The opportunity for conspiracy in restraint of trade: An experimental study

This study is a limited exploration into the relationship between the opportunity for conspiracy in restraint of trade and the resulting market performance. Laboratory experimental methods are applied to separate competing theories. The competitive model predicts well relative to cartel models. Nevertheless, when measurements are taken relative to the performance of markets where conspiracies are not possible, the effects of attempted conspiracies can be detected.     

Price cap regulation: A case study of some pitfalls of implementation

There has been considerable discussion of price-cap regulation as an alternative to traditional rate-of-return regulation. This paper examines some of the practical pitfalls of price-cap regulation. First, a model of a terminating price cap is developed. Next, this model is used to propose some problems of implementation. These problems are evaluated in the context of a case study of the Tucson Electric Power Company, which faced a type of price cap for several years in the 1980s. Extensions of the specific case to more general lessons about price-cap regulation are considered.     

Do preferences for charitable giving help auctioneers?

Preferences for charitable giving in auctions can be modeled by assuming that bidders receive additional utility proportional to the revenue raised by an auctioneer. The theory of bidding in the presence of such preferences results in a very counterintuitive prediction which is that, in many cases, bidders having preferences for charitable giving does not lead to a substantial revenue advantage for an auctioneer. We test this theory and this prediction with a series of experiments. In one experiment we induce charitable preferences exactly as specified in the model to see if bidders respond to them as predicted. We find that they do. We then conduct a second experiment in which the revenue from the auctions is donated to actual charities to verify the robustness of the prediction when charitable preferences are generated by a more natural source and find again that the theoretical prediction holds: even strong charitable preferences do not result in substantial revenue increases to the auctioneer.     

Extracting a common stochastic trend: Theory with some applications

This paper investigates the statistical properties of estimators of the parameters and unobserved series for state space models with integrated time series. In particular, we derive the full asymptotic results for maximum likelihood estimation using the Kalman filter for a prototypical class of such models—those with a single latent common stochastic trend. Indeed, we establish the consistency and asymptotic mixed normality of the maximum likelihood estimator and show that the conventional method of inference is valid for this class of models. The models we explicitly consider comprise a special–yet useful–class of models that may be employed to extract the common stochastic trend from multiple integrated time series. Such models can be very useful to obtain indices that represent fluctuations of various markets or common latent factors that affect a set of economic and financial variables simultaneously. Moreover, our derivation of the asymptotics of this class makes it clear that the asymptotic Gaussianity and the validity of the conventional inference for the maximum likelihood procedure extends to a larger class of more general state space models involving integrated time series. Finally, we demonstrate the utility of this class of models extracting a common stochastic trend from three sets of time series involving short- and long-term interest rates, stock return volatility and trading volume, and Dow Jones stock prices.