Efficient Delegation by an Informed Principal

Consider the case of a firm with private valuation information bargaining with a supplier over the price and quantity of a good. If the firm and the supplier bargain directly, the bargaining outcome may not yield a first-best outcome due to the presence of information rents. The question we examine in this paper is whether these direct bargaining inefficiencies can be eliminated if the firm delegates the authority to negotiate with the supplier to an agent. We model the agent as an independent profit center that contracts with the parent firm as well as the supplier. The delegation of decision-making to the agent can influence the interaction between the firm and the supplier by altering the information rents the agent can claim from the supplier. To identify the role of delegation, we focus instead on two games. Both games have a continuum of equilibria, which we compare to the set of incentive efficient equilibria of the initial no-delegation bargaining game. The first game involves partial delegation as the firm controls the release of its private information through a public transfer price charged to the agent. Because the relationship between the agent and the uninformed supplier is one of full information, the unique equilibrium quantity is first-best yet we show that the informed firm still earns an information rent. The second game involves full delegation as the agent controls both the quantity choice and the release of the firm's private information. We show that the full delegation game has a large set of equilibria that includes all of the incentive efficient equilibria of the bargaining game as well as inefficient equilibria. We believe our notion of partial delegation can be reflected in firms organized as profit centers and the management practice of category managementDelegation, common agency

A Dynamic Two Country Heckscher-Ohlin Model with Non-Homothetic Preferences

We examine the properties of a two country dynamic Heckscher-Ohlin model that allows for preferences to be non-homothetic. We show that the model has a continuum of steady state equilibria under free trade, with the initial conditions determining which equilibrium will be attained. We establish conditions under which a static Heckscher-Ohlin theorem will hold in the steady state, and also conditions for a dynamic H-O theorem to hold. If both goods are normal, each country will have a unique autarkic steady state, and all steady state equilibria are saddle points. We also consider the case in which one good is inferior, and show that this can lead to multiple autarkic steady states, violations of the static H-O theorem in the steady state. Furthermore, there may exist steady state equilibria that Pareto dominate other steady states. These steady states will be unstable if discount factors are the same in each country, although they may exhibit dynamic indeterminacy if discount factors differ.two-country model, Heckscher-Ohlin, inferior good, multiple equilibria, indeterminacy

A general two-sector model of endogenous growth with human and physical capital: balanced growth and transitional dynamics

Economic development ; Human capital

Transportation infrastructure investments and regional trade liberalization

The author examines whether trade liberalization should create a greater incentive for countries to invest in transportation infrastructure. He pays special attention to the case of preferential trade liberalization between neighboring countries, where investments in roads or railroads are specific to the partner country and will thus have spillover effects. The existence of spillovers will lead to gains from cooperative agreements about investment levels. The author shows that in a small country the incentive to invest in infrastructure depends on the level of the tariff when demand is linear. If protection is in the form of a quota, on the other hand, trade liberalization will increase the optimal infrastructure investment. He shows that in a two-country model with spillovers between countries, the cooperative equilibrium may involve either more or less investment than the noncooperative equilibrium, depending on the pattern of trade between the two countries and the degree of substitutability between investments in the two countries. For a relatively small country, for example, there would be more underinvestment in railroad and highway infrastructure to neighboring countries than there would be in airport and harbor infrastructure. The first type of investment is specific to certain markets and is likely to affect the relative price of goods in those markets. The second type of investment, on the other hand, will send goods to world markets generally, where prices are likely to be relatively unaffected by the investments. The author examines the desirability of linking regional trade and infrastructure agreements. The prediction generated by his model is that in the absence of cooperative agreements between countries, there will be underinvestment in those forms of transportation in which the investments will have spillover effects to other countries. The author identifies two forms of gains from infrastructure agreements: internalizing the terms-of-trade effects and thus avoiding the inefficient investment levels that arise in noncooperative choices of investment levels; and internalizing the effects of the infrastructure investment in the tariff negotiations process, in cases where countries cannot commit to future tariff rates.Transport Economics Policy&Planning,Economic Theory&Research,Decentralization,Environmental Economics&Policies,Payment Systems&Infrastructure,Transport Economics Policy&Planning,Trade and Regional Integration,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research

A general two sector model of endogenous growth with human and physical capital

Human capital

Primordial helium recombination III: Thomson scattering, isotope shifts, and cumulative results

Upcoming precision measurements of the temperature anisotropy of the cosmic microwave background (CMB) at high multipoles will need to be complemented by a more complete understanding of recombination, which determines the damping of anisotropies on these scales. This is the third in a series of papers describing an accurate theory of HeI and HeII recombination. Here we describe the effect of Thomson scattering, the $^3$He isotope shift, the contribution of rare decays, collisional processes, and peculiar motion. These effects are found to be negligible: Thomson and $^3$He scattering modify the free electron fraction $x_e$ at the level of several $\times 10^{-4}$. The uncertainty in the $2^3P^o-1^1S$ rate is significant, and for conservative estimates gives uncertainties in $x_e$ of order $10^{-3}$. We describe several convergence tests for the atomic level code and its inputs, derive an overall $C_\ell$ error budget, and relate shifts in $x_e(z)$ to the changes in $C_\ell$, which are at the level of 0.5% at $\ell =3000$. Finally, we summarize the main corrections developed thus far. The remaining uncertainty from known effects is $\sim 0.3$ in $x_e$.Comment: 19 pages, 15 figures, to be submitted to PR

Primordial helium recombination. I. Feedback, line transfer, and continuum opacity

Precision measurements of the cosmic microwave background temperature anisotropy on scales ℓ>500 will be available in the near future. Successful interpretation of these data is dependent on a detailed understanding of the damping tail and cosmological recombination of both hydrogen and helium. This paper and two companion papers are devoted to a precise calculation of helium recombination. We discuss several aspects of the standard recombination picture, and then include feedback, radiative transfer in He i lines with partial redistribution, and continuum opacity from H i photoionization. In agreement with past calculations, we find that He ii recombination proceeds in Saha equilibrium, whereas He i recombination is delayed relative to Saha due to the low rates connecting excited states of He i to the ground state. However, we find that at z<2200 the continuum absorption by the rapidly increasing H i population becomes effective at destroying photons in the He i 21Po-11S line, causing He i recombination to finish around z≃1800, much earlier than previously estimated

On the Nature of Small Planets around the Coolest Kepler Stars

We constrain the densities of Earth- to Neptune-size planets around very cool (Te =3660-4660K) Kepler stars by comparing 1202 Keck/HIRES radial velocity measurements of 150 nearby stars to a model based on Kepler candidate planet radii and a power-law mass-radius relation. Our analysis is based on the presumption that the planet populations around the two sets of stars are the same. The model can reproduce the observed distribution of radial velocity variation over a range of parameter values, but, for the expected level of Doppler systematic error, the highest Kolmogorov-Smirnov probabilities occur for a power-law index alpha ~ 4, indicating that rocky-metal planets dominate the planet population in this size range. A single population of gas-rich, low-density planets with alpha = 2 is ruled out unless our Doppler errors are >= 5m/s, i.e., much larger than expected based on observations and stellar chromospheric emission. If small planets are a mix of gamma rocky planets (alpha = 3.85) and 1-gamma gas-rich planets (alpha = 2), then gamma > 0.5 unless Doppler errors are >=4 m/s. Our comparison also suggests that Kepler's detection efficiency relative to ideal calculations is less than unity. One possible source of incompleteness is target stars that are misclassified subgiants or giants, for which the transits of small planets would be impossible to detect. Our results are robust to systematic effects, and plausible errors in the estimated radii of Kepler stars have only moderate impact.Comment: Accepted to the Astrophysical Journa