Convergence to perfect competition of a dynamic matching and bargaining market with two-sided incomplete information and exogenous exit rate

Consider a decentralized, dynamic market with an infinite horizon and incomplete information in which buyers and sellers' values for the traded good are private and independently drawn. Time is discrete, each period has length δ, and each unit of time a large number of new buyers and sellers enter the market. Within a period each buyer is matched with a seller and each seller is matched with zero, one, or more buyers. Every seller runs a first price auction with a reservation price and, if trade occurs, the seller and winning buyer exit with their realized utility. Traders who fail to trade either continue in the market to be rematched or exit at an exogenous rate. We show that in all steady state, perfect Bayesian equilibria, as δ approaches zero, equilibrium prices converge to the Walrasian price and realized allocations converge to the competitive allocation.     

A short proof of the Bulow-Klemperer auctions vs. negotiations result

Summary. Bulow and Klemperer [1] have provided an upper bound on the value of bargaining power for a seller of an indivisible object. Specifically, negotiating optimally with N buyers yields lower revenue than an English auction with N + 1 buyers. In this paper, a short and intuitive proof of this result is presented.Received: 2 August 2004, Revised: 6 December 2004, JEL Classification Numbers: C78, D44, D82.I would like to thank Per B. Overgaard and an anonymous referee for many valuable comments.     

The asymptotic shapley value for a simple market game

We consider the game in which b buyers each seek to purchase 1 unit of an indivisible good from s sellers, each of whom has k units to sell. The good is worth 0 to each seller and 1 to each buyer. Using the central limit theorem, and implicitly convergence to tied down Brownian motion, we find a closed form solution for the limiting Shapley value as s and b increase without bound. This asymptotic value depends upon the seller size k, the limiting ratio b/ks of buyers to items for sale, and the limiting ratio of the excess supply relative to the square root of the number of market participants. This work was sponsered in part by NSF Grant DMS-03-01795.     

Overconfidence in the Markets for Lemons

We extend Akerlof's “Market for Lemons” (1970, Quarterly Journal of Economics 84, 488–500) by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is on display for sale. Overconfident buyers do not update according to Bayes' rule but take the noisy signal at face value. We show that the presence of overconfident buyers can stabilize the market outcome by preventing total adverse selection. However, this stabilization comes at a cost: rational buyers are crowded out of the market.     

Pre-auction offers in asymmetric first-price and second-price auctions

We consider first-price and second-price auctions with asymmetric buyers, and examine whether pre-auction offers to a subset of buyers are profitable. A single offer is never profitable prior to a second-price auction, but may be profitable prior to a first-price auction. However, a sequence of offers is profitable in either type of auction. In our model, suitably chosen pre-auction offers work because they move the assignment when bidder valuations are “near the top” closer to the optimal, revenue-maximizing assignment.     

Hangovers

This paper analyzes a process by which a market boom brought on by a temporary increase in the flow of buyers, can subsequently lead to a collapse of liquidity (speed of sale), prices and production to levels lower than before the onset of the boom. I consider a general model of markets subject to search frictions in the matching of buyers and sellers, where the entry of buyers and sellers (through production) are subject to adjustment costs. The resulting co-movement between unemployment, inventories and sales with the production cycle matches the stylized facts.     

Remain silent and ye shall suffer: seller exploitation of reticent buyers in an experimental reputation system

By providing incentives for sellers to act in a trustworthy manner, reputation mechanisms can mitigate moral-hazard problems when particular buyers and sellers interact infrequently. However, these mechanisms rely on buyers sharing their private information about sellers, and thus may suffer from too little feedback when provision is costly. We experimentally compare a standard feedback mechanism to one in which sellers can inspect a buyer’s feedback-provision history, thus providing incentives to share private information even when costly. We find fairly high trust and trustworthiness in all markets, with buyers providing costly feedback, especially negative, sufficient to induce trustworthiness. However, feedback-provision histories did not improve outcomes, and at least weakly decreased trustworthiness with experienced participants, as this information enabled sellers to discriminate and ship less frequently to buyers lacking a reputation for information sharing.     

The Evolutionary Stability of Auctions over Bargaining

This paper considers equilibrium in transaction mechanisms. In an environment with homogeneous buyers and sellers, which eliminates the advantage auctions possess of matching buyers and sellers, both auctions and bargaining are equilibria. However, only auctions are evolutionarily stable. This identifies a new advantage of auctions over bargaining, arising from the division of the gains from trade.Journal of Economic LiteratureClassification Numbers: C78, C73, D44.     

Game and Simulation Experiments

When students become buyers, sellers and producers their learning of economics is accelerated. The inventor of a simulation exercise illustrates this point and comments on the need to keep the computer “hardware” from overwhelming the process of instruction.     

Dynamic sorting in durable goods markets with buyer heterogeneity

In a competitive dynamic durable good market where sellers have private information about quality, I identify certain inefficiencies that arise due to heterogeneity in buyers' valuations. Even if the market induces dynamic sorting among sellers and all goods are eventually traded, inefficiency can arise because high valuation buyers buy early when low‐quality goods are sold, while high‐quality goods are allocated to low valuation buyers that buy later. This misallocation adds to the inefficiency caused by delay in trading. Under certain circumstances, high‐quality goods may never be traded as in a static market.     

Cheating in markets: A laboratory experiment

We develop a two-market model under three conditions: autarky, frictionless free trade, and free trade with cheating. With cheating, buyers can underpay by π% in cross-market trades and sellers can deliver π% of full value. We solve for competitive equilibrium with cheating and obtain novel testable predictions on price, volume and surplus. We test these in a laboratory experiment using parameters intended to challenge the theory. The results are generally consistent with competitive equilibrium. We find evidence of price unification, market segmentation, a cross-market volume of trade lower under cheating than in frictionless free trade, but a higher overall volume.     

More pessimism than greediness: a characterization of monotone risk aversion in the rank-dependent expected utility model

Summary. This paper studies monotone risk aversion, the aversion to monotone, mean-preserving increase in risk (Quiggin [21]), in the Rank Dependent Expected Utility (RDEU) model. This model replaces expected utility by another functional, characterized by two functions, a utility function u in conjunction with a probability-perception function f. Monotone mean-preserving increases in risk are closely related to the notion of comparative dispersion introduced by Bickel and Lehmann [3,4] in Non-parametric Statistics. We present a characterization of the pairs (u,f) of monotone risk averse decision makers, based on an index of greediness G _u of the utility function u and an index of pessimism P _f of the probability perception function f: the decision maker is monotone risk averse if and only if . The index of greediness (non-concavity) of u is the supremum of taken over . The index of pessimism of f is the infimum of taken over 0 < v < 1. Thus, , with G _u = 1 iff u is concave. If then , i.e., f is majorized by the identity function. Since P _f = 1 for Expected Utility maximizers, forces u to be concave in this case; thus, the characterization of risk aversion as is a direct generalization from EU to RDEU. A novel element is that concavity of u is not necessary. In fact, u must be concave only if P _f = 1.Received: 10 April 2001, Revised: 18 November 2003, JEL Classification Numbers: D81. Correspondence to: Michéle CohenAlain Chateauneuf, Michéle Cohen, Isaac Meilijson: We are most grateful to Mark Machina, Peter Wakker and two anonymous referees for very helpful suggestions and comments.     

Indivisibilities, Lotteries, and Monetary Exchange

We introduce lotteries (randomized trading) into search-theoretic models of money. In a model with indivisible goods and fiat money, we show goods trade with probability 1 and money trades with probability τ, where τ<1 iff buyers have sufficient bargaining power. With divisible goods, a nonrandom quantity q trades with probability 1 and, again, money trades with probability τ where τ<1 iff buyers have sufficient bargaining power. Moreover, q never exceeds the efficient quantity (not true without lotteries). We consider several extensions designed to get commodities as well as money to trade with probability less than 1, and to illuminate the efficiency role of lotteries. Journal of Economic Literature Classification Numbers: E40, D83.     

Palonosetron versus other 5-HT3 receptor antagonists for prevention of chemotherapy-induced nausea and vomiting in patients with hematologic malignancies treated with emetogenic chemotherapy in a hospital outpatient setting in the United States

Abstract

Objective:

This study evaluated the rate of uncontrolled chemotherapy-induced nausea and vomiting (CINV) after initiating antiemetic prophylaxis with palonosetron versus other 5-HT₃ receptor antagonists (RAs) in patients diagnosed with hematologic malignancies (lymphoma and leukemia) and receiving highly emetogenic chemotherapy (HEC) or moderately emetogenic chemotherapy (MEC) in a hospital outpatient setting.

Methods:

Patients aged?≥?18 years and diagnosed with hematologic malignancies initiating HEC or MEC and antiemetic prophylaxis with palonosetron (Group 1) and other 5-HT₃ RAs (Group 2) for the first time in a hospital outpatient setting between 4/1/2007 and 3/31/2009 were identified from the Premier Perspective Database. Within each cycle, CINV events were identified (in the hospital outpatient, inpatient, and emergency room settings) through ICD-9 codes for nausea, vomiting, and/or volume depletion (from each CT administration day 1 until the end of the CT cycle), or use of rescue medications (day 2 until the end of the CT cycle). Negative binomial distribution generalized linear multivariate regression model estimating the CINV event rate on CT, specific CT cycles, and cancer diagnosis (leukemia/lymphoma)-matched groups in the follow-up period (first of 8 cycles or 6 months) was developed.

Results:

Of 971 identified patients, 211 initiated palonosetron (Group 1). Group 1 patients comprised of more females [50.2 vs. 41.4%; p?=?0.0226], Whites [74.4 vs. 70.4%, and Hispanics [7.6 vs. 6.3%; all races p?=?0.0105], received more HEC treatments [89.6 vs. 84.2%; all CT types p?=?0.0129], and had more lymphoma diagnosed patients [89.6 vs. 76.3%; all cancer types p?=?0.0033] at baseline. After controlling for differences in several demographic and clinical variables, the regression model predicted a 20.4% decrease in CINV event rate per CT cycle for Group 1 versus Group 2 patients. Study limitations include potential lack of generalizability, absence of data on certain confounders including alcohol consumption and prior history of motion sickness, potential underestimation of incidence of uncontrolled CINV, and inability to draw conclusions pertaining to cause and effect relationship.

Conclusion:

In this retrospective hospital study, patients with hematologic malignancies treated with HEC or MEC and initiated on antiemetic prophylaxis with palonosetron in the hospital outpatient setting were more likely to experience significantly lower CINV event rates (in the hospital outpatient, inpatient, and emergency room settings) versus patients initiated on other 5-HT₃ RAs.     

Asymmetric first-price auctions with uniform distributions: analytic solutions to the general case

In 1961, Vickrey posed the problem of finding an analytic solution to a first-price auction with two buyers having valuations uniformly distributed on ${[\underline{v}_{1}, \overline{v}_{1}]}$ and ${[\underline{v}_{2}, \overline{v}_{2}]}$ . To date, only special cases of the problem have been solved. In this paper, we solve this general problem and in addition allow for the possibility of a binding minimum bid. Several interesting examples are presented, including a class where the two bid functions are linear.     

Combinatorial auctions with decreasing marginal utilities

In most of microeconomic theory, consumers are assumed to exhibit decreasing marginal utilities. This paper considers combinatorial auctions among such submodular buyers. The valuations of such buyers are placed within a hierarchy of valuations that exhibit no complementarities, a hierarchy that includes also OR and XOR combinations of singleton valuations, and valuations satisfying the gross substitutes property. Those last valuations are shown to form a zero-measure subset of the submodular valuations that have positive measure. While we show that the allocation problem among submodular valuations is NP-hard, we present an efficient greedy 2-approximation algorithm for this case and generalize it to the case of limited complementarities. No such approximation algorithm exists in a setting allowing for arbitrary complementarities. Some results about strategic aspects of combinatorial auctions among players with decreasing marginal utilities are also presented.     

EXPERIMENTAL WORK ON SUBSIDIES,MORAL HAZARD,AND MARKET POWER IN AGRICULTURAL MARKETS

Laboratory markets are created to capture the important features of agricultural commodity markets. Sellers make production decisions and hold inventories before goods are sold. In a posted‐bid auction environment, price supports create a moral hazard for sellers. Part of the price‐support subsidy is transferred to buyers in the form of lower prices, which are close to those predicted by the buyers' Cournot level. The subsidy program is expensive for this reason. Lump‐sum payments correct the moral hazard problem and are better at transferring income to sellers. However, transfers made at the beginning of each production period cause a decline in production levels. (JEL D44, C92)     

Intertemporal self-selection with multiple buyers

Summary We consider a monopolist selling durable goods to consumers with unit demands but different preferences for quality. The seller can offer items of different quality at the same time to induce buyers to self-select, as in Mussa-Rosen (1978), but is not artificially constrained to offer only one such menu. Instead the seller can offer without precommitment asequence of menus over time. In the two-buyer case where the seller has complete information about each buyer's marginal valuation for quality, the seller's profits exceed what can be obtained from a single menu and sometimes approximate the profits of a perfectly discriminating monopolist. In companion papers (Bagnoli et al., 1990, 1992), we show that these conclusions continue to hold (1) in the infinite-horizon case with any finite number of buyers and (2) in two-period examples where the seller has incomplete information about buyer preferences.     

DIRECTED SEARCH,COORDINATION FAILURE,AND SELLER PROFITS: AN EXPERIMENTAL COMPARISON OF POSTED PRICING WITH SINGLE AND MULTIPLE PRICES

We experimentally examine posted pricing and directed search. In one treatment, capacity‐constrained sellers post fixed prices, which buyers observe before choosing whom to visit. In the other, firms post both “single‐buyer” (applied when one buyer visits) and “multibuyer” (when multiple buyers visit) prices. We find, based on a 2 × 2 (two buyers and two sellers) market and a follow‐up experiment with 3 and 2 × 3 markets, that multibuyer prices can be lower than single‐buyer prices or prices in the one‐price treatment. Also, allowing the multibuyer price does not affect seller profits and increases market frictions.     

Annual acquisition and administration cost of biologic response modifiers per patient with rheumatoid arthritis,psoriasis, psoriatic arthritis,or ankylosing spondylitis

Abstract

Objective:

To estimate annual biologic response modifier (BRM) cost per treated patient with rheumatoid arthritis, psoriasis, psoriatic arthritis, and/or ankylosing spondylitis receiving etanercept, abatacept, adalimumab, certolizumab, golimumab, infliximab, rituximab, or ustekinumab.

Methods:

This was a cohort study of 69,349 commercially insured individuals in a nationwide claims database with one of these conditions that had a claim for one of these BRMs between January 2008 and December 2010 (the index BRM/index date). Cost per treated patient was calculated as the total BRM acquisition and administration cost to the payer in the first year after the index date (including costs of other BRMs after switching) divided by the number of patients who received the index BRM. Etanercept was selected as the reference for comparisons.

Results:

Etanercept was the most commonly used index BRM (n?=?32,298; 47%), followed by adalimumab (n?=?20,582; 30%), infliximab (n?=?11,157; 16%), abatacept (n?=?2633; 4%), rituximab (n?=?1359; 2%), golimumab (n?=?687; <1%), ustekinumab (n?=?388; <1%), and certolizumab (n?=?245; <1%). Using etanercept as the reference, the cost per treated patient in the first year across all four conditions was 102% for adalimumab and 108% for infliximab. Newer BRMs had costs relative to etanercept that were 90% to 102% for rheumatoid arthritis, 132% for psoriasis, 100% for psoriatic arthritis, and 94% for ankylosing spondylitis.

Limitations:

Potential study limitations were the lack of clinical information (e.g., disease severity, treatment outcomes) or indirect costs, the inability to compare costs of newer BRMs across all four conditions, and much smaller sample sizes for newer BRMs.

Conclusions:

Of the BRMs that are approved for indications within all four conditions studied, etanercept had the lowest cost per treated patient when assessed across all four conditions.