Category index

We compare the R&;D decision of a second best social surplus maximizer to that of a profit maximizing monopolist in a second best world, namely one in which a monopolist makes production decisions. We show that a monopolist underinvests in R&;D relative to a second best social surplus maximizer. We show that the expected present value social surplus under a monopoly situation increases with the production technology except at the technology level where a monopolist stops doing R&;D.     

Mechanism design in queueing problems

Summary.   A well-known result in incentive theory is that for a very broad class of decision problems, there is no mechanism which achieves truth-telling in dominant strategies, efficiency and budget balancedness (or first best implementability). On the contrary, Mitra and Sen (1998), prove that linear cost queueing problems are first best implementable. This paper is an attempt at identification of cost structures for which queueing problems are first best implementable. The broad conclusion is that, this is a fairly large class. Some of these first best implementable problems can be implemented by mechanisms that satisfy individual rationality. Received: October 19, 1999; revised version: March 13, 2000.     

The impact of mean reversion model on portfolio investment strategies: Empirical evidence from emerging markets

Investors use mean reversion model to make decisions on which stocks should be taken in their portfolios according to their mean values. The first goal of the paper is to test the validity of the mean reversion model in emerging markets. Second, it aims to determine the best portfolio investment strategy on the validity of the mean reversion model. As a result of panel regression analysis, we find that the mean reversion model is valid in all of the emerging countries in the sample. This result implies that emerging markets are not efficient even in weak form. On the validity of the mean reversion model, we find that Max3–Min3 portfolio has recorded the best performance and contrarian portfolio is the best portfolio investment strategy. The paper makes contribution to the literature in terms of providing the information about which portfolio investment strategy has the best performance on the validity of the mean reversion model.     

Optimal development programs under uncertainty: The undiscounted case

One considers a many-commodity world where technology depends on an exogenous environment whose successive states form a stationary Markov process. A program is optimal if it overtakes any other program or has the maximum expected utility.It is shown there exists a best stationary program. One proves then there exists an optimal program, which converges asymptotically to the best stationary program, and is generated by a policy such that, at every date, a nonrandom production decision is chosen which depends only on the state of the world and of the economy at that time.     

Tournaments with gaps

A standard tournament contract specifies only tournament prizes. If agents’ performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the winner prize. We analyze a tournament with two risk averse agents. Under unlimited liability, the principal strictly benefits from a gap by partially insuring the agents and thereby reducing labor costs. If the agents are protected by limited liability, the principal sticks to the standard tournament.     

Using the Hawthorne effect to examine the gap between a doctor's best possible practice and actual performance

Many doctors in developing countries provide considerably lower quality care to their patients than they have been trained to provide. The gap between best possible practice and actual performance (often referred to as the know-do gap) is difficult to measure among doctors who differ in levels of training and experience and who face very different types of patients. We exploit the Hawthorne effect-in which doctors change their behavior when a researcher comes to observe their practices-to measure the gap between best and actual performance. We analyze this gap for a sample of doctors and also examine the impact of the organization for which doctors work on their performance. We find that some organizations succeed in motivating doctors to work at levels of performance that are close to their best possible practice. This paper adds to recent evidence that motivation can be as important to health care quality as training and knowledge.     

Anticipated regret as an explanation of uncertainty aversion

The paper provides a psychological explanation of uncertainty aversion based on the fear of regret. We capture an agent’s regret using a reference-dependent utility function in which the agent’s utility depends on the performance of his chosen option relative to the performance of the option that would have been best ex post. An uncertain option is represented as a compound lottery. The basic idea is that selecting a compound lottery reveals information, which alters the ex post assessment of what the best choice would have been, inducing regret. We provide sufficient conditions under which regret implies uncertainty aversion in the sense of quasi-concave preferences over compound lotteries.     

Limited duration employment

This paper analyzes a matching model in which labor market participants use temporary employment as a waiting station between searches. Searchers entering the market see all available options. The best match, however, may not be particularly productive. Since all currently available traders are known, immediate search is not worthwhile. Over time, turnover replenishes the stock of potential traders and poor matches eventually find it profitable to search again. Searchers therefore take the best available match and simultaneously formulate if and when to look again. The best matches become indefinite; lower quality matches coexist as temporary employment. This duration increases with match quality and declines as matching improves.     

Basins of attraction and equilibrium selection under different learning rules

A deterministic learning model applied to a game with multiple equilibria produces distinct basins of attraction for those equilibria. In symmetric two-by-two games, basins of attraction are invariant to a wide range of learning rules including best response dynamics, replicator dynamics, and fictitious play. In this paper, we construct a class of three-by-three symmetric games for which the overlap in the basins of attraction under best response learning and replicator dynamics is arbitrarily small. We then derive necessary and sufficient conditions on payoffs for these two learning rules to create basins of attraction with vanishing overlap. The necessary condition requires that with probability one the initial best response is not an equilibrium to the game. The existence of parasitic or misleading actions allows subtle differences in the learning rules to accumulate.     

Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco‐Industries

Permit markets lead polluting firms to purchase abatement goods from an eco‐industry which is often concentrated. This paper studies the consequences of this sort of imperfectly competitive eco‐industry on the equilibrium choices of the competitive polluting firms. It then characterizes the second‐best pollution cap. By comparing this situation to one of perfect competition, we show that Cournot competition on the abatement good market contributes not only to a nonoptimal level of emission reduction but also to a higher permit price, which reduces the production level. These distortions increase with market power, measured by the margin taken by the noncompetitive firms, and suggest a second‐best larger pollution cap.     

THE HEARTY AND CHEERY STATE

Progress is usually defined by the growth rate of real per capita income. It is not a sufficient statistic but one that has to do. The extent to which the accumulation of ordinary human capital is responsible for progress is examined. There is, I contend, no place for a concept of entrepreneurial human capital in a positive theory of growth. Professional human capital appears to be a consequence of growth and not a causal force. In an uncertain world, there is no way to guarantee growth. The best that one can do is to create an environment in which individuals are guaranteed the freedom to pursue those activities that they judge to be in their best interest. ( JEL O40)     

Optimal taxation in the Uzawa–Lucas model with externality in human capital

In this paper we study the optimal policy in the Uzawa–Lucas model with externality in human capital when agents value both consumption and leisure. We find that the government pursuing the first best can achieve its goal by a subsidy which depends on foregone earnings while studying and which is financed through a lump sum tax. Anyway, the optimal policy, that should be designed to provide incentives for agents to devote more time to schooling and cut both on leisure and working, is not unique. There exists an infinite number of combinations of consumption, capital income, labor income and lump sum taxes that can decentralize the first best.     

囚徒困境的均衡辨析

传统的 《博弈论》 分析最终结果是两个囚徒均会坦白，但这并不是两个囚徒的最好结局，如何才能达到最好结局？本文从 《博弈论》 中“理性人”的假设出发，对传统的 （坦白，坦白） 均衡提出质疑。本文指出理性人不会满足于传统的均衡，理性人会积极寻找双方利益最大化的均衡，并达到此均衡。本文给出了新的均衡：广义均衡，并给出广义均衡的求解过程。通过对引入公共支付函数的概念，公共支付函数表达了两个人的共同利益。通过公共支付函数的最大化，使两个囚徒公共利益最大化，以求得囚徒困境的新的均衡，让两个囚徒的结果达到最好———即两人均抵赖。本文还将公共支付函数运用于其他 《博弈论》 案例，并指出广义均衡比纳什均衡更具有社会意义，因为前者体现了公共利益。文中还对囚徒困境的机制设计问题做了分析，指出囚徒困境中机制的设计会诱导囚徒作出不正确的选择，从而没有达到双方利益的最大化。     

Deforestation and national accounting

We construct a first best growing economy in which land is being switched continuously from use in forestry to an alternative use. We find that implicitly for such activity to take place there must be no net loss to land owners. This implies no deduction in the national accounts for deforestation. With soil erosion on deforested land, Pigovian taxes must be levied to sustain a first best. We also observe an optimal tax on households for their implicit use of forests as oxygenation sinks.     

商业银行信贷最优规模问题研究——基于风险成本角度

中国商业银行信贷最佳规模一直是金融界与学界十分关注的经济问题。信贷规模过大,导致货币供给增加,同时也会增加信贷风险。研究与把握商业银行信贷最佳规模问题关系到商业银行的生存与发展。     

A Simple Supermodular Mechanism that Implements Lindahl Allocations

This paper introduces a new incentive‐compatible mechanism which, for general preference environments, implements Lindahl allocations as Nash equilibria. We provide an example that having a mechanism induce a supermodular game is not typically sufficient to guarantee dynamic stability of equilibrium. However, for the new mechanism, inducing a supermodular game guarantees that the best reply mapping is a contraction. Thus, this new mechanism provides a connection between the desirable welfare properties of Lindahl allocations and the theoretical/convergence properties of games whose best reply mappings are a contraction.     

Natural Resource Federalism: Preferences Versus Connectivity for Patchy Resources

We examine the efficiency of centralized versus decentralized management of spatially-connected renewable resources when users have heterogeneous preferences for conservation versus extraction. Resource mobility induces a spatial externality, while spatial preference heterogeneity drives a wedge between users’ privately optimal extraction rates. We first address these market failures analytically and show that the first is most efficiently handled with centralized planning while the second is best tackled with decentralized management. Except in special cases, neither approach will be first best, but which arises as second best depends on the relative strength of preference heterogeneity versus spatial mobility of the resource. We illustrate the theory, and test its robustness, with a numerical example.     

A competitive idea-based growth model

ABSTRACT

In this paper, we present a model in which endogenous growth arises in competitive markets. Knowledge is described as a factor used directly in the final goods' production. Firms demand both basic nonrival knowledge contents, which are supplied jointly and inelastically with raw labor, and further contents supplied by patent holders. This fact, together with Lindahl prices for knowledge, allows competition to work, while it also implies that workers' income share declines overtime. In a first version of the model with constant cost of knowledge production, the first best is attained. In a further version of the model, in which the cost of knowledge production is allowed to change over time and thus intertemporal externalities arise, in a decentralized economy a second best equilibrium occurs in the transitional period, while in the long run there is convergence to efficiency.     

基于三维空间模型的产业集群持续成长研究

目前,世界范围内一部分产业集群正遭受萎缩和衰退的威胁,这是一个亟待解决的问题。首先分析了产业集群最理想的演化路径,然后构建了由市场需求、产业聚集度和集群动态核心能力构成的三维空间模型,并加以分析。最后提出:产业集群向市场需求、产业聚集度、集群动态核心能力三个维度发展是实现产业集群沿最理想演化路径持续成长的关键。