The pareto-stability concept is a natural solution concept for discrete matching markets with indifferences

In a decentralized setting the game-theoretical predictions are that only strong blockings are allowed to rupture the structure of a matching. This paper argues that, under indifferences, also weak blockings should be considered when these blockings come from the grand coalition. This solution concept requires stability plus Pareto optimality. A characterization of the set of Pareto-stable matchings for the roommate and the marriage models is provided in terms of individually rational matchings whose blocking pairs, if any, are formed with unmatched agents. These matchings always exist and give an economic intuition on how blocking can be done by non-trading agents, so that the transactions need not be undone as agents reach the set of stable matchings. Some properties of the Pareto-stable matchings shared by the Marriage and Roommate models are obtained.

Adjusting prices in the multiple-partners assignment game

Starting with an initial price vector, prices are adjusted in order to eliminate the excess demand and at the same time to keep the transfers to the sellers as low as possible. In each step of the auction, to which set of sellers should those transfers be made is the key issue in the description of the algorithm. We assume additively separable utilities and introduce a novel distinction by considering multiple sellers owing multiple identical objects and multiple buyers with an exogenously defined quota, consuming more than one object but at most one unit of a seller`s good and having multi-dimensional payoffs. This distinction induces a necessarily more complicated construction of the over-demanded sets than the constructions of these sets for the other assignment games. For this approach, our mechanism yields the buyer-optimal competitive equilibrium payoff, which equals the buyer-optimal stable payoff. The symmetry of the model allows to getting the seller-optimal stable payoff and the seller-optimal competitive equilibrium payoff can then be also derived.

Heterogeneity, saving-investment dynamics and capital mobility in Latin America

The purpose of this paper is to analyze the dynamics of national saving-investment relationship in order to determine the degree of capital mobility in 12 Latin American countries. The analytically relevant correlation is the short-term one, defined as that between changes in saving and investment. Of special interest is the speed at which variables return to the long run equilibrium relationship, which is interpreted as being negatively related to the degree of capital mobility. The long run correlation, in turn, captures the coefficient implied by the solvency constraint. We find that heterogeneity and cross-section dependence completely change the estimation of the long run coefficient. Besides we obtain a more precise short run coefficient estimate compared to the existent estimates in the literature. There is evidence of an intermediate degree of capital mobility, and the coefficients are extremely stable over time.

The structure of worker compensation in Brazil, with a comparison to France and the United States

We employ comprehensive linked employer-employee data for Brazil to analyze wage determinants and compare results to Abowd et al. (2001) for French and U.S. manufacturing. While returns to human capita in Brazilian manufacturing exceed those of the other countries, occupation and gender differentials are similar. The worker-characteristics component accounts for much of the greater wage inequality in Brazil, but the establishment-fixed component has scant explanatory power. Thus, firm-or industry-level factors offer little scope for explaining the differences in wage inequality. Brazil`s wage structure resembles that of France, a country with some similarity in labor market institutions.

The stability of the equilibrium outcomes in the admission games induced by stable matching rules

A stable matching rule is used as the outcome function for the Admission game where colleges behave straightforwardly and the students` strategies are given by their preferences over the colleges. We show that the college-optimal stable matching rule implements the set of stable matchings via the Nash equilibrium (NE) concept. For any other stable matching rule the strategic behavior of the students may lead to outcomes that are not stable under the true preferences. We then introduce uncertainty about the matching selected and prove that the natural solution concept is that of NE in the strong sense. A general result shows that the random stable matching rule, as well as any stable matching rule, implements the set of stable matchings via NE in the strong sense. Precise answers are given to the strategic questions raised.

ICT AND PRODUCTIVITY IN DEVELOPING COUNTRIES: NEW FIRM-LEVEL EVIDENCE FROM BRAZIL AND INDIA

This paper uses a unique new data set on manufacturing firms in Brazil and India to estimate production functions, augmented by information and communications technology (ICT). We find a strong positive association between ICT capital and productivity in both countries that is robust to several different specification tests. The paper also breaks new ground when using the Indian data to investigate the effect of the institutional and policy environment on ICT capital investment and productivity. We find that poorer infrastructure quality and labor market policy are associated with lower levels of ICT adoption, while poorer infrastructure is also associated with lower returns to investment.

Bayesian analysis of the error correction model

This paper presents a method for estimating the posterior probability density of the cointegrating rank of a multivariate error correction model. A second contribution is the careful elicitation of the prior for the cointegrating vectors derived from a prior on the cointegrating space. This prior obtains naturally from treating the cointegrating space as the parameter of interest in inference and overcomes problems previously encountered in Bayesian cointegration analysis. Using this new prior and Laplace approximation, an estimator for the posterior probability of the rank is given. The approach performs well compared with information criteria in Monte Carlo experiments. (C) 2003 Elsevier B.V. All rights reserved.

Book review of: Choice, Behavioural Economics and Addiction Ruby Vuchinich & Nick Heather, eds

The body of work contained in Choice, Behavioural Economics and Addiction is the result of a conference held at the University of Alabama in Birmingham, 2002. The purpose of the conference was to bring together highly accredited international authors in the field of addiction research pertaining to behavioural choice theories. The conference provided a forum where these theories and their empirical implications could be discussed and debated. This book represents the conference proceedings and as such is a combination of journal articles that each relevant author has published plus additional comments from allocated reviewers.

Corruption and auctions

We investigate how corruption affects the outcome of a first-price auction (bidding behavior, efficiency and the seller's expected revenue). The auctioneer approaches the winner to offer the possibility of a reduction in his bid in exchange for a bribe. The bribe can be a percentage of the difference between the winning and the second-highest bid or a fixed amount. We show that there exists a symmetric bidding strategy equilibrium that is monotone, i.e., higher valuation buyers bid higher. Corruption does not affect efficiency but both the auctioneer's expected bribe and the seller's expected revenue depend on the format of the bribe payments. We also find the optimal bribe scheme.

Mathematical constraints on a theory of human memory - Response

Colonius suggests that, in using standard set theory as the language in which to express our computational-level theory of human memory, we would need to violate the axiom of foundation in order to express meaningful memory bindings in which a context is identical to an item in the list. We circumvent Colonius's objection by allowing that a list item may serve as a label for a context without being identical to that context. This debate serves to highlight the value of specifying memory operations in set theoretic notation, as it would have been difficult if not impossible to formulate such an objection at the algorithmic level.

Monte Carlo evidence on cointegration and causation

The small sample performance of Granger causality tests under different model dimensions, degree of cointegration, direction of causality, and system stability are presented. Two tests based on maximum likelihood estimation of error-correction models (LR and WALD) are compared to a Wald test based on multivariate least squares estimation of a modified VAR (MWALD). In large samples all test statistics perform well in terms of size and power. For smaller samples, the LR and WALD tests perform better than the MWALD test. Overall, the LR test outperforms the other two in terms of size and power in small samples.

Applying linear time-varying constraints to econometric models: With an application to demand systems

When linear equality constraints are invariant through time they can be incorporated into estimation by restricted least squares. If, however, the constraints are time-varying, this standard methodology cannot be applied. In this paper we show how to incorporate linear time-varying constraints into the estimation of econometric models. The method involves the augmentation of the observation equation of a state-space model prior to estimation by the Kalman filter. Numerical optimisation routines are used for the estimation. A simple example drawn from demand analysis is used to illustrate the method and its application.

A mathematical model for Escherichia coli debris size reduction during high pressure homogenisation based on grinding theory

Experimental data for E. coli debris size reduction during high-pressure homogenisation at 55 MPa are presented. A mathematical model based on grinding theory is developed to describe the data. The model is based on first-order breakage and compensation conditions. It does not require any assumption of a specified distribution for debris size and can be used given information on the initial size distribution of whole cells and the disruption efficiency during homogenisation. The number of homogeniser passes is incorporated into the model and used to describe the size reduction of non-induced stationary and induced E. coil cells during homogenisation. Regressing the results to the model equations gave an excellent fit to experimental data ( > 98.7% of variance explained for both fermentations), confirming the model's potential for predicting size reduction during high-pressure homogenisation. This study provides a means to optimise both homogenisation and disc-stack centrifugation conditions for recombinant product recovery. (C) 1997 Elsevier Science Ltd.

Sequential asymmetric auctions with endogenous participation

In this paper we suggest a model of sequential auctions with endogenous participation where each bidder conjectures about the number of participants at each round. Then, after learning his value, each bidder decides whether or not to participate in the auction. In the calculation of his expected value, each bidder uses his conjectures about the number of participants for each possible subgroup. In equilibrium, the conjectured probability is compatible with the probability of staying in the auction. In our model, players face participation costs, bidders may buy as many objects as they wish and they are allowed to drop out at any round. Bidders can drop out at any time, but they cannot come back to the auction. In particular we can determine the number of participants and expected prices in equilibrium. We show that for any bidding strategy, there exists such a probability of staying in the auction. For the case of stochastically independent objects, we show that in equilibrium every bidder who decides to continue submits a bid that is equal to his value at each round. When objects are stochastically identical, we are able to show that expected prices are decreasing.

A stochastic frontier production function with flexible risk properties

This paper considers a stochastic frontier production function which has additive, heteroscedastic error structure. The model allows for negative or positive marginal production risks of inputs, as originally proposed by Just and Pope (1978). The technical efficiencies of individual firms in the sample are a function of the levels of the input variables in the stochastic frontier, in addition to the technical inefficiency effects. These are two features of the model which are not exhibited by the commonly used stochastic frontiers with multiplicative error structures, An empirical application is presented using cross-sectional data on Ethiopian peasant farmers. The null hypothesis of no technical inefficiencies of production among these farmers is accepted. Further, the flexible risk models do not fit the data on peasant farmers as well as the traditional stochastic frontier model with multiplicative error structure.