Strategic Analysis of High-tech Auctions

This paper deals with the security voting structure in an auction mechanism used to sell an item Of high-tech. The design of security voting structure allows the seller to choose between two objectives that are not mutually consistent. However, if the seller wants to maximize his revenue, he should retain some shares to benefit from the future dividends generated by the acquirer. In addition, if he wants to sell his high-tech to the most efficient candidate, he should sell all the shares.     

Impact of electoral competition,swing voters and interest groups on equilibrium policy platforms: Exploring the strategic forces at work

This paper constructs a stylized model of election between two opportunistic candidates who can influence equilibrium policy platforms in exchange for monetary contributions provided by two distinct lobby groups. Two key features are embedded which give rise to a dual uncertainty in the model: the existence of partisan spread across voter groups as well as the embezzlement of campaign funds received by the electoral candidates from the interest groups. We derive and compare the equilibrium platforms of the two office-seeking candidates in three scenarios: none of the above uncertainties exist (benchmark case), only uncertainty about voters’ preferences exist (swing-voter case), and both the uncertainties exist (swing voters and lobby groups case). We find that an opportunistic candidate’s swing-voter tax platform is always lower than the benchmark tax platform. Additionally, the equilibrium tax choice of electoral contenders in the swing voters and opposing lobby groups case is found to be greater than the tax level chosen under the swing-voter case if the lobby group advocating a greater level of tax is sufficiently well-organized such that it outweighs the relative swing-voter effect in that group. Furthermore, we find that when an electoral candidate transitions from being highly corrupt to becoming relatively more honest, the equilibrium level of public good provision adjusts in conformity with the well-organized group’s economic preferences. Finally, if the strength of relative lobbying effect is weaker, a lower partisan bias within that group induces an electoral candidate to choose a tax platform closer to that group’s policy bliss point.     

Strategic candidacy for multivalued voting procedures

Dutta et al. (Econometrica 69 (2001) 1013) (Dutta, Jackson, and Le Breton—DJLeB) initiate the study of manipulation of voting procedures by a candidate who withdraws from the election. A voting procedure is candidate stable if this is never possible. We extend the DJLeB framework by allowing: (a) the outcome of the procedure to be a set of candidates; (b) some or all of the voters to have weak preference orderings of the candidates. When there are at least three candidates, any strongly candidate stable voting selection satisfying a weak unanimity condition is characterized by a serial dictatorship. This result generalizes Theorem 4 of DJLeB.     

Arithmetics of research specialization

In hiring decisions, universities explicitly reward focusing on a specific field. I model the use of research specialization (focusing) in hiring as a signal of ability. Without explicit reward for focusing, candidates who focus are more likely to be able. However, if job market rewards focusing, less able candidates who would otherwise be indifferent between focusing or not, start focusing, which leads to smaller likelihood of observing an able candidate among those who focus than among those who do not. Specialization works as an effective ability signal only when generation of good ideas is highly likely for all ability levels.     

Manipulation through political endorsements

We study elections with three candidates under plurality voting. A candidate is a Condorcet loser if the majority of the voters place that candidate at the bottom of their preference rankings. We first show that a Condorcet loser might win the election in a three-way race. Next we introduce to the model an endorser who has private information about the true probability distribution of the preferences of the voters. Observable endorsements facilitate coordination among voters who may otherwise split their votes and lead to the victory of the Condorcet loser. When the endorser has an ideological bias towards one of the candidates, the coordination impact of endorsements remains unaltered, moreover the endorser successfully manipulates the outcome of the election in favor of his bias, even if his ideological bias is known by the voters. The results are true for any endorsement cost and any magnitude of bias as long as the electorate is large enough.     

Populism and the return of the “Paranoid Style”: Some evidence and a simple model of demand for incompetence as insurance against elite betrayal

We present a simple model of populism as the rejection of “disloyal” leaders. We show that adding the assumption that people are worse off when they experience low income as a result of leader betrayal (than when it is the result of bad luck) to a simple voter choice model yields a preference for incompetent leaders even if all leaders have the same underlying probability of betrayal. These deliver worse material outcomes in general, but they reduce the feelings of betrayal during bad times. Some evidence consistent with our model is gathered from the Trump–Clinton 2016 election: on average, subjects primed with the importance of competence in policymaking decrease their support for Trump, the candidate who scores lower on competence in our survey (even amongst Trump supporters). But two groups respond to the treatment with a large (approximately 5 percentage points) increase in their support for Donald Trump: those living in rural areas and those that are low educated, white and living in urban and suburban areas.     

The Endurance and Eclipse of the Controlled Vote: A Formal Model of Vote Brokerage Under the Secret Ballot

Throughout much of mankind's experience with elections, vote brokers – local elites who direct the voting decisions of a subset of the electorate – have been able to make or break political careers. In various polities, brokers have thrived in spite of the secret ballot, a surprising outcome given that vote secrecy would ostensibly allow citizens to pocket the inducements offered by such individuals and vote their consciences anyway. To address this puzzle, we develop a framework for understanding the persistence and demise of vote brokerage under the secret ballot. In our model, a broker contracts with voters using an outcome contingent contract: some fixed benefit is promised to all voters sharing one of several observable profiles should the broker's candidate win the election. Using this framework, we demonstrate that the existence of brokerage depends on the size of the electorate contained within the jurisdiction controlled by the broker, with large jurisdiction sizes tending to drive brokerage out of existence. Moreover, we detail the manner in which the strategies employed by brokers depend on their economic power, the size of social groups, and ideological polarization. Empirical evidence from Minas Gerais, Brazil is used to evaluate the performance of the model.     

Environmental taxes with heterogeneous consumers: an application to energy consumption in France

This paper constructs a model with four groups of households who have preferences over labor supply, consumption of polluting (energy related) and non-polluting (non-energy) goods, and emissions. It quantifies the model for the French economy and computes its optimal tax equilibria under nine second-best tax regimes. We find that the redistributive role of environmental taxes requires the polluting goods to be taxed at a rate much below their marginal social damage. These goods may even require an outright subsidy if the society values equality ‘a lot’. Secondly, if environmental taxes that have an exclusively externality-correcting role, they benefit all types—although the gains are rather modest. The gains and losses become more substantial when environmental taxes have a redistributive role as well. Third, setting the environmental tax at its Pigouvian level, rather than its optimal externality-correcting-cum-redistributive level, benefits the high-income group at the expense of the low-income groups. Fourth, nonlinear taxation of polluting goods, and nonlinear commodity taxation in general, is a powerful redistributive mechanism. Fifth, introducing environmental taxes in the current French tax system, with its suboptimal income taxes, results in substantial welfare gains for the highest income group and a sizable loss for the least well-off persons.     

The sale of small firms: a multidimensional analysis

Summary. This paper endogeneizes the security voting structure in an auction mechanism used to sell a small firm. The design of security voting structure allows the seller to choose between two objectives which are not mutually consistent. If the seller wants to maximize his revenue, he should retain some shares to benefit from the future dividends generated by the acquirer. At the opposite, if he wants to sell his firm to the most efficient candidate, he should sell all the shares. Received: July 4, 2001; revised version: October 31, 2002 RID="*" ID="*" The paper has benefited from a number of comments from the anonymous referees. Correspondence to: C. At     

Political incentives for rent creation

Rent-seeking is often depicted as a contest in which rent-seekers compete for a prize—the rent. In the process of rent-seeking, much or perhaps all of the rent is dissipated through the costs the contestants incur to compete. Rent dissipation is inconsistent with the incentives of both the rent-seekers and those who create the rents. Policymakers have an incentive to create rents only if they gain from the process, and their gain comes from sharing any surplus that goes to those who obtain the rents. A surplus can be created through a barrier to entry into rent-seeking. When institutions that generate barriers to entry into rent-seeking break down, rent-seeking competitions can occur in which all rents are dissipated, but this should be a special case rather than the general rule in rent-seeking.     

Psychologically-based voting with uncertainty

We analyse a psychologically-based model of voter turnout in an election with common value and uncertainty about who the best candidate is. Potential voters' behaviour is based on anticipated regret, where voters will experience regret if they fail to vote or vote for the wrong candidate. Furthermore, such regret is stronger when the margin of victory is smaller. We characterize mixed and pure-strategy equilibria, which can be desirable, where the right candidate is always elected in all states, or undesirable, where the wrong candidate is elected in some state. Our model yields distinctive comparative statics results. First, an increase in the proportion of informed citizens may cause the winning margin for the right candidate to either rise or fall, depending on the type of equilibrium. In addition, such an increase can have a non-monotonic effect on turnout of uninformed citizens. Second, as the prior becomes more favourable towards the ex ante favoured candidate, turnouts of informed and uninformed voters both change in a non-monotonic way. Furthermore, total turnout can be positively or negatively correlated with winning margins. The distinctive implications of our model could be tested using experimental or empirical studies. In addition, given its inclusion of uncertainty, our model can be used to study, in future research, information provision and acquisition as well as other policy questions.     

Fuzzy Targeting Indices and Orderings

The targeting efficiency and the coverage of social programs for the poor are typically analyzed by partitioning the total population in four mutually exclusive groups: the poor who benefit from a program or policy, the poor who do not benefit, the non‐poor who benefit, and the non‐poor who do not benefit. While useful, this partition into crisp sets may not capture the difficulty of identifying the poor. This paper presents a method that consists of using a membership function to identify to what extent households can be considered as poor or non‐poor. The method builds on fuzzy sets theory whereby the definition of the boundaries of a set, say the poor or the non‐poor, is fuzzy. We characterize the properties that membership functions should have, and we test for the robustness of targeting performance comparisons to the choice of the membership function.     

Partisan politics and election failure with ignorant voters

We analyze candidate competition when some voters do not observe a candidate's policy choice. Voters have a personality preference when both candidates offer the same policy. In equilibrium, the candidate with a personality advantage may get elected with a partisan policy even though his opponent's policy is preferred by all voters. The departure from the Downsian prediction is most pronounced when candidates have a weak policy preference and care mostly about winning the election. In that case, uninformed voters choose the candidate with the preferred personality even if electing this candidate implies a lower payoff on average.     

Multinational public goods provision under multilateral income transfers and productivity differences

This article examines multinational public goods provision under multilateral income transfers and productivity differences across countries. Under a planner who uses linear approximation for utility maximization, we show that (1) a country is an income receiver if it has a higher productivity than the average in producing public goods, enabling it to provide more public goods; (2) the amount of transfers can be pinned down for all countries with an adjustment cost; (3) each country obtains an identical utility increment; and (4) the country with the lowest adjustment cost is the best candidate for the planner country. All results are derived based on well-known information regarding the cost of producing the public goods and income levels.     

Profitable Buybacks in Sovereign Debt

Since the 1982 debt crisis, several debtor countries have repurchased fractions of their debts. Bulow and Rogoff have argued that these buybacks benefit the banks but not the countries. Krugman argues the opposite. This paper provides an explanation of why buybacks benefit both countries and banks. A lending environment with terms-of-trade shocks is considered. If a country defaults, banks impose a penalty on the country and incur some costs. It is shown that with a buyback, the country defaults on a smaller loan, if at all, and the economy saves part of these costs, if not all.     

The Labour Market Impact of Adult Education and Training: A Cohort Analysis

Education boosts individuals' productivity and wages. Yet many individuals leave school with minimal skills and qualifications. One way for these workers to catch up might be lifelong learning. We find that a particular form of lifelong learning, work related training, does have a positive impact on earnings. However, firms tend only to train those workers who will gain from training. Training does benefit those chosen to receive it but if all workers received training, the average impact on wages would be low. Hence, this form of lifelong learning is not necessarily an effective way of raising wages.     

Approval voting in subset elections

Summary. Approval voting is designed to be “insensitive to numbers” of voters, and likely to elect a Condorcet candidate. However, the result of an election among one group of candidates gives no information about the results of elections among any other groups, even if every voter follows the recommended utility-maximizing strategy, which places strong restrictions on the individual voter's subset ballots. Thus the addition of a single candidate could completely reverse the outcome of an election, or a Condorcet candidate could finish last. Received: November 5, 1998; revised version: November 30, 1998     

Selection by committee: Anonymity and gratitude

What kind of candidate is selected into a job when the principal has to appoint a committee to measure the candidates’ ability and select a winner? We find that if the committee takes into account the candidate’s gratitude towards them, a candidate with less than first best ability will be selected. A relevant exception may occur if the first best is the overall best candidate. First best selection is always achieved if the committee is anonymous to the candidates. If the committee is not detached enough from the candidates then delegation fares even worse than random selection.     

NORTH AMERICAN FREE TRADE: OPPORTUNITIES AND PITFALLS

Most studies of the impacts of the North American Free Trade Agreement assume that once the agreement is in place, it will remain in place. Some common theories of trade and of special interest groups' influences upon government policy call these assumptions into question. If ratification of the agreement represents a loss for some import-competing special interest groups, the loss likely will be only of a battle in a war that continues. Attempts to abridge the effects of the agreement may succeed even if the agreement itself is not abridged. U.S. special interest groups rather than their Mexican counterparts will make the majority of these attempts.     

The equivalence between costly and probabilistic voting models

In costly voting models, voters abstain when a stochastic cost of voting exceeds the benefit from voting. In probabilistic voting models, they always vote for a candidate who generates the highest utility, which is subject to random shocks. We prove an equivalence result: In two-candidate elections, given any costly voting model, there exists a probabilistic voting model that generates winning probabilities identical to those in the former model for any policy announcements, and vice versa. Thus many predictions of interest established in one of the models hold in the other as well, providing robustness of the conclusions to model specifications.