Finite decentralization in a Tiebout economy with crowding types

We study a model with local public goods in which agents' crowding effects are formally distinguished from their taste types. It has been shown that the core of such an economy can be decentralized with anonymous admission prices (which are closely related to cost share prices). Unfortunately, such a price system allows for an arbitrary relationship between the public goods level in a given jurisdiction and the cost to an agent for joining. Formally, this means that admission prices are infinite dimensional. Attempts to decentralize the core with finite price systems such as Lindahl prices suggest that this is possible only under fairly restrictive conditions. In this paper, we introduce a new type of price system called finite cost shares. This system has strictly larger dimension than Lindahl prices but, in contrast to general cost share prices, is finite. We show that this allows for decentralization of the core under more general conditions than are possible with Lindahl prices. Received: 18 January 2000/Accepted: 21 January 2002 The authors would like to thank two anonymous referees for their helpful comments.     

CONTRACT DELEGATION WITH BARGAINING

In the theoretical literature on contract delegation, it is assumed that the contractor has all the bargaining power when contracts are proposed to the subcontractee. In this case, the principal prefers centralized to decentralized contracting structures. This paper analyzes the consequences of relaxing this assumption. It is shown that when contracts are determined by bargaining, the principal might prefer decentralization to centralization. Furthermore, it is shown that this can happen even when subcontractees have very little bargaining power. The results explain, for example, the coexistence of centralized and decentralized contracting in public procurement. (JEL D23, D82, L22)     

CAPACITY CONSTRAINTS AND INFORMATION REVELATION IN PROCUREMENT AUCTIONS

We utilize laboratory experiments to study behavior in sequential procurement auctions where winning an auction round increases a bidder's future costs. The game admits competitive as well as bid‐rotation style collusive equilibria. We find that (a) bidders show some propensity to account for the opportunity cost of winning an auction, but underestimate its magnitude; (b) revealing all bids (instead of only the winning bid) after each round leads to dramatically higher procurement costs. The rise in procurement costs is accompanied by an increase in very high (extreme) bids, a fraction of which appear to be collusive in nature. (JEL C91, D44, L44)     

Anonymous implementation of the Lindahl correspondence: possibility and impossibility results

This paper deals with the existence of anonymous mechanisms to realize the Lindahl correspondence. We consider, in turn, constant and decreasing returns to scale technologies for producing public goods. In each case, we provide a continuous (but not smooth) and weakly balanced mechanism, which meets the two conditions. We then remark that they satisfy a property (see property NC), which is related to, but in fact stronger than anonymity. Finally, we prove that if a mechanism has this property, if it is weakly balanced and implements the Lindahl correspondence, then it cannot be differentiable around Nash equilibria.     

ENTRY COORDINATION AND AUCTION DESIGN WITH PRIVATE COSTS OF INFORMATION ACQUISITION

Auction design with endogenous entry is complicated by entry coordination among bidders due to multiple entry equilibria issue. This article studies auction design when information acquisition costs are private information of bidders. We show that this problem can be resolved by sufficient dispersion in these costs. First, we find that a simple second‐price auction with no entry fee and a reserve price equal to the seller's valuation is ex ante efficient, while a revenue‐maximizing auction involves personalized entry fees, which are determined by the hazard rates of their information acquisition cost distribution. Second, we show that sufficient dispersion in the information acquisition costs (more dispersion than a particular uniform distribution by the Bickel‐Lehman dispersive order) can coordinate bidders and implement uniquely the desirable entry. The dispersion in information acquisition costs is also necessary for this “unique implementation” result. (JEL D44, D82)     

The Educational Soundscape: Participation and Perception in Japanese High School English Lessons

In this article I discuss the emergence of practices of hearing in the midst of English language learning activities. I focus on listening activities during oral English lessons at two public high schools in Tokyo, Japan. One setting is a liberal arts high school. The other is a technical high school where students are trained in specializations such as industrial chemistry and electrical engineering. The different organization of listening activities in each of the schools has consequences for the different shape, texture, and categorization of what is heard. I show how hearing, therefore, is an act not solely located the moment sound meets the ear of an individual. Rather, it is socially rationed, controlled, and imagined through the joint actions of participants before, during, and after such physiological hearing takes place. This constitutes hearing as a social act, cognitively distributed among participants and over space and time in the classroom.     

Are They Not Worthy? How Partisan Political Blogs Legitimize the Tea Party Movement and Occupy Wall Street

Social movements struggle to gain acceptance as legitimate actors so that they can raise money, recruit members, and convince politicians to meet their demands. We know little, however, about how this legitimacy is granted by various political authorities, in part because legitimacy is often poorly operationalized. To operationalize legitimacy, I revise Charles Tilly's ( 1999 ) classic concept of WUNC displays (i.e., public presentations of worthiness, unity, numbers, commitment) to assess how political authorities legitimize social movements. I analyze original data on the coverage the Tea Party and Occupy Wall Street received from 20 elite political blogs during a critical event early in each movement's development. I find that liberal and conservative blogs both use the same aspects of worthiness (and not unity, numbers, or commitment) to endorse their preferred movement but different aspects of unworthiness to denounce the movement they opposed. Conservative outlets were more partisan on both accounts. This suggests that these blogs' shared status as distinctly partisan political outsiders produces a similar, but not identical, relationship with social movements. While both sets of blogs legitimize and delegitimize a movement based on its specific strengths and weaknesses, conservative blogs act more as a partisan bullhorn and liberal blogs act more as a forum for debate.     

LIVING IN TWO NEIGHBORHOODS—SOCIAL INTERACTION EFFECTS IN THE LABORATORY

Field evidence suggests that people belonging to the same group often behave similarly, that is, behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randomly assigned and identical groups where only members (“neighbors”) are different. We study behavior in a coordination game with multiple equilibria and a public goods game, which has only one equilibrium in material payoffs. We speak of social interactions if the same subject at the same time makes group‐specific decisions that depend on their respective neighbors' decisions. We find that a majority of subjects exhibit social interaction effects both when the game has multiple equilibria in material payoffs and when it only has one equilibrium. (JEL C91, H41, K42, H26)     

DISEQUILIBRIUM EXCHANGE IN BARTER AND MONETARY ECONOMIES

This article compares the relative performances of barter and monetary arrangements at fixed disequilibrium prices. The decentralized functioning of the two systems is described, and their "fix-price" equilibria compared. It is shown that, while the fix-price equilibria will be more difficult to obtain in the barter economy, they are more efficient than in the monetary economy where disequilibrium "effective demand failures" appear.     

Binary participation and incremental provision of public goods

This paper presents a comprehensive analysis of voluntary binary participation in the provision of public goods in a full information setting where the marginal product of participation is positive but decreases with the number of participants. Our study extends Palfrey and Rosenthal's (1984) binary model. It deals with an important special case of uniform multi-person prisoner's dilemma, Schelling (1978), that might be conceived of as the discrete counterpart of the continuous model where both players' contributions and the production function of the public good are continuous, Olson (1965), Chamberlin (1974), McGuire (1974). For pure strategies, we find that as in the continuous setting, Nash equilibria are inefficient and the public good is underprovided. Surprisingly, for mixed strategies, the symmetric equilibria are inefficient, however, even in expected terms, the public good can be overprovided. The concurrence between inefficiency and underprovision of the public good reemerges, provided that one of the following holds: (i) the number of potential participants is sufficiently large, (ii) the marginal product of participation is sufficiently stable, (iii) the costs of participation are sufficiently low or sufficiently high, or (iv) the identical players are constrained to select identical strategies.We would like to thank Howard Rosenthal and two anonymous referees for very helpful comments and suggestions.     

Sociological Factors Affecting Agricultural Price Risk Management in Australia*

Abstract The highly volatile auction system in Australia accounts for 85 percent of ex‐farm wool sales, with the remainder sold by forward contract, futures, and other hedging methods. In this article, against the background of an extensive literature on price risk strategies, we investigate title behavioral factors associated with producers' adoption of price risk‐management strategies (specifically futures and forward contracts) for selling wool. This research presents a behavioral model based on Diffusion of Innovations, the Theory of Reasoned Action, and the Theory of Planned Behavior. We found that the auction system is used as a price risk‐management tool because other selling methods are considered more risky. We also report on a curious relationship between risk and complexity in terms of wool producers' intentions to use forward contracts. We explored sociological factors in conjunction with focus‐group data in an attempt to understand this relationship. This exercise yielded some interesting findings on the impact that trust, habit, social cohesion, and networks have on decision making in the rural community. The significance of this article lies in its application of core sociological theory in a new research context: the Australian wool industry.     

Linear cost sharing in economies with non-Samuelsonian public goods: Core equivalence

 We consider an economy with non-Samuelsonian public goods and we focus on linear cost sharing. In a linear cost sharing equilibrium all agents in the economy optimize given a certain fixed cost share to be contributed towards the provision of public goods in the economy. Hence, each agent pays a certain fraction of the total establishment costs of public goods and these cost shares are common knowledge. We show that for a certain fixed contribution scheme the resulting linear cost share equilibria are equivalent to corresponding core allocations, in which the core is based on the integral of the individual cost shares. We also show that there is no equivalence of the Foley core with cost share equilibria, even in well-behaved large economies. Received: 16 August 1995/Accepted: 29 July 1996     

Natural implementation in public goods economies

In this paper, we identify necessary and sufficient conditions for social choice correspondences to be Nash implemented by “natural” mechanisms in economies with arbitrary numbers of private and public goods. We find that when there exist only one public good and an arbitrary number of private goods, the Lindahl correspondence is implementable by a natural quantity mechanism in which each agent announces his own consumption bundle of private goods and input vectors for public goods. However, regardless of the numbers of private and public goods, the Pareto correspondence is not implementable even by any natural price ⁿ -quantity mechanism in which each agent reports a price vector of private goods and all agents’ personalized price vectors of public goods, in addition to his own consumption bundle of private goods and input vectors for public goods.     

Game forms for Nash implementation of general social choice correspondences

Several game forms are given for Nash implementing general social choice correspondences (SCC's) which satisfy Maskin's conditions of monotonicity and No Veto Power. The game forms have smaller strategy spaces than those used in previously studied mechanisms: the strategy for an individual consists of an alternative, two subsets (of alternatives), and a player number. For certain types of economic and political SCC's, including -majority rule, the Walrasian, and Lindahl correspondence, the strategy space reduces to an alternative and a vector, where the number of components of the vector is at most twice the dimension of the alternative space.This paper was inspired by Tatsuyoshi Saijo's dissertation. I am greatly indebted to Kim Border, Leo Hurwicz, and Tatsuyoshi Saijo for some very helpful discussions. I acknowledge support of NSF grant No. SES 8208184.     

DESIGNED TO FAIL: THE MEDICARE AUCTION FOR DURABLE MEDICAL EQUIPMENT

We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unique features of the Medicare auction are (1) winners are paid the median winning bid and (2) bids are nonbinding. We show that median pricing results in allocation inefficiencies as some high‐cost firms potentially displace low‐cost firms as winners. Further, the auction may leave demand unfulfilled as some winners refuse to supply because the price is set below their cost. We also introduce a model of nonbinding bids that establishes the rationality of a lowball bid strategy employed by many bidders in the actual Medicare auctions and recently replicated in Caltech experiments. We contrast the median‐price auction with the standard clearing‐price auction where each firm bids true costs as a dominant strategy, resulting in competitive equilibrium prices and full efficiency. (JEL D44, I11, H57)     

Totem and Taboo in Sociology: The Politics of Affirmative Action Research*

The thesis is advanced that sociology's strong links with welfare-state liberalism have also led to the widespread acquiescence to “liberal taboos” regarding some topics of social research such as affirmative action. The relationship between sociology and liberalism is examined. Radical and neoconservative influences are also noted. Adverse encounters with affirmative action taboos by intellectuals and social scientists are discussed as is the “fashionable” consensus on affirmative action in sociology. That this consensus may sometimes be shallow and relatively uninformed is suggested by reactions by the author's Southern California colleagues regarding his proposed studies of (1) the extent of widespread public discussion of affirmative action in the 1970s. and (2) the social psychological impact of such policies upon white males. The paper concludes with a discussion of related taboos in sociology and other fields and the dangers involved in ideological allegiances. I'm not saying that cities are doomed places, but I will say that the hard core of the welfare society is doomed. There are no prospects for these people. Nobody ever took the trouble to teach them anything. They live in a kind of perpetual chaos, in a great noise. And, you know, they really are startled souls. They cannot be reasoned with or talked to about anything. Isn't it time for us to admit this? For a long time, the subject lay under a taboo. Nobody was going to talk about it. Now people are beginning to do so. Though I consider myself a kind of liberal, I have to admit that the taboos were partly of liberal origin. It was supposed to be wrong to speak with candor. But lying in a good cause only aggravates disorder. –Saul Bellow (1982) We had best remember that socìology and ideology are competitors …–Alvin Gouldner (1976)     

Lottery Rather than Waiting-line Auction

This paper investigates the allocative efficiency of two non-price allocation mechanisms – the lottery (random allocation) and the waiting-line auction (queue system) – for the cases where consumers possess identical time costs (the homogeneous case), and where time costs are correlated with time valuations (the heterogeneous case). We show that the relative efficiency of the two mechanisms depends critically on a scarcity factor (measured by the ratio of the number of objects available for allocation over the number of participants) and on the shape of the distribution of valuations. We show that the lottery dominates the waiting-line auction for a wide range of situations, and that while consumer heterogeneity may improve the relative allocative efficiency of the waiting-line auction, the ranking on relative efficiency is not reversed.     

Policing Mechanisms in Agricultural Contracts*

Abstract In this paper we focus on mechanisms of coordination in agricultural contracts. Our approach is intended to advance understanding of social relations of production and distribution of power in agrofood systems. Through an analysis of contracts between farmers and intermediaries (e.g., processors, shippers, consignment agents) for California fruits and vegetables, we identify three functions of contracts: they help to coordinate production, they provide incentives (and penalties) to induce particular behaviors, and they allow farmers and intermediaries to share risk. These functions are implemented via four policing instruments: input control, monitoring, quality measurement, and revenue sharing. The instruments are employed by intermediaries to mitigate “blind spots” in contracts and to control farmers' actions and the quality of their output. This mechanism design approach is complemented by a sociologically oriented analysis emphasizing the embeddedness of economic institutions. We problematize the stylized fashion in which the concept of authority has been treated in the contract farming literature, and propose an alternative approach to studying new organizational forms and divisions of labor among farmers and intermediaries.     

Axiomatic foundations for fairness-motivated preferences

Much work in social choice theory takes individual preferences as uninvestigated inputs into aggregation functions designed to reflect considerations of fairness. Advances in experimental and behavioural economics show that fairness can also be an important motivation in the preferences of individuals themselves. A proper characterisation of how fairness concerns enter such preferences can enrich the informational basis of many social choice exercises. This paper proposes axiomatic foundations for individual fairness-motivated preferences that cover most of the models developed to rationalise observed behaviour in experiments. These models fall into two classes: Outcome-based models, which see preferences as defined only over distributive outcomes, and context-dependent models, which allow rankings over distributive outcomes to change systematically with non-outcome factors. I accommodate outcome-based and context-sensitive fairness concerns by modelling fairness-motivated preferences as a reference-dependent preference structure. I first present a set of axioms and two theorems that generate commonly used outcome-based models as special cases. I then generalise the axiomatic basis to allow for reference-dependence, and derive a simple functional form in which the weight on each person’s payoff depends on a reference vector of how much each person deserves.     

DECENTRALIZATION AND PUBLIC PROCUREMENT PERFORMANCE: NEW EVIDENCE FROM ITALY

We exploit a new dataset based on European Union (EU) procurement award notices to investigate the relationship between the degree of centralization of public procurement and its performance. We focus on the case of Italy, where all levels of government, along with a number of other public institutions, are involved in procurement and are subject to the same EU regulation. We find that (a) municipalities and utilities, which currently award among the largest shares of contracts, achieve lower rebates than other institutional categories; and (b) decentralization implies lower rebates only when it comes with weak competences of procurement officials. The evidence seems to suggest that a reorganization of the procurement system, both in terms of partial centralization and increased professionalization of procurement officials, would help improve award-stage procurement performance. (JEL H11, H57, H71, H77)