Computing Equilibrium in Matching Markets

Market equilibria of matching markets offer an intuitive and fair solution for matching problems without money with agents who have preferences over the items. Such a matching market can be viewed as a variation of Fisher market, albeit with rather peculiar preferences of agents. These preferences can be described by piece-wise linear concave (PLC) functions, which however, are not separable (due to each agent only asking for one item), are not monotone, and do not satisfy the gross substitute property-- increase in price of an item can result in increased demand for the item. Devanur and Kannan in FOCS 08 showed that market clearing prices can be found in polynomial time in markets with fixed number of items and general PLC preferences. They also consider Fischer markets with fixed number of agents (instead of fixed number of items), and give a polynomial time algorithm for this case if preferences are separable functions of the items, in addition to being PLC functions. Our main result is a polynomial time algorithm for finding market clearing prices in matching markets with fixed number of different agent preferences, despite that the utility corresponding to matching markets is not separable. We also give a simpler algorithm for the case of matching markets with fixed number of different items

Online pricing for multi-type of Items

LNCS v. 7285 entitled: Frontiers in algorithmics and algorithmic aspects in information and management: joint international conference, FAW-AAIM 2012 ... proceedingsIn this paper, we study the problem of online pricing for bundles of items. Given a seller with k types of items, m of each, a sequence of users {u 1, u 2, ...} arrives one by one. Each user is single-minded, i.e., each user is interested only in a particular bundle of items. The seller must set the price and assign some amount of bundles to each user upon his/her arrival. Bundles can be sold fractionally. Each u i has his/her value function v i (·) such that v i (x) is the highest unit price u i is willing to pay for x bundles. The objective is to maximize the revenue of the seller by setting the price and amount of bundles for each user. In this paper, we first show that the lower bound of the competitive ratio for this problem is Ω(logh + logk), where h is the highest unit price to be paid among all users. We then give a deterministic online algorithm, Pricing, whose competitive ratio is O (√k·log h log k). When k = 1 the lower and upper bounds asymptotically match the optimal result O(logh). © 2012 Springer-Verlag.postprin

Estimated Open Economy New Keynesian Phillips Curves for the G7

In this paper we develop an open economy model of firms' pricing behaviour under imperfect competition. This allows us to introduce various terms of trade effects influencing the firm's pricing decision, in addition to labour costs which dominate most closed-economy specifications of the New Keynesian Phillips (NKPC) curve. Our analysis gives rise to a hybrid open economy NKPC which nests existing closed and open economy specifications adopted in empirical work. We estimate this specification for the G7 economies and find that the US, UK and Canada typically enjoy less inertia in price setting than the European G7 economies and Japan and that these estimates are both plausible and in line with survey evidence. We also find that the proportion of firms which use simple backward-looking rules of thumb in price setting is greater when the frequency of price change is smaller. Finally there is evidence of significant asymmetries in price setting amongst EMU members.

Ramsey, Pigou, heterogenous agents, and non-atmospheric consumption externalities

This paper analyzes the effects of non-atmospheric consumption externalities on optimal commodity taxation and on the social cost and optimal levels of public good provision. A negative consumption externality, by lowering the social cost of public good provision, may require the second-best level of public good provision to exceed the first-best level. If those households who are most important for building up the consumption reference level respond the least to commodity taxation, heterogeneity may imply an equity-efficiency tradeoff. This tradeoff is present only if the consumption externality is of the non-atmospheric type.consumption externality, optimal commodity taxation, Pigou, public good provision, Ramsey rule

Net energy analysis in a Ramsey-Hotelling growth model

This article presents a dynamic growth model with energy as an input in the production function. The available stock of energy resources is ordered by a quality parameter based on energy accounting: the “Energy Return on Energy Invested” (EROI). To our knowledge this is the first paper where EROI fits in a neoclassical growth model (with individual utility maximization and market equilibrium), setting the economic use of “net energy analysis” on firmer theoretical ground. All necessary concepts to link neoclassical economics and EROI are discussed before their use in the model, and a comparative static analysis of the steady states of a simplified version of the model is presentedEste artículo presenta un modelo de crecimiento dinámico con la energía como un input en la función de producción. El stock de recursos energéticos disponibles se ordena por un parámetro de calidad basado en la contabilidad energética: la tasa de retorno energético (TRE). Por lo que sabemos esta es la primera vez que la TRE encaja en modelo de crecimiento neoclásico (con maximización individual de la utilidad y equilibrio de mercado) estableciendo así el uso del “análisis de rendimiento energético" sobre una base teórica más firme. Todos los conceptos necesarios para enlazar la economía neoclásica con la TRE se discuten antes de ser usados en el modelo, y se presenta un análisis comparativo del estado estacionario de una versión simplificada del model

Valuing biodiversity and ecosystem services: why linking economic values with Nature?

The evaluation of ecosystems and biodiversity has become an important field of inquiry for economists. Although this development has been largely motivated by the search for arguments in favour of more ambitious conservation policies, both the methods and the meaning of the results continue to be controversial. This article aims to clarify the interests and limitations of this works, by revisiting a number of issues, such as the economic qualification of the services that human societies take from nature, the specificities of their contribution to human well-being, or the consequences of a valuation of biodiversity based on ecosystem services. We conclude with a discussion of the purposes of evaluations: improving public policies or creating new markets?

The dynamics of hours worked and technology

We study the relationship between hours worked and technology during the postwar period in the US. We show that the responses of hours to technological improvements have increased over time, and that the patterns captured by the SVAR are consistent with those obtained from an RBC model with a less than unitary elasticity of substitution between capital and labor. Data supports the hypothesis that the observed changes in the response of hours to a technology shock are attributable to changes in the magnitude of the degree of capital-labor substitution ..En este artículo estudiamos la relación entre horas trabajadas y progreso técnico durante el período de postguerra en los Estados Unidos. Mostramos que la respuesta de las horas a mejoras tecnológicas ha aumentado a lo largo del tiempo y que los patrones capturados por un modelo SVAR son coherentes con los obtenidos por un modelo de ciclos reales con una elasticidad de sustitución entre capital y trabajo menor que 1. Los datos apoyan la hipótesis de que el cambio observado en la respuesta de las horas a mejoras tecnológicas es debido a cambios en la magnitud de la elasticidad de sustitución $\sigma$. Nuestro argumento es que la variación de $\sigma$ puede haber surgido por cambios en la composición estructural de los sectores de actividad económica o, de modo equivalente, la composición de los factores de producción en una función de producción con inputs heterogéneos, o bien por sesgos en la dirección del cambio técnic

The Economic Impact of the South-North Water Transfer Project in China: A Computable General Equilibrium Analysis

Water resources are unevenly spread in China. Especially the basins of the Yellow, Hui and Hai rivers in the North are rather dry. To increase the supply of water in these basins, the South-to-North Water Transfer project (SNWT) was launched. Using a computable general equilibrium model this study estimates the impact of the project on the economy of China and the rest of the world. We contrast three alternative groups of scenarios. All are directly concerned with the South-to-North water transfer project to increase water supply. In the first group of scenarios additional supply implies productivity gains. We call it the “non-market” solution. The second group of scenarios is called “market solution”. The market price for water adjusts such that supply and demand are equated again. In the third group of simulations the economic implications of China’s capital investment in infrastructure for the water South-North water transfer project is analyzed. Finally, the investment is combined with the increased capacity of water. If an increase in water supply in China leads to an increase in productivity of their water-intensive goods and services (non-market solution) this would result in a huge positive welfare effect from increased production and export. The effect on China’s welfare would still be positive, if a market for water would exist (market solution), but the world as a whole would lose. The negative effect for the rest of the world is largely explained by a deterioration of its terms-of-trade. Well functioning water markets in China are unlikely to exist.Computable General Equilibrium, South-North Water Transfer Project, Water Policy, Water Scarcity

Market Design, Human Behavior, and Management

We review past research and discuss future directions on how the vibrant research areas of market design and behavioral economics have influenced and will continue to impact the science and practice of management in both the private and public sectors. Using examples from various auction markets, reputation and feedback systems in online markets, matching markets in education, and labor markets, we demonstrate that combining market design theory, behavioral insights, and experimental methods can lead to fruitful implementation of superior market designs in practice