A nested bundling strategy creates menus in which more expensive bundles include all the goods of less expensive ones. We study when nested bundling is optimal and determine which nested menu is optimal, when consumers differ in one dimension. We define a partial order on bundles by (i) set inclusion and (ii) sales quantity when sold alone. We show that, under quasi-concavity assumptions, if the undominated bundles with respect to this partial order are nested, then nested bundling is optimal. We present an iterative algorithm that identifies the minimal optimal menu consisting of a subset of the undominated bundles.

Wolfgang Mayer (1984) applied Duncan Black's (1948) median-voter theorem to investigate endogenous tariff formation under direct democracy. This paper extends Mayer's model from direct to representative democracy.' The extension from direct to representative democracy is straightforward if candidates possess perfect information. One can still apply the median-voter theorem, for a candidate in a two-party representative democracy also chooses the most preferred tariff of the median voter. Mayer (1984) himself fully recognized this direct extension.2 Nevertheless, if candidates possess imperfect information, which is believed typical in the real world, how the medianvoter outcome might alter or be modified remains unanswered. The purpose of the current paper is to answer the question. That candidates are something more than simply policy surrogates is the highlight of the article by James M. Enelow and Melvin J. Hinich (1982). In contrast to direct democracy in which only policies matter in voter choices, in a representative democracy candidates are thought to be judged by voters on the basis of both nonpolicy candidate characteristics and proposed policies. In this paper I adopt the view of Enelow and Hinich (1982) and combine it with candidate uncertainty. More specifically, I consider a model incorporating candidates' lack of information regarding voters' nonpolicy preferences. The model gives rise to probabilistic rather than deterministic voting.3 I show that, in such a framework, the equilibrium tariff is no longer dictated by the most preferred tariff of the median voter, but is a weighted mean or even the mean of voters' most preferred tariffs; moreover, the income distribution resulting from the equilibrium tariff tends to be more equalized than that from free trade. The plan of the paper is as follows. Section I introduces the model of the paper. It consists of an economic and a political structure. Section II characterizes the equilibrium tariff and discusses its implications for income distribution. Concluding remarks are presented in Section III.

A data broker sells market segmentations to a producer with private cost who sells a product to a unit mass of consumers. This paper characterizes the revenue-maximizing mechanisms for the data broker. Every optimal mechanism induces quasi-perfect price discrimination. All the consumers with values above a cost-dependent cutoff buy by paying their values while the rest of consumers do not buy. The characterization implies that market outcomes remain unchanged even if the data broker becomes more powerful—either by gaining the ability to sell access to consumers or by becoming a retailer who purchases the product and sells to the consumers exclusively.

We study how international migrant income prospects affect long-run development in origin areas. We leverage the 1997 Asian Financial Crisis exchange rate shocks in a shift-share identification strategy across Philippine provinces. Initial migrant income shocks are magnified six-fold over time, increasing domestic income, education levels, migrant skills, and high-skilled migration. Remarkably, 74.9 percent of long-run income gains come from domestic rather than migrant income. Trade driven impacts of exchange rate shocks are orthogonal to effects via migrant income. A structural model reveals that 19.7 percent of long-run income gains stem from educational investments. International migration fosters broad economic development in origin communities.

We examine the effect of early-life rainfall on the health, education, and socioeconomic outcomes of Indonesian adults. We link historical rainfall for each individual's birth year and birth location with adult outcomes from the 2000 Indonesia Family Life Survey (IFLS). Higher early-life rainfall has large positive effects on the adult outcomes of women, but not of men. Women with 20 percent higher rainfall (relative to the local norm) are 0.57 centimeters taller, complete 0.22 more schooling grades, and live in households scoring 0.12 standard deviations higher on an asset index. Schooling attainment appears to mediate the impact on adult women's socioeconomic status.

The model of Avinash Dixit and Joseph E. Stiglitz (1977) (DS hereafter) has received more and more attention from economists in the past decade and can now be regarded as the central model of monopolistic competition. Applications of the model can be found in such diverse fields as international trade, growth theory, and macroeconomics.1 The purpose of this short note is twofold. First, we suggest an alternative solution method to that proposed by DS and used in most applications of their model. Our method makes full use of the symmetry assumption employed by DS but extends their method, so that the resultant pricing rule takes into account the price-index effect. Our method retains the intuitive appeal and simplicity of the original DS model. Second, we show that our solution method extends the range of applicability of the DS model significantly; more general production structures can now be incorporated in the model. The note is organized as follows. In Section I we set up the DS model and develop our solution method. We also discuss the impact that the alternative solution method has on the qualitative results obtained in the DS study and the early application by Paul R. Krugman (1980). Section II broadens the scope of the discussion somewhat by discussing existence problems associated with the DS approach under increasing returns and isoelastic cost functions. It is shown that if our solution method is used then the existence problems disappear, and the DS model yields well-defined answers. Finally, in Section III some concluding remarks are given.

Online search as well as keyword-based contextual advertising on third-party publishers is primarily priced using pay-per-click (PPC): advertisers pay only when a consumer clicks on the advertisement. Slots for advertisements are auctioned, and per-click bids are weighted by the probability of a click given that the advertisement is displayed (the “click-through rate”) in addition to other factors. The PPC method allows the advertising platform (e.g. Google) to bundle together otherwise heterogeneous items (impressions on different positions on a search page, on different search phrases sharing common “keywords,” and on different publishers) into more homogeneous units, simplifying the advertiser's bidding problem. However, PPC pricing has some drawbacks. First, all clicks are not created equal: clicks on a Paris, France hotel website that is displayed on a search for Paris Hilton may result in lower profit conditional on the click. Second, for infrequently searched phrases on search engines or small content providers, it is difficult for the advertiser to accurately estimate conversion rates, increasing the risk and monitoring costs for the advertiser and diminishing their incentives to advertise broadly (indeed, on contextual networks, the advertising platform may not even provide the advertiser with sufficient accounting data about where the advertisements were displayed to allow the advertiser to distinguish sources of clicks, and the publisher mix may change on an ongoing basis.) Third, the problem of click fraud is fairly pervasive: when publishers receive a share of advertising revenue, advertisers place a single bid applying to many publishers, and revenue

Over 20 percent of prison and jail inmates in the United States are currently awaiting trial, but little is known about the impact of pretrial detention on defendants. This paper uses the detention tendencies of quasi-randomly assigned bail judges to estimate the causal effects of pretrial detention on subsequent defendant outcomes. Using data from administrative court and tax records, we find that pretrial detention significantly increases the probability of conviction, primarily through an increase in guilty pleas. Pretrial detention has no net effect on future crime, but decreases formal sector employment and the receipt of employment- and tax-related government benefits. These results are consistent with (i) pretrial detention weakening defendants' bargaining positions during plea negotiations and (ii) a criminal conviction lowering defendants' prospects in the formal labor market.