Multidimensionality and renegotiation : evidence from transport-sector public-private-partnership transactions in Latin America

Multidimensional auctions are a natural and practical solution when auctioneers pursue more than one objective in their public-private-partnership transactions. However, it is difficult to achieve auction efficiency with multiple award criteria. Using auction data from road and railway concessions in Latin America, the probability of renegotiation this paper estimates by a two-stage least squares technique with a binary selection in the first-stage regression. The findings show that auctioneers tend to adopt the multidimensional format when the need for social considerations, such as alleviation of unemployment, is high. This implies that such political considerations could hinder efficiency and transparency in auctions. The analysis also shows that the renegotiation risk in infrastructure concessions increases when multidimensional auctions are used. Rather, good governance, particularly anti-corruption policies, can mitigate the renegotiation problem.Transport Economics Policy&Planning,Debt Markets,Infrastructure Economics,E-Business,Emerging Markets

Country Risk Ratings of Small Island Tourism Economies

Over the last twenty years, there has been a growing fascination within public and academic circles about the livelihood of islands with small populations and territory which are present in each of the world’s great oceans. The Small Island Tourism Economies analysed in this paper vary profoundly in their size, land area, and location. Moreover, they have depended heavily on financial aid from their former colonists for infrastructure development, which has declined dramatically since the collapse of Communism. These economies also differ in their narrow natural resource bases on land and in water, in their prospects for self reliance in economic development, and their overwhelming reliance on tourism as a source of exports. These economies are developing countries which need a consistent inflow of foreign direct investment to maintain economic growth. Such sovereign island economies differ in the extent to which they are home to a multitude of ethnic diversity, political systems, historical experience, economic and environmental vulnerability, ecological fragility, the types of risks facing private investors, and in the extent to which they are perceived as, or perceive themselves to be, insular and peripheral. In spite of the vast diversity as well as similarities, researchers are fascinated by the world of small island economies, and are intrigued by their unique features which cannot be addressed through a generalised set of rules. This paper analyses the geographical, historical, economic, tourism-oriented and institutional characteristics, as well as vulnerability to changes in the international economic, financial and political climates, of twenty Small Island Tourism Economies. The snapshot images provide a comparative assessment of the international country risk ratings, and highlight the importance of economic, financial and political risk ratings as components of a composite risk rating for Small Island Tourism Economies.Small size, Tourism, Volatility, Vulnerability, Country risk ratings, Economic risk, Financial risk, Political risk, Composite risk

Optimal Soil Management and Environmental Policy

This paper studies the effects of environmental policy on the farmer’s soil optimal management. We consider a dynamic economic model of soil erosion where the intensity use of inputs allows the farmer to control soil losses. Therefore, inputs use induces a pollution which is accentuated by the soil fragility. We show, at the steady state, that the environmental tax induces a more conservative farmer behavior for soil, but in some cases it can exacerbate pollution. These effects can be moderated when farmers introduce abatement activity.Soil erosion, Pollution, Environmental policy, Optimal soil conservation, Abatement activities

Mechanism Design with Set-Theoretic Beliefs

In settings of incomplete information, we put forward (1) a very conservative -- indeed, purely set-theoretic -- model of the beliefs (including totally wrong ones) that each player may have about the payoff types of his opponents, and (2) a new and robust solution concept, based on mutual belief of rationality, capable of leveraging such conservative beliefs. We exemplify the applicability of our new approach for single-good auctions, by showing that, under our solution concept, a normal-form, simple, and deterministic mechanism guarantees -- up to an arbitrarily small, additive constant -- a revenue benchmark that is always greater than or equal to the second-highest valuation, and sometimes much greater. By contrast, we also prove that the same benchmark cannot even be approximated within any positive factor, under classical solution concepts.United States. Office of Naval Research (Grant number N00014-09-1-0597

Optimal two-object auctions with synergies.

We design the revenue-maximizing auction for two goods when each buyer has bi-dimensional private information and a superadditive utility function (i.e., a synergy is generated if a buyer wins both goods). In this setting the seller is likely to allocate the goods inefficiently with respect to an environ-ment with no synergies. In particular, if the synergy is large then it may occur that a buyer’s valuations for the goods weakly dominate the valuations of another buyer and the latter one receives the bundle. We link this fact, which contrasts with the results for a setting without synergies, to "non-regular" one-good models.Multiple-unit Auctions; Multi-dimensional Screening; Bundling

Coordinating Development: Can Income-based Incentive Schemes Eliminate Pareto Inferior Equilibria?

Individuals’ inability to coordinate investment may significantly constrain economic development. In this paper we study a simple investment game characterized by multiple equilibria and ask whether an income-based incentive scheme can uniquely implement the high investment outcome. A general property of this game is the presence of a crossover investment point at which an individual’s incomes from investment and non-investment are equal. We show that arbitrarily small errors in the government’s knowledge of this crossover point can prevent unique implementation of the high investment outcome. We conclude that informational requirements are likely to severely limit a government’s ability to use income-based incentive schemes as a coordination device.Coordination, Public Policy, Income Taxation, Implementation

Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust

A well-known result by Vega-Redondo implies that in symmetric Cournot oligopoly, imitation leads to the Walrasian outcome where price equals marginal cost. In this paper we show that this result is not robust to the slightest asymmetry in fixed costs. Instead of obtaining the Walrasian outcome as unique prediction, every outcome where agents choose identical actions will be played some fraction of the time in the long run. We then conduct experiments to check this fragility. We obtain that, contrary to the theoretical prediction, the Walrasian outcome is still a good predictor of behavior.

The Stability of the Adjusted and Unadjusted Environmental Kuznets Curve

In our paper, we test the stability of the unadjusted and adjusted Environmental Kuznets Curve (EKC). Our results provide evidence in favour of the significance of the adjusted EKC hypothesis in which the impact of per capita GDP on the intensity of CO2 emissions is evaluated conditionally to the effects of the energy-supply infrastructure and of additional socio-demographic variables. In this framework, the GDP-CO2 relationship appears robust to the inclusion of additional regressors and to changes in the estimation period and intervalSustainable development, Kuznets curve, CO2 emissions