[The existence of backwardation in futures markets has remained an intriguing and controversial issue since Keynes first argued that it was the "normal" state of affairs. Most theoretical explanations for the existence of backwardation are quite restrictive. Among the assumptions are pure forward as opposed to true futures trading, differences in probability beliefs, degrees of risk aversion, or the level of commodity commitments among long and short hedgers. In a simple model of short and long commodity hedgers, we show that a backwardation equilibrium can occur in a true futures (as opposed to forward) market even when hedgers are identical in these respects and speculators hold the same probability beliefs as hedgers. This result is driven by Houthakker's completely neglected intuitive notion that one possible explanation for backwardation is the high correlation between cash and futures prices when inventories of a commodity are large. While the simple existence of such an "inventory effect" does not necessarily imply backwardation, we prove that backwardation will occur under an appropriately specified inventory effect.]

Professional team sports leagues provide insight into the problems facing the management of functioning cartels. This paper provides an analysis of the incentives and outcomes inherent in the management of professional team sports cartels. Except for revenue sharing and salary caps, league cartel management outcomes are consistent with league-wide revenue maximization and have no impact on competitive balance. However, there are predictable impacts on the profitability of strong- and weak-drawing teams within the league. While providing an analytical review of the literature, the work here also yields new results concerning salary caps, local TV revenue sharing, and the behavior of cartel managers in the face of rival leagues.

The existence of backwardation in futures markets has remained an intriguing and controversial issue since Keynes first argued that it was the "normal" state of affairs. Most theoretical explanations for the existence of backwardation are quite restrictive. Among the assumptions are pure forward as opposed to true futures trading, differences in probability beliefs, degrees of risk aversion, or the level of commodity commitments among long and short hedgers. In a simple model of short and long commodity hedgers, we show that a backwardation equilibrium can occur in a true futures (as opposed to forward) market even when hedgers are identical in these respects and speculators hold the same probability beliefs as hedgers. This result is driven by Houthakker's completely neglected intuitive notion that one possible explanation for backwardation is the high correlation between cash and futures prices when inventories of a commodity are large. While the simple existence of such an "inventory effect" does not necessarily imply backwardation, we prove that backwardation will occur under an appropriately specified inventory effect.

Economics is characterized by well-developed predictive theories of human behavior. A wide variety of empirical tests of models based on those theories have been developed, as well as extensive and reliable data bases to test the theories. Thus, one can experiment with and simulate economic behavior. For these reasons, the conventional lecture-discussion format may be the least effective way to teach economics. Rather, the most effective teaching method may be as a laboratory science. We report here on two efforts to adapt economic instruction to a laboratory format. The purpose of adapting the lecture-laboratory format to economics is to permit a more active learning environment in which students can be meaningfully engaged by the material, with other students, and with the instructor. We report on two recent efforts to convert economics to a true, experimental, laboratory social science. The first, beginning in 1988, is a demonstration project conducted at Denison University for majors in economics. The second, beginning in 1993, is a true experiment conducted at Washington State University for all students taking introductory microand macroeconomics. I. The Demonstration Project for Economics Majors at Denison University