The Declining Price Anomaly in Dutch Dutch Rose Auctions by Gerard J. van den Berg, Jan C. van Ours and Menno P. Pradhan. Published in volume 91, issue 4, pages 1055-1062 of American Economic Review, September 2001

In recent years workplace smoking policies have become increasingly prevalent and restrictive. Using data from two large-scale national surveys, we investigate whether these policies reduce smoking. Our estimates suggest that workplace bans reduce smoking prevalence by 5 percentage points and daily consumption among smokers by 10 percent. Although workers with better health habits are more likely to work at firms with smoking bans, estimates from systems of equations indicate that these results are not subject to an omitted variables bias. The rapid increase in bans can explain all of the recent drop in smoking among workers relative to nonworkers.

In the three months following the Iraqi invasion of Kuwait, the University of Michigan's Index of Consumer Sentiment (ICS) fell an unprecedented 24.3 index points, to its lowest level since the 1981-1982 recession.' This collapse in household confidence became the focus of a great deal of economic commentary and, indeed, frequently was cited as an important-if not the leading-cause of the economic slowdown that ensued. Concern was fueled by the well-known contemporaneous correlation between the ICS and the growth of household spending. Figure 1 shows quarterly averages of the index, 1978-1993, together with the quarterly growth in real personal consumption expenditures as measured in the national income accounts (Bureau of Economic Analysis). The correlation is impressive. Of course, it is not surprising that sentiment and the growth of spending are positively correlated. This correlation may simply reflect that, when economic prospects are poor, households curtail their spending and also give gloomy responses to interviewers. Thus, the contemporaneous correlation between sentiment and spending does not refute traditional life-cycle or permanentincome models of consumption. Nor does it necessarily make the job of forecasting changes in consumption any easier. From the point of view of an economic forecaster, the questions of interest are first, whether an index of consumer sentiment has any predictive power on its own for future changes in consumption spending, and second, whether it contains information about future changes in consumer spending aside from the information contained in other available indicators. In Section I, we present evidence that the answer to the first question is a clear yes: we find that lagged values of the ICS, taken on their own, explain about 14 percent of the variation in the growth of total real personal consumption expenditures over the post1954 period. Further investigation shows that the answer to the second question is probably yes as well, though here the margin is narrower and the evidence more murky. The ICS contributes about 3 percent to the R2 of a simple reduced-form equation for total personal consumption expenditures in the longer of the two sample periods we examine, but nothing in the shorter sample period (though the latter result is heavily influenced by the observation for 1980:2). For the major subcategories of spending, the contribution generally ranges between 1 percent and 8 percent. Overall, we read the evidence as pointing toward at least some significant incremental explanatory power. Therefore, we take as given for the remainder of the paper that sentiment forecasts spending, and we turn to the issue of how that statistical relationship should be interpreted. One possible interpretation is that sentiment is an independent driving factor in the economy, and that changes in * Carroll: Division of Research and Statistics, Stop 80, Federal Reserve Board, Washington, DC 20551: Fuhrer: Research Department, Federal Reserve Bank of Boston, Boston, MA 02106: Wilcox: Division of Monetary Affairs, Stop 71, Federal Reserve Board, Washington, DC 20551. We have benefited from the research assistance of Stephen Helwig and Christopher Geczy and the comments of an anonymous referee. The views expressed in this paper are those of the authors and not of the Federal Reserve Board, the Federal Reserve Bank of Boston, or the other members of the staff of either institution. IThe Conference Board's Consumer Confidence Index also plunged at the same time.

This paper estimates the impact of globalization on markups, and the effect of changing markups on US welfare, in a monopolistic competition model. We work with symmetric translog preferences, which allow for endogenous markups and firm entry and exit, thereby changing product variety. We find that between 1992 and 2005, US import shares rose and US firms exited, leading to an implied fall in markups, while variety went up because of imports. US welfare rose by nearly 1 percent as a result of these changes, with product variety contributing one-half of that total and declining markups the other half.

Bioprospecting has been touted as a source of finance for biodiversity conservation. Recent work has suggested that the bioprospecting value of the “marginal unit” of genetic resources is likely to be vanishingly small, creating essentially no conservation incentive. This result is shown to flow specifically from a stylized description of the research process as one of brute‐force testing, unaided by an organizing scientific framework. Scientific models channel research effort toward leads for which the expected productivity of discoveries is highest. Leads of unusual promise then command information rents, associated with their role in reducing the costs of search. When genetic materials are abundant, information rents are virtually unaffected by increases in the profitability of product discovery and decline as technology improvements lower search costs. Numerical simulation results suggest that, under plausible conditions, the bioprospecting value of certain genetic resources could be large enough to support market‐based conservation of biodiversity.

This paper proposes an empirical framework for measuring the effects of entry in concentrated markets. Building on models of entry in atomistically competitive markets, the authors show how the number of producers in an oligopolistic market varies with changes in demand and market competition. These analytical results structure the authors' empirical analysis of competition in five retail and professional industries. Using data on geographically isolated monopolies, duopolies, and oligopolies, they study the relationship between the number of firms in a market, market size, and competition. The authors' empirical results suggest that competitive conduct changes quickly as the number of incumbents increases.

The authors' estimates of the pay-performance relation (including pay, options, stockholding, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 changes in shareholder wealth. Although the incentives generated by stock ownership are large relative to pay and dismissal incentives, most CEOs hold trivial fractions of the firms' stock, and ownership levels have declined over the past fifty years. The authors hypothesize that public and private political forces impose constraints that reduce the pay-performance sensitivity. Declines in both the pay-performance relation and the level of CEO pay since the 1930s are consistent with this hypothesis.

Models of collusive bidder behavior at single-object second-price and English auctions are provided. The ind ependent private values model is generalized to permit the formulatio n of coalitions and a strategic response by the auctioneer. Cooperati ve strategies are found to be dominant in these models; coalitions of any size are viable, and the payoff to each member increases with th e size of the coalition. In addition, the collusive strategies of the coalition represent a noncooperative equilibrium. The optimal respon se of the auctioneer is to establish a reserve price that is a functi on of the coalition's size. These and other features of the model are found to be consistent with the essential features of actual behavio r.

It is found that the welfare gain per unit of revenue raised is maximized for an export tariff on technology transfer, followed by an import tariff on goods, with an export tariff on goods the poorest policy alternative. These results are derived within a monopolistic competition model, where the production of any good requires some initial research and development (R&D), and technology transfer occurs when R&D is done in one country for production of goods in the other. An intuitive explanation is presented, based on the public-good nature of R&D and also the elasticity of demand for technologies from firms.