Can retailers get higher prices for “end-of-life” inventory through online auctions?

Manufacturers and retailers are using online auctions to liquidate excess inventory. Using a field study of 11,879 online auctions, this paper builds upon theories of competitive processes to relate four key seller-controlled variables (starting price, day of close, auction length, and brand) to outcomes of online auction for apparel goods. Results suggest that to obtain a higher percentage of the original retail price, retailers should start with a lower price and feature national brands. These and other findings are discussed and a number of future research topics are offered.     

On the formation of interaction networks in social coordination games

There are many situations where two interacting individuals can benefit from coordinating their actions. We examine the endogenous choice of partners in such social coordination games and the implications for resulting play. We model the interaction pattern as a network where individuals periodically have the discretion to add or sever links to other players. With such endogenous interaction patterns we see multiple stochastically stable states of play, including some that involve play of equilibria in the coordination game that are neither efficient nor risk-dominant. Thus the endogenous network structure not only has implications for the interaction pattern that emerges, but it also has a significant impact on the play in the coordination game relative to what would arise if the same interaction network were exogenous.     

More on money as a medium of exchange

Summary We extend the analysis of Kiyotaki and Wright, who study economies where the commodities that serve as media of exchange (or, commodity money) are determined endogenously. Kiyotaki and Wright consider only steady-state, pure-strategy equilibria; here we allow dynamic and mixed-strategy equilibria. We demonstrate that symmetric, steady-state equilibria in mixed-strategies always exist, while sometimes no such equilibria exist in pure-strategies. We prove that the number of symmetric steady-state equilibria is generically finite. We also show, however, that for some parameter values there exists a continuum of dynamic equilibria. Further, some equilibria display cycles.We thank the National Science Foundation and the University of Pennsylvania Research Foundation for financial support, as well as seminar participants at Stanford University, the London School of Economics, the Econometric Society World Congress in Barcelona, and the Conference on Monetary Theory and Financial Institutions at the Federal Reserve Bank of Minneapolis for their comments or suggestions. Alberto Trejos provided research assistance. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.     

Indivisibilities,lotteries, and sunspot equilibria

Summary We analyze economies with indivisible commodities. There are two reasons for doing so. First, we extend and provide some new insights into sunspot equilibrium theory. Finite competitive economies with perfect markets and convex consumption sets do not allow sunspot equilibria; these same economies with nonconvex consumption sets do, and they have several properties that can never arise in convex environments. Second, we provide a reinterpretation of the employment lotteries used in contract theory and in macroeconomic models with indivisible labor. We show how socially optimal employment lotteries can be decentralized as competitive equilibria without lotteries once sunspots are introduced.We thank Kenneth Arrow, Aditya Goenka, Ed Green, Jeremy Greenwood, Walter Heller, Steve Matthews, Herve Moulin, Roger Meyerson, Jim Peck, Patrick Kehoe, Ramon Marimon, Ed Prescott, Richard Rogerson, Nancy Stokey and Raghu Sundaram for their comments. We also thank participants in seminars at Northwestern, Yale, USC, Cornell, Barcelona, Madrid, Santander, and the Canadian Economics Association annual meetings in Victoria. We are grateful to the National Science Foundation (through grants SES-8606944 and SES-8821225), the Center for Analytic Economics, the Thorne Fund, and the University of Pennsylvania Research Foundation for research support. The views expressed here are those of the authors, and not necessarily those of the Federal Reserve System or the Federal Reserve Bank of Minneapolis.     

Strongly stable networks

We analyze the formation of networks among individuals. In particular, we examine the existence of networks that are stable against changes in links by any coalition of individuals. We show that to investigate the existence of such strongly stable networks one can restrict focus on a component-wise egalitarian allocation of value. We show that when such strongly stable networks exist they coincide with the set of efficient networks (those maximizing the total productive value). We show that the existence of strongly stable networks is equivalent to core existence in a derived cooperative game and use that result to characterize the class of value functions for which there exist strongly stable networks via a “top convexity” condition on the value function on networks. We also consider a variation on strong stability where players can make side payments, and examine situations where value functions may be non-anonymous—depending on player labels.     

Employment law and The European Community: review article

Book reviewed in this article: Business Transfers and Employee Rights John McMullen Butterworths Harmonization and Hazard: Regulating Workplace Health and Safety in the European Community Robert Baldwin and Terence Daintith (Eds.) EC Social Policy and 1992: Laws, Cases and Materials Union of Parts: Labor Politics in Postwar Germany Kathleen A. Thelen The Power to Manage? Employers and Industrial Relations in Comparative Historical Context S. Tolliday and J. Zeitlin (Eds.) Trouble on Board: The Plight of International Seafarers Paul K. Chapman (Introduction by Clifford B. Donn) Markets, Firms and the Management of Labour in Modern Britain . Howard Gospel Hard Cheese: A Study of Hotel and Catering Employment in Scotland Ian R. Macaulay and Roy C. Wood Working Miracles: Experiences of Jobs and Childcare Usha Brown and Louise Tait Scottish     

Business Groups and the Big Push: Meiji Japan's Mass Privatization and Subsequent Growth

Paul Rosenstein-Rodan argues that economic development requirescoordinated investment in many interdependent industries, andprescribes a flood of state-controlled investment across allsectors—a so-called big push. Widespread government failuredefeated twentieth-century ‘big push’ schemes. Butspillovers across firms and industries, and from public goods,hold-up problems, and capital market limitations are real, andjustify coordinated growth across sectors if it can be donewithout government failures. Large, extensively diversifiedpyramidal business groups of listed firms dominate the historiesof developed economies and the economies of developing economies.Arguing that such groups provided this coordination in prewarJapan after a state-run big push failed, we propose that pyramidalbusiness groups are private-sector mechanisms for coordinatingbig push growth, and that competition between rival groups inducesefficiency unattainable in a state-run big push. We postulatethat a successful business-group led big push requires economicopenness, basic public goods, rule of law, separation of thestate from business, and a timely demise of business groupswhen the big push phase is complete. Where these criteria arenot met, growth stalls and oligarchic families become too powerfulto dislodge.