Knowledge that Transforms

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.

A Comment on the Economics of Labor Adjustment: Mind the Gap: Rejoinder by Russell Cooper and Jonathan L. Willis. Published in volume 94, issue 4, pages 1245-1247 of American Economic Review, September 2004

Wealthier people live longer and experience less morbidity than do poorer people, in both developed and developing countries. While the association between income and health status has been well documented, the mechanisms leading to this correlation are unclear. In this paper, we use data collected from an informal urban township in South Africa to examine the extent to which compliance with medical protocols plays a role in the observed income-health gradient. Specifically, we look at adherence to protocols among individuals diagnosed with hypertension.

What are the determinants of health and of well-being? Income and wealth are clearly part of the story, but does access to health care have a large independent effect, as the advocates of more investment in health care, such as the World Health Organization’s Commission on Macroeconomics and Health (Commission on Macroeconomics and Health, 2001), have argued? This paper reports on a recent survey in a poor rural area of the state of Rajasthan in India intended to shed some light on this issue, where there was an attempt to use a set of interlocking surveys to collect data on health and economic status, as well as the public and private provision of health care.

We examine the entry behavior of producers in different industries in different ex-port markets using a comprehensive dataset of French firms. These data reveal enormous heterogeneity, primarily within industries, in the nature of entry into different markets. Nonetheless, some striking regularities appear both across and within industries. The French data add a new dimension to an emerging empirical literature examining international trade at the level of individual producers. Andrew Bernard and J. Bradford Jensen (1995, 1999), Sofronis Clerides et al. (1998), and Bee Yan Aw et al. (2000), among others, have shown that: (i) exporters are typically in the minority; (ii) they tend to be more productive and larger; (iii) yet they usually export only a small fraction of their output. The findings that most firms do not export while those that do sell most of what they make at home suggest substantial barriers to exporting. Theories of producer export behavior have suggested either standard “iceberg ” costs, e.g., Bernard et al. (2003) or

This study clarifies the conditions under which learning in games produces convergence to Nash equilibria in practice. We experimentally investigate the role of supermodularity, which is closely related to the more familiar concept of strategic complementarities, in achieving convergence through learning. Using a game from the literature on solutions to externalities, we find that supermodular and “near-supermodular” games converge significantly better than those far below the threshold of supermodularity. From a little below the threshold to the threshold, the improvement is statistically insignificant. Increasing the parameter far beyond the threshold does not significantly improve convergence.

Two decades ago, most workers with pensions had a defined benefit (DB) plan. The employer made necessary contributions and investments to meet promised pension benefit payments when the employee retired. By 1993, the tide had turned; more than half of covered employees participated primarily in defined contribution (DC) pensions such as 401(k) plans [Employee Benefit Research Institute (EBRI), 1997]. This dramatic shift was associated as well with growing concerns about the emerging 401(k) plans. Some viewed 401(k) plans as a crisis waiting to happen when current generations, having made minimal (or no) contributions to their DC plan, retired with inadequate pension asset balances (Karen Ferguson and Kate Blackwell, 1995; Anne Willette, 1995). Another concern was that workers switching jobs would use the lump-sum distributions for houses, boats, or other purchases rather than reinvesting them in another retirement account [Ellen E. Schultz, 1995; U.S. Department of Labor (USDOL), 1998a]. In a similar vein, newly retired workers may not roll over the assets into an annuity and therefore risk spending down their retirement wealth too early (e.g., Jeffrey R. Brown and Mark J. Warshawsky, 2001). The most serious charge against 401 (k) plans,

This paper shows how the demand for non-life insurance interacts with consumption and saving. The analysis is set in continuous time, using the maximum principle. When insurance is actuarially fair, the insurance and consumption decisions are separable. With loaded premiums, and alternatively without insurance, optimal consumption is dynamically related to the growth rate of the loss probability, and a growing loss probability generates precautionary saving. With loaded premiums, less than full insurance is demanded at each instant, and optimal cover varies over time, whether or not the loss probability is constant.