When bidders exhibit multi-unit demands, standard auction methods generally yield inefficient outcomes. This article proposes a new ascending-bid auction for homogeneous goods, such as Treasury bills or telecommunications spectrum. The auctioneer announces a price and bidders respond with quantities. Items are awarded at the current price whenever they are “clinched,” and the price is incremented until the market clears. With private values, this (dynamic) auction yields the same outcome as the (sealed-bid) Vickrey auction, but has advantages of simplicity and privacy preservation. With interdependent values, this auction may retain efficiency, whereas the Vickrey auction suffers from a generalized Winner's Curse.

We present a model of the creation of social networks, such as political parties, trade unions, religious coalitions, or political action committees, through discussion and mutual persuasion among their members. The key idea is that people are influenced by those inside their network, but not by those outside. Once created, networks can be "rented out" to politicians who seek votes and support for their initiatives and ideas, which may have little to do with network members' core beliefs. In this framework, political competition does not lead to convergence of party platforms to the views of the median voter. Rather, parties separate their messages and try to isolate their members to prevent personal influence from those in the opposition.

In a recent article in this journal, B. D. McCullough and H. D. Vinod (2003; hereafter MV) argue that checking the condition number of the Hessian should be a standard part of checking the validity of any estimates obtained via nonlinear optimization. While we think that looking at the condition number of the Hessian is a good idea, we argue that the issue is not as straightforward as claimed by MV. To illustrate our point, we show that MV reached the wrong conclusion about the validity of the Ron Shachar and Barry Nalebuff (1999) solution. In Sections I–III of their article, MV note that it is possible for a well-coded log-likelihood program to declare convergence when some of the parameters are not identified for the given data set. Furthermore, MV make several important recommendations including that researchers check that

We study the incentives that governments have to protect intellectual property in a trading world economy. We consider a world economy with ongoing innovation in two countries that differ in market size and in their capacity for innovation. After describing the determination of national patent policies in a noncooperative regime of patent protection, we ask, “Why is intellectual property better protected in the North than in the South?” We also study international patent agreements by deriving the properties of an efficient global regime of patent protection and asking whether harmonization of patent policies is necessary or sufficient for global efficiency.

Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity: Comment by Leslie M. Marx and Greg Shaffer. Published in volume 94, issue 3, pages 796-801 of American Economic Review, June 2004

Pulled Away or Pushed Out? Explaining the Decline of Teacher Aptitude in the United States by Caroline M. Hoxby and Andrew Leigh. Published in volume 94, issue 2, pages 236-240 of American Economic Review, May 2004

Lucas (1990) argued that it was a paradox that more capital does not flow from rich countries to poor countries. He rejected the standard explanation of expropriation risk and argued that paucity of capital flows to poor countries must instead be rooted in externalities in human capital formation favoring further investment in already capital rich countries. In this paper, we review the various explanations offered for this “paradox.” There is no doubt that there are many reasons why capital does not flow from rich to poor nations – yet the evidence we present suggests some explanations are more relevant than others. In particular, as long as the odds of non repayment are as high as 65 percent for some low income countries, credit risk seems like a far more compelling reason for the paucity of rich-poor capital flows. The true paradox may not be that too little capital flows from the wealthy to the poor nations, but that too much capital (especially debt) is channeled to “debt intolerant” serial defaulters.

A Comment on the Economics of Labor Adjustment: Mind the Gap: Reply by Ricardo J. Caballero and Eduardo M.R.A. Engel. Published in volume 94, issue 4, pages 1238-1244 of American Economic Review, September 2004

The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery by David M. Cutler, Robert S. Huckman and Mary Beth Landrum. Published in volume 94, issue 2, pages 342-346 of American Economic Review, May 2004

Changing Labor-Market Opportunities for Women and the Quality of Teachers, 1957-2000 by Sean P. Corcoran, William N. Evans and Robert M. Schwab. Published in volume 94, issue 2, pages 230-235 of American Economic Review, May 2004