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Full-Text Articles in Economic Theory
Future Fiscal And Budgetary Shocks, Hian Teck Hoon, Edmund S. Phelps
Future Fiscal And Budgetary Shocks, Hian Teck Hoon, Edmund S. Phelps
Research Collection School Of Economics
We study here the effects of future tax and budgetary shocks on present levels of economic activity and real interest rates in a nonmonetary and possibly non-Ricardian economy. The paper first takes up an (unanticipated) temporary tax cut to be effective on a given future date—a delayed debt bomb. The sudden prospect of this future-dated shock causes at once a drop in the (unit) value placed on the firms’ business asset, the customer, and accordingly on the price of shares—with the result that the hourly wage, hours worked and GDP drop in tandem. This paradox of reduced activity through announcement …
Vickrey Auctions With Reserve Pricing, Peter Cramton, Lawrence M. Ausubel
Vickrey Auctions With Reserve Pricing, Peter Cramton, Lawrence M. Ausubel
Peter Cramton
We generalize the Vickrey auction to allow for reserve pricing in a multi-unit auction with interdependent values. In the Vickrey auction with reserve pricing, the seller determines the quantity to be made available as a function of the bidders’ reports of private information, and then efficiently allocates this quantity among the bidders. Truthful bidding is a dominant strategy with private values and an ex post equilibrium with interdependent values. If the auction is followed by resale, then truthful bidding remains an equilibrium in the auction-plus-resale game. In settings with perfect resale, the Vickrey auction with reserve pricing maximizes seller revenues.
Auctioning Many Divisible Goods, Peter Cramton, Lawrence M. Ausubel
Auctioning Many Divisible Goods, Peter Cramton, Lawrence M. Ausubel
Peter Cramton
We study the theory and practical implementation of auctioning many divisible goods. With multiple related goods, price discovery is important not only to reduce the winner’s curse, but more importantly, to simplify the bidder’s decision problem and to facilitate the revelation of preferences in the bids. Simultaneous clock auctions are especially desirable formats for auctioning many divisible goods. We examine the properties of these auctions and discuss important practical considerations in applying them.
Competitive Auction Markets In British Columbia, Peter Cramton, Susan Athey
Competitive Auction Markets In British Columbia, Peter Cramton, Susan Athey
Peter Cramton
US-Canada Softwood Lumber Trade Dispute, On behalf of British Columbia Ministry of Forests.
From Hayek To Keynes: G.L.S. Shackle And Our Ignorance Of The Future, Greg Hill
From Hayek To Keynes: G.L.S. Shackle And Our Ignorance Of The Future, Greg Hill
Greg Hill
G.L.S. Shackle stood at the historic crossroads where the economics of Hayek and Keynes collided. Shackle fused these opposing lines of thought in a macroeconomic theory that draws Keynesian conclusions from Austrian premises. In Shackle’s scheme of thought, the power to imagine alternative courses of action releases decision makers from the web of predictable causation. But the continuous stream of spontaneous and unpredictable choices that originate in the subjective and disparate orientations of individual agents denies us the possibility of rational expectations, and therewith the logical coherence of market equilibrium through time.
What Do The Ibbottson Historical Studies Really Prove About Firm Size, Risk And Return?, Michael Sack Elmaleh
What Do The Ibbottson Historical Studies Really Prove About Firm Size, Risk And Return?, Michael Sack Elmaleh
Michael Sack Elmaleh
I deny that the Ibbottson historical studies prove that small and medium caps outperform large caps because they are more risky. First, I question whether covariance measures are necessarily a good proxy for risk. The higher levels of volatility associated with small and medium cap versus large cap may be a statistical artifact: the greater number of transactions associated with large caps as compared to small caps may account for this difference. Secondly, higher returns on small and medium caps may be a function of less efficient information distribution for these securities as compared to large caps. Finally, can we …
Competitive Bidding Behavior In Uniform-Price Auction Markets, Peter Cramton
Competitive Bidding Behavior In Uniform-Price Auction Markets, Peter Cramton
Peter Cramton
Profit-maximizing bidding in uniform price auction markets involves bidding above marginal cost. It therefore is not surprising that such behavior is observed in electricity markets. This incentive to bid above marginal cost is not the result of coordinated action among the bidders. Rather, each bidder is independently selecting its bid to maximize profits based on its estimate of the residual demand curve it faces. The supplier bids a price for its energy capacity to optimize its marginal tradeoff between higher prices and lower quantities. Price response from either demand or other suppliers prevents the supplier from raising its bid too …