettung für wirtschaftliche Transaktionen

This paper focuses on the conditions that enhance punctual payments of clients in economic transactions. Within such exchange relations the actors face a problem of trust: the contractor delivers goods or services ex ante and has to trust the client that he will pay punctually. Three possible solutions are discussed: institutional mechanisms like enforceable contracts, market mechanisms, and mechanisms based on the social embeddedness of the transaction. It can be shown, that the trust problem concerning proper payment behavior cannot be solved by the market or bilateral contracts. Due to this fact, the embeddedness of economic transactions in social networks and long-term relationships becomes an important mechanism to reduce problems of trust between client and contractor. Based on a general theoretical framework, hypotheses are tested using regional restricted data of handicraft enterprises. It can be shown, that due to unbalanced power relations and insufficient institutional regulations the actors are not able to solve the problem of trust. Although the social embeddedness fosters cooperative behavior, opportunism by the client cannot be avoided completely.     

SUPPLY SHOCKS AND THE INTEREST RATE

The classic example of a temporary supply shock is a failed agricultural harvest. Theoretically, adverse temporary supply shocks are predicted to raise the ex ante real interest rate; that is, a below-normal harvest raises the interest rate. Apparently, however, no one has tested this conclusion using agriculture as the supply shock. This paper examines nineteenth century French data and confirms the hypothesis that deviations from the "average" harvest have an inverse effect on the interest rate. It also finds that temporary fluctuations in government spending affect the interest rate: higher than normal government spending raises the interest rate.     

THE INCENTIVES FOR RESALE PRICE MAINTENANCE UNDER IMPERFECT INFORMATION

This paper considers both the incentives for and the welfare effects of resale price maintenance (RPM) in retail markets characterized by imperfect consumer information. In markets where point-of-sale information on the product is essential for sales and information on prices is costly, RPM permits manufacturers with some monopoly power to resolve two incentive conflicts with retailers. First, because retailers with price-setting powers do not appropriate the gains in profit to an upstream manufacturer from actions taken to increase demand, their incentives to inform consumers of the product and to set low prices are inadequate. This purely vertical externality results in the classic "double mark-up" of final prices. Second, when consumers' costs of price search vary, stores offering low prices and no information can exist in the market equilibrium. These discount houses free-ride on the informational services of high-price informing retail outlets — a horizontal externality. In the imperfect information setting of this paper, (1) administered pricing improves monopolists' profits by resolving the incentive conflict; (2) the profitable use of a price floor reduces the maximum retail price charged and may reduce the average retail price; (3) price floors or administered prices can be Pareto-improving and more likely welfare (surplus)-improving; (4) price floors are welfare-improving.     

A DIRECT TEST OF THE EFFICIENT MARRIAGE MARKET HYPOTHESIS

This paper takes Becker's efficient marriage market hypothesis at face value, and directly confronts it with data from Hong Kong. The theory of optimal assignment is used to develop an empirical model of spouse selection, which resembles a Tobit model. This model can address positive or negative assortative matching as well as marginal product pricing in marriage markets. We also use a computer algorithm to solve the assignment problem for imputed marital output. The degree to which the actual pairing of husbands and wives corresponds to the optimal pairing provides a goodness-of-fit test of the efficient marriage market hypothesis. ( JEL C51, C61, C78, J12)     

REDISTRIBUTING INCOMES: EX ANTE OR EX POST

The standard analyses of optimal income taxation assume that the distribution of gross wages in the economy is immutable depending as it does on the distribution of innate abilities. In this paper I assume that wage distribution is not fixed but that it can be varied, up to a point, by more or less precise measurement of workers' innate abilities. I demonstrate that complete knowledge of abilities is not desirable if income can only be distributed using a linear tax. I isolate those variables which favor the narrowing of wage inequality measured by the variance with the mean held constant. This section of the paper is related to the existing literature on the desirability of price randomization.
In the second part of the paper I consider the consequences of spreading wage distributions on the optimal tax rate. It is shown that those consequences are ambiguous and dependent on the form of the social welfare function.