nep-mic New Economics Papers
on Microeconomics
Issue of 2005‒02‒20
eleven papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Efficient Bidding with Externalities By Inés Macho-Stadler; David Pérez-Castrillo; David Wettstein
  2. Measuring polarization, inequality, welfare and poverty By Juan Gabriel Rodríguez
  3. Network Externalities: Adoption of Low Emission Technologies in the Automobile Market By Eftichios S. Sartzetakis
  4. Innovation Strategies in a Competitive Dynamic Setting By Ruslan Lukach; Joseph Plasmans; Peter M. Kort
  5. Individual Preferences for Giving By Ray Fisman; Shachar Kariv; Daniel Markovits
  6. Asymmetric Information about Rivals’ Types in Standard Auctions: An Experiment By James Andreoni; Yeon-Koo Che; Jinwoo Kim
  7. Information Acquisition: Experimental Analysis of a Boundedly Rational Model By Xavier Gabaix; David Laibson; Guillermo Moloche; Stephen Weinberg
  8. The Sunk Cost Bias and Managerial Pricing Practices By Nabil Al-Najjar; Sandeep Baliga; David Besanko
  9. The economics of books By Canoy,Marcel; Ours,Jan C. van; Ploeg,Frederick van der
  10. Market Power in the Spanish Electricity Auction. By Aitor Ciarreta; Mari Paz Espinosa
  11. What Can Happiness Research Tell Us About Altruism? Evidence from the German Socio-Economic Panel By Schwarze, Johannes; Winkelmann, Rainer

  1. By: Inés Macho-Stadler; David Pérez-Castrillo; David Wettstein
    Abstract: We implement a family of efficient proposals to share benefits generated in environments with externalities. These proposals extend the Shapley value to games with externalities and are parametrized through the method by which the externalities are averaged. We construct two slightly different mechanisms: one for environments with negative externalities and the other for positive externalities. We show that the subgame perfect equilibrium outcomes of these mechanisms coincide with the sharing proposals.
    Keywords: Implementation, Externalities, Bidding, Shapley Value.
    JEL: D62 C71
    Date: 2005–02–10
  2. By: Juan Gabriel Rodríguez (Universidad Rey Juan Carlos de Madrid e Instituto de Estudios Fiscales)
    Abstract: This paper analyzes the relationship between polarization and inequality, welfare and poverty measures. First, the Wolfson polarization measure is generalized in terms of the between-groups and within-groups Gini components for income groups separated by any z income value. Second, it is shown that polarization is the difference between the welfare levels of rich and poor income groups when feelings of identification between individuals are based on their utility functions. Third, the proposed polarization measure is a function of the Sen poverty index, its extension due to Shorrocks (1995) and the normalized poverty deficit index when the z income value represents the poverty line. In addition, these results are linked to the Esteban and Ray (1994) and Esteban et al. (1999) polarization measures.
    Keywords: polarization, inequality, welfare, poverty.
    JEL: D39 D63 H30
    Date: 2004
  3. By: Eftichios S. Sartzetakis (University of Macedonia (Greece)and University College of the Cariboo)
    Abstract: This paper develops a simple model of the automobile market, in which significant network and environmental externalities are present, and examines consumers' choice of technology. There are two types of technology: one that currently dominates the market but imposes significant environmental costs, and one that is expected to be introduced and has zero environmental costs. We find that, in the absence of policy intervention, the benefits of the installed base and the price diferentials in favour of the existing technology will deter new users from adopting the clean technology. We consider diferent tax policies that will induce adoption provided it is welfare warranted. First, we analyze a tax policy on the dirty technology with the tax revenues generated being used for general purposes.Under this case, we find that the tax, to induce adoption, will be greater than the marginal environmental damage. Second, we consider the tax revenue generated from the dirty technology to be earmarked towards a future subsidy to the clean technology. In this case, the tax is found to be lower than the case where revenues are used for general purposes and more interesting is the fact that the tax can be set equal to the marginal damage. Finally, we examine the case where the government credibly commits a revenue neutral tax/subsidy policy prior to the introduction of the clean technology and we find that the tax and the subsidy expenditures required could be lower relative to the case without precommitment.
    Date: 2004
  4. By: Ruslan Lukach; Joseph Plasmans; Peter M. Kort
    Abstract: This paper presents a dynamic model of a competitive R&D and production duopoly subject to knowledge spillovers. Two asymmetric firms operate for a limited period of time and dispose their knowledge capital in the end. Both firms and the social planner prefer the R&D-cooperative strategy over the competitive one regardless of the intensity of knowledge spillovers. Accumulation of knowledge capital results allows the monopolist to have lower marginal cost of production and charge a lower market price than a fully competitive duopoly. Being able to define the degree of knowledge exchange when creating a research joint venture, the firms do not necessary choose the highest degree of cooperation available.
    Keywords: innovation, R&D, spillovers, cooperation
    JEL: C72 D21 O31
    Date: 2005
  5. By: Ray Fisman; Shachar Kariv; Daniel Markovits
    Date: 2005–02–10
  6. By: James Andreoni; Yeon-Koo Che; Jinwoo Kim
    Date: 2005–02–10
  7. By: Xavier Gabaix; David Laibson; Guillermo Moloche; Stephen Weinberg
    Date: 2005–02–10
  8. By: Nabil Al-Najjar; Sandeep Baliga; David Besanko
    Date: 2005–02–10
  9. By: Canoy,Marcel; Ours,Jan C. van; Ploeg,Frederick van der (Tilburg University, Center for Economic Research)
    Abstract: The tensions between books and book markets as expressions of culture and books as products in profit-making businesses are analysed and insights from the theory of industrial organisation are given. Governments intervene in the market for books through laws concerning prices of books, grants for authors and publishers, a lower value-added tax, public libraries and education in order to stimulate the diversity of books on offer, increase the density of retail outlets and to promote reading. An overview of the different ways by which countries differ in terms of market structures and government policies is given. Particular attention is paid to retail price maintenance. Due to differences between European countries it is not a good idea to harmonise European book policies. Our analysis suggests that the book market seems quite able to invent solutions to specific problems of the book trade and that, apart from promoting reading, there is little need for government intervention.
    JEL: Z11 D4 D6 L1 L4
    Date: 2005
  10. By: Aitor Ciarreta (Universidad del País Vasco); Mari Paz Espinosa (Universidad del País Vasco)
    Keywords: market power, electricity market
    JEL: L11 L13 L51
    Date: 2005–02–11
  11. By: Schwarze, Johannes (University of Bamberg, DIW Berlin and IZA Bonn); Winkelmann, Rainer (University of Zurich, CEPR and IZA Bonn)
    Abstract: Much progress has been made in recent years on developing and applying a direct measure of utility using survey questions on subjective well-being. In this paper we explore whether this new type of measurement can be fruitfully applied to the study of interdependent utility in general, and altruism between parents and children in particular. We introduce an appropriate econometric methodology and, using data from the German Socio-Economic Panel for the years 2000-2002, find that the parents’ self-reported happiness depends positively, albeit not very strongly, on the happiness of adult children who moved out.
    Keywords: utility function, extended family, fixed effects, ordered probit
    JEL: D6 D64 C25 J10
    Date: 2005–02

This nep-mic issue is ©2005 by Joao Carlos Correia Leitao. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.