nep-mic New Economics Papers
on Microeconomics
Issue of 2010‒06‒04
nineteen papers chosen by
Vaishnavi Srivathsan
Indian Institute of Technology

  1. Vertical bargaining and countervailing power By Alberto Iozzi; Tommaso Valletti
  2. Revealed Unawareness By Schipper, Burkhard
  3. Short-Run Subsidies and Long-Run Adoption of New Health Products: Evidence from a Field Experiment By Pascaline Dupas
  4. Do Google Searches Help in Nowcasting Private Consumption? A Real-Time Evidence for the US By Konstantin A. Kholodilin; Maximilian Podstawski; Boriss Siliverstovs
  5. The disappointment of expectations and the theory of fluctuations By Meacci, Ferdinando
  6. Matching Networks with Bilateral Contracts By Hatfield, John William; Kominers, Scott Duke
  7. Pure Saddle Points and Symmetric Relative Payoff Games By Duersch, Peter; Oechssler, Jorg; Schipper, Burkhard C.
  8. Taking punishment into your own hands: An experiment on the motivation underlying punishment By Duersch, Peter; Müller, Julia
  9. Non-profits Are Seen as Warm and For-Profits as Competent: Firm Stereotypes Matter By Aaker, Jennifer; Vohs, Kathleen D.; Mogilner, Cassie
  10. Does Shelf-Labeling of Organic Foods Increase Sales? Results from a Natural Experiment By Daunfeldt, Sven-Olov; Rudholm, Niklas
  11. Sex Selective Abortions, Fertility and Birth Spacing By Claus C Pörtner
  12. Regulating Altruistic Agents By Anthony Heyes; Sandeep Kapur
  13. The Dixit-Stiglitz-Krugman Trade Model: A Geometric Note By Toru Kikuchi
  14. European Electricity Market Reforms: Any Signs of Efficiency Improvements? By Ziga Zarnic
  15. Consumer Learning and Hybrid Vehicle Adoption By Heutel, Garth; Muehlegger, Erich
  16. The Multiple-partners Assignment Game with Heterogeneous Sells and Multi-unit Demands: Competitive Equilibria By Daniel Jaume; Jordi Massó; Alejandro Neme
  17. Building Sustainable Organizations: The Human Factor By Pfeffer, Jeffrey
  18. Putting Health in all Policies: The National Institute for Welfare Enhancement By Vicente Ortún; Beatriz González López-Valcárcel
  19. The Height Production Function from Birth to Early Adulthood By Elisabetta De Cao

  1. By: Alberto Iozzi (Faculty of Economics, University of Rome "Tor Vergata"); Tommaso Valletti (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: We study the existence of countervailing buyer power in a vertical industry where the input price is set via Nash bargainings between one upstream supplier and many differentiated but competing retailers. In case one bilateral bargaining fails, the supplier still has the ability to sell to the other retailers. We show that the capacity of these other retailers to react in the final market has a dramatic impact on the supplier’s outside options and, ultimately, on input prices and welfare. Under downstream quantity competition, we find either no or opposite support to the hypothesis of countervailing power on input prices, as the retail industry becomes more concentrated. With price competition, we find a case for countervailing power, but its existence depends on the degree of product differentiation and on the ability of competing retailers to react to a disagreement.
    Keywords: Countervailing buyer power, Nash bargaining.
    JEL: L50
    Date: 2010–05–28
  2. By: Schipper, Burkhard (University of California, Davis)
    Abstract: I develop awareness-dependent subjective expected utility by taking unawareness structures introduced in Heifetz, Meier, and Schipper (2006, 2008, 2009) as primitives in the Anscombe-Aumann approach to subjective expected utility. I observe that a decision maker is unaware of an event if and only if her choices reveal that the event is "null" and the negation of the event is "null". Moreover, I characterize "impersonal" expected utility that is behaviorally indistinguishable from awareness-dependent subject expected utility and assigns probability zero to some subsets of states that are not necessarily events. I discuss in what sense impersonal expected utility can not represent unawareness.
    JEL: C70 C72 D80 D82
    Date: 2010–03
  3. By: Pascaline Dupas
    Abstract: This paper is about a field experiment which was designed to estimate the relative importance of competing effects of targeted subsidies for health products. It has been found out that, for a health product with high private returns (an anti malarial bednet), positive experience and social leanings eliminate.
    Keywords: technologyadoption;subsidies;social learning;anchoring
    Date: 2010
  4. By: Konstantin A. Kholodilin (DIW Berlin, Germany); Maximilian Podstawski (Universität Potsdam, Wirtschafts- und Sozialwissen- schaftliche Fakultät, Potsdam, Germany); Boriss Siliverstovs (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: In this paper, we investigate whether the Google search activity can help in nowcasting the year-on-year growth rates of monthly US private consumption using a real-time data set. The Google-based forecasts are compared to those based on a benchmark AR(1) model and the models including the consumer surveys and financial indicators. According to the Diebold-Mariano test of equal predictive ability, the null hypothesis can be rejected suggesting that Google-based forecasts are significantly more accurate than those of the benchmark model. At the same time, the corresponding null hypothesis cannot be rejected for models with consumer surveys and financial variables. Moreover, when we apply the test of superior predictive ability (Hansen, 2005) that controls for possible data-snooping biases, we are able to reject the null hypothesis that the benchmark model is not inferior to any alternative model forecasts. Furthermore, the results of the model confidence set (MCS) procedure (Hansen et al., 2005) suggest that the autoregressive benchmark is not selected into a set of the best forecasting models. Apart from several Google-based models, the MCS contains also some models including survey-based indicators and financial variables. We conclude that Google searches do help improving the nowcasts of the private consumption in US.
    Keywords: Google indicators, real-time nowcasting, principal components, US private consumption.
    JEL: C22 C53 C82
    Date: 2010–04
  5. By: Meacci, Ferdinando
    Abstract: The role of “errors in time” (Fanno, 1933) or “disappointment of expectations” (Hicks, 1933) was a major object of analysis in the years of high theory when it contributed to the replacement of the paradigm of General Equilibrium Theory by the new paradigm of the Economics of Uncertainty and Expectations that took place in those years. The scope of this paper is to re-evaluate this object of analysis in the light of the evolution of the theory of fluctuations to which it belongs. The paper is thus divided in two Parts. Part I provides a unified account of how the leading authors of those years (Keynes, Hayek, Hicks) dealt with expectations and their disappointment in their theory of fluctuations. Part II provides instead a brief account of the major constructions worked out by some leading authors of what is here called the “years of rational expectations”. The paper shows how the focus on errors in time has been replaced in the latter period by a set of assumptions and arguments which either neglect the impact of the disappointment of expectations on macroeconomic disequilibrium or even exclude the very possibility of this disappointment. The paper concludes by highlighting the decreasing scope and relevance of the theory of fluctuations as one moves from the years of high theory to the more recent years of rational expectations.
    Keywords: Expectations; Disappointment; Errors; Fluctuations
    JEL: E32 E2 E1
    Date: 2009–12
  6. By: Hatfield, John William (Stanford University); Kominers, Scott Duke (Harvard University)
    Abstract: We introduce a model in which firms trade goods via bilateral contracts which specify a buyer, a seller, and the terms of the exchange. This setting subsumes (many-to- many) matching with contracts, as well as supply chain matching. When firms' relationships do not exhibit a supply chain structure, stable allocations need not exist. By contrast, in the presence of supply chain structure, a natural substitutability condition characterizes the maximal domain of firm preferences for which stable allocations always exist. Furthermore, the classical lattice structure, rural hospitals theorem, and one-sided strategy-proofness results all generalize to this setting.
    Date: 2010–02
  7. By: Duersch, Peter (University of Heidelberg); Oechssler, Jorg (University of Heidelberg); Schipper, Burkhard C. (University of California, Davis)
    Abstract: It is well known that the rock-paper-scissors game has no pure saddle point. We
    Abstract: show that this holds more generally: A symmetric two-player zero-sum game has
    Abstract: a pure saddle point if and only if it is not a generalized rock-paper-scissors game.
    Abstract: Moreover, we show that every finite symmetric quasiconcave two-player zero-sum
    Abstract: game has a pure saddle point. Further sufficient conditions for existence are provided. We apply our theory to a rich collection of examples by noting that the
    Abstract: class of symmetric two-player zero-sum games coincides with the class of relative
    Abstract: payoff games associated with symmetric two-player games. This allows us to derive
    Abstract: results on the existence of a finite population evolutionary stable strategies.
    JEL: C72 C73
    Date: 2010–02
  8. By: Duersch, Peter; Müller, Julia
    Abstract: In a punishment experiment, we separate the demand for punishment in general from a possible demand to conduct punishment personally. Subjects experience an unfair split of their earnings from a real effort task and have to decide on the punishment of the person who determines the distribution. First, it is established whether the allocator's payoff is reduced and, afterwards, subjects take part in a second price auction for the right to (physically) carry out the act of payoff reduction. This auction only resolves who will punish, not whether punishment takes place, so only subjects with a demand for personal punishment should bid.
    Keywords: personal punishment; real effort task; experiment; auction; desire to win
    JEL: C92
    Date: 2010–05–28
  9. By: Aaker, Jennifer (Stanford University); Vohs, Kathleen D. (University of Minnesota); Mogilner, Cassie (University of Pennsylvania)
    Abstract: Consumers use warmth and competence, two fundamental dimensions that govern social judgments of people, to form perceptions of firms. Three experiments showed that consumers perceive non-profits as being warmer than for-profits, but as less competent. Further, consumers are less willing to buy a product made by a non-profit than a for-profit because of their perceptions that the firm lacks competence. Consequently, when perceived competence of a non-profit is boosted through subtle cues that connote credibility, discrepancies in willingness to buy disappear. In fact, when consumers perceive high levels of competence and warmth, they feel admiration for the firm--which translates to consumers' increased desire to buy. This work highlights the importance of consumer stereotypes about non-profit and for-profit companies that, at baseline, come with opposing advantages and disadvantages but that can be altered.
    Date: 2010–01
  10. By: Daunfeldt, Sven-Olov (The Ratio Institute and Dalarna University); Rudholm, Niklas (The Swedish Retail Institute (HUI) and Dalarna University)
    Abstract: Can a simple point-of-purchase (POP) shelf-label increase sales of organic foods? We use a random-effects, random-coefficients model, including a time adjustment variable, to test data from a natural experiment in a hypermarket in Gävle, Sweden. Our model incorporates both product specific heterogeneity in the effects of labeling and consumer adjustment to the labels over time. The introduction of POP displays was found to lead to an increase in sales of organic coffee and olive oil, but a reduction in sales of organic flour. All targeted products became less price-sensitive. The results reveal that product specific heterogeneity has to be accounted for, and in some cases consumers adjusted to labeling over time.
    Keywords: Product labeling; random coefficient models; ecological products; experimental economics
    JEL: L66 L81 M31 M37
    Date: 2010–05–26
  11. By: Claus C Pörtner (University of Washington)
    Abstract: This paper presents a novel approach to estimating the determinants of sex selective abortions, using individual level data on fertility, birth spacing and birth outcomes. The decisions on fertility, abortions and birth spacing are closely related but have received little empirical attention. Theory predicts that lower fertility leads to more sex selective abortions, but abortions also increase the space between births and the decision to use sex selection may change with the distance from last birth. Using data from three rounds of the Indian National Family and Health Survey, low fertility women are shown to use sex selective abortions, while households with low cost of children do not. Despite legal efforts to curtail sex selective abortions, use is increasing over time. For women with eight or more years of education, the number of sex selective abortions expected during their childbearing has gone up by six percent from 1985-1994 to 1995-2006 for both urban and rural women. At the same time their predicted fertility has fallen to below replacement level for urban women and only slightly above for rural women. Finally, ignoring birth spacing leads to bias when censoring is important.
    Date: 2010–05
  12. By: Anthony Heyes (Royal Holloway, University of London); Sandeep Kapur (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: Altruism or `regard for others' can encourage self-restraint among generators of negative externalities, thereby mitigating the externality problem. We explore how introducing impure altruism into standard regulatory settings alters regulatory prescriptions. We show that the optimal calibration of both quantitative controls and externality taxes are affected. It also leads to surprising results on the comparative performance of instruments. Under quantity-based regulation welfare is increasing in the propensity for altruism in the population; under price-based regulation the relationship is non-monotonic. Price-based regulation is preferred when the population is either predominantly altruistic or predominantly selfish, quantity-based regulation for cases in between.
    Date: 2010–05
  13. By: Toru Kikuchi (Graduate School of Economics, Kobe University)
    Abstract: In this note, we briefly review the now standard Dixit-Stiglitz-Krugman trade model of monopolistic competition. Furthermore, we propose a convincing graphical exposition that emphasizes the firms' entry-exit process.
    Date: 2010–05
  14. By: Ziga Zarnic
    Abstract: This paper investigates whether European electricity market reforms have induced any changes in rm eciency either through productive, allocative or dynamic eciency improve- ments. In particular, this ex-post analysis looks closely at productivity eects of changing industry structure, ownership structure and regulation with respect to barriers to entry and access to wholesale and retail markets. Based on the European rm-level data for the period 1996-2007, the results indicate sluggish productivity improvements of European electricity rms due to reforms implemented in the last decade. In particular, productivity gains are associated with high-productivity rms close to the technology frontier, while no signicant impact is found for the laggards. Looking from a dynamic perspective, it seems that the clos- est are the rms to the frontier the more they are able to improve productivity in response to liberalization eorts stimulating competition.
    Keywords: EU electricity market reforms; rms; productivity; regulation; TFP
    JEL: F10 L11 L51 L94
    Date: 2010
  15. By: Heutel, Garth (University of North Carolina, Greensboro); Muehlegger, Erich (Harvard University)
    Abstract: We study the diffusion of hybrid vehicles among consumers. Using data on sales of 11 different models over seven years, we identify the effect of the penetration rate--total cumulative hybrid sales per capita--on new hybrid purchases. The penetration rate significantly affects new purchases, and the effect differs by hybrid model. In particular, we find a positive diffusion effect from the Toyota Prius and a negative diffusion effect from the Honda Insight, with elasticities of 0.23 to 0.85 for the Prius and -0.08 to -0.32 for the Insight. This finding is consistent with our model of model-specific learning along with anecdotal evidence that early Insight models were perceived to be of lower quality than Prius models. Higher Insight penetration rates gave a negative signal about hybrid quality and inhibited rather than promoted hybrid adoption. The findings are relevant for policy designed to promote new technologies.
    JEL: D83 O33 Q55
    Date: 2010–04
  16. By: Daniel Jaume; Jordi Massó; Alejandro Neme
    Abstract: A multiple-partners assignment game with heterogeneous sells and multi-unit demands consists of a set of sellers that own a given number of indivisible units of (potentially many different) goods and a set of buyers who value those units and want to buy at most an exogenously fixed number of units. We define a competitive equilibrium for this generalized assignment game and prove its existence by only using linear programming. We show that the set of competitive equilibria (pairs of price vectors and assignments) has a Cartesian product structure: each equilibrium price vector is part of a competitive equilibrium with all equilibrium assignments, and vice versa. We also show that the set of (restricted) equilibrium price vectors has a natural lattice structure and we study how this structure is translated into the set of agents' utilities that are attainable at equilibrium.
    Keywords: Matching, Assignment Game, Indivisible Goods, Competitive Equilibrium, Lattice
    JEL: C78 D78
    Date: 2009–07–26
  17. By: Pfeffer, Jeffrey (Stanford University)
    Abstract: Although most of the research and public pressure concerning sustainability has been focused on the effects of business and organizational activity on the physical environment, companies and their management practices profoundly affect the human and social environment as well. This article briefly reviews the literature on the direct and indirect effects of organizations and their decisions about people on human health and mortality. It then considers some possible explanations for why social sustainability has received relatively short shrift in management writing, and outlines a research agenda for investigating the links between social sustainability and organizational effectiveness as well as the role of ideology in understanding the relative neglect of the human factor in sustainability research.
    Date: 2010–01
  18. By: Vicente Ortún; Beatriz González López-Valcárcel
    Abstract: Welfare is a rather vague term whose meaning depends on ideology, values and judgments. Material resources are just means to enhance people’s well-being, but growth of the Gross Domestic Production is still the standard measure of the success of a society. Fortunately, recent advances in measuring social performance include health, education and other social outcomes. Because “what we measure affects what we do” it is hoped that social policies will change. The movement Health in all policies and its associated Health Impact Assessment methodology will contribute to it. The task consists of designing transversal policies that consider health and other welfare goals, the short term and long-term implications and intergenerational redistributions of resources. As long as marginal productivity on health outside the healthcare system is higher than inside it, efficiency needs cross-sectoral policies. And fairness needs them even more, because in order to reduce social inequalities in health, a wide social and political response is needed. Unless we reduce the well-documented inefficiencies in our current health care systems the welfare states will fail to consolidate and the overall economic wellbeing could be in serious trouble. In this article we sketched some policy solutions such as pricing according to net benefits of innovation and public encouragement of radical innovation besides the small type incremental and market-led innovation. We proposed an independent agency, the National Institute for Welfare Enhancement to guarantee long term fair and efficient social policies in which health plays a central role.
    Keywords: Public health policies; Health Impact Assessment; Welfare; Health in All Policies.
    JEL: I18 D60 H10
    Date: 2010–05
  19. By: Elisabetta De Cao (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: In this paper I specify a height production function in order to study the determinants of height from birth to early adulthood in the Philippines. I use a rich longitudinal data set on Filipino children born in 1983 and followed for more than 20 years. The structure of the production function allows height to be the result of the accumulation of inputs over time. The results show that inputs from conception to birth are relevant at each age of the children. Nutrition inputs have a positive but small effect on the child’s height. The shorter the distance between the age when the nutrition input is applied and the age when height is measured, the higher the impact on height. The younger the child, the bigger the impact. The earlier disease inputs are experienced, the stronger their negative effect on height. The older the child, the stronger the effects of past diseases.
    Date: 2010–05–28

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