Undominated Nash Implementation with Collusion and Renegotiation

This article looks at implementation in economic environments when agents have perfect information about the state of the world, but cannot commit not to renegotiate bad outcomes or to collude against each other. If renegotiation satisfies a weak condition of disagreement point monotonicity, then any Pareto-efficient social choice function can be implemented if there are at least three agents who play undominated Nash equilibria. The mechanism does not use modulo or integer games, has no bad mixed strategy equilibria, and is “bounded.”Journal of Economic LiteratureClassification Number: D71.     

Public Debt, Migration, and Shortsighted Politicians

We analyze a model where local public debt levels are set by politicians who are chosen in local elections. Migration causes an externality across districts, and leads to overaccumulation of local public debt. Since debt is a strategic substitute, the median voters in each district prefer shortsighted political leaders who “borrow and spend,” thereby exacerbating the problem of overaccumulation of local public debt.     

Public Preferences and Private Choices: Effect of Altruism and Free Riding on Demand for Environmentally Certified Pork

Sales of private goods with affiliated public good attributes have markedly risen in recent years. This fact is difficult to explain within the paradigm of purely self-interested behavior. This paper investigates factors influencing consumer demand for pork products with certifications related to the environment, animal welfare, and antibiotics. Using psychometric scaling techniques, we measure individuals’ degree of altruism and propensity toward free riding. Results of a random parameter logit model applied to choice data obtained from a nationwide survey in the United States indicates that more altruistic individuals are willing to pay more for pork products with public good attributes than less altruistic individuals and free riders. These results indicate that private purchases of goods with public-good attributes are not simply a result of individuals’ perceptions of the ability to mitigate private risks such as food safety, but that individuals are making private choices to affect public outcomes. Results have implications for policy makers weighing the relative costs and benefits of food labeling policies versus bans related to certain livestock production practices.     

A Preliminary Investigation into the Causes and Effects of the Rise and Fall of Advertising Expenditures in Sweden

The purpose of this study is not only to chronicle the rise and fall of advertising expenditures in Sweden from 1975 to the present day but also to consider possible causes for their rise and fall. It is hoped that understanding the nature of these variations will become a key to the deeper understanding of the advertising market place. Both traditional and non-traditional media were studied. It was suggested that variations in advertising expenditures stemmed from two broad factors: (1) the demand for advertising space, determined by the advertisers; and (2) the supply of advertising space, determined by the media. These factors are intrinsically affected by external factors such as business cycles and legal and social environments.     

On the Existence of Finite-Dimensional Realizations for Nonlinear Forward Rate Models

We consider interest rate models of the Heath–Jarrow–Morton type, where the forward rates are driven by a multidimensional Wiener process, and where the volatility is allowed to be an arbitrary smooth functional of the present forward rate curve. Using ideas from differential geometry as well as from systems and control theory, we investigate when the forward rate process can be realized by a finite-dimensional Markovian state space model, and we give general necessary and sufficient conditions, in terms of the volatility structure, for the existence of a finite-dimensional realization. A number of concrete applications are given, and all previously known realization results (as far as existence is concerned) for Wiener driven models are included and extended. As a special case we give a general and easily applicable necessary and sufficient condition for when the induced short rate is a Markov process. In particular we give a short proof of a result by Jeffrey showing that the only forward rate models with short rate dependent volatility structures which generically possess a short rate realization are the affine ones. These models are thus the only generic short rate models from a forward rate point of view.