Methods for measuring the effect of adjustment policies on income distribution

The effect of adjustment policies on different groups in the population is an important and complex issue. The distributional implications can have a large influence on the sustainability of programs. In particular, there is a need to identify how different groups in society are affected by an adjustment program and how an alternative mix of policies would affect this outcome. This assessment will be useful for developing compensation schemes for those groups that may be negatively affected in the transitional adjustment period, and in generating support for adjustment programs. This paper reviews the methodologies that have been suggested to study the effect of adjustment on distribution and provides examples of each approach. Each method is evaluated and data requirements are described. The review provides a range of approaches to selecta method to apply to a particular country. The paper also reviews recent work on macropolicies and income distribution and provides recommendations and conclusions.Inequality,Achieving Shared Growth,Environmental Economics&Policies,Economic Theory&Research,Health Economics&Finance

Auctions with Financial Externalities

We study sealed-bid auctions with financial externalities, i.e., auctions in which losers' utilities depend on how much the winner pays.In the unique symmetric equilibrium of the first-price sealed-bid auction (FPSB), larger financial externalities result in lower bids and in a lower expected revenue.The unique symmetric equilibrium of the second-price sealed-bid auction (SPSB) reveals ambiguous effects.We further show that a resale market does not have an e¤ect on the equilibrium bids and that FPSB yields a lower expected revenue than SPSB.With a reserve price, we find an equilibrium for FPSB that involves pooling at the reserve price.For SPSB we derive a necessary and sufficient condition for the existence of a weakly separating equilibrium, and give an expression for the equilibrium.Auctions;financial externalities;reserve price;resale market

Auctions with Financial Externalities

We study sealed-bid auctions with financial externalities, i.e., auctions in which losers’ utilities depend on how much the winner pays. In the unique symmetric equilibrium of the first-price sealed-bid auction (FPSB), larger financial externalities result in lower bids and in a lower expected revenue. The unique symmetric equilibrium of the second-price sealed-bid auction (SPSB) reveals ambiguous effects. We further show that a resale market does not have an effect on the equilibrium bids and that FPSB yields a lower expected revenue than SPSB. With a reserve price, we find an equilibrium for FPSB that involves pooling at the reserve price. For SPSB we derive a necessary and sufficient condition for the existence of a weakly separating equilibrium, and give an expression for the equilibrium.Auctions, financial externalities, reserve price, resale market

On the Unique D1 Equilibrium in the Stackelberg Model with Asymmetric Information

This note studies a version of the Stackelberg model in which the Leader has more information about demand than the Follower. We show that there exists a unique D1 equilibrium and that this equilibrium is perfectly revealing. We also give a full characterization of the equilibrium in terms of the posterior beliefs of the Follower and show under which condition there is first mover disadvantage.Separating equilibria;signalling games;Stackelberg competition

Optimal Auctions with Financial Externalities

We construct optimal auctions when bidders face financial externalities.In a Coasean World, in which the seller cannot prevent a perfect resale market, nor withhold the object, the lowest-price all-pay auction is optimal.In a Myersonean World, in which the seller can both prevent resale after the auction, and fully commit to not selling the object, an optimal two-stage mechanism is derived.In the first stage, bidders are asked to pay an entry fee.In the second stage, bidders play the lowest-price all-pay auction with a reserve price.In both worlds, the expected revenue is increasing in the financial externality, and each bidder's expected utility is independent of the financial externality.Optimal auctions;financial externalities;lowest-price allpay auction;Coasean World;Myersonean World

Essays in auction theory

Auction theory is a branch of game theory that considers human behavior in auction markets and the ensuing market outcomes. It is also successfully used as a tool to design real-life auctions. This thesis contains five essays addressing a variety of topics within the realm of auction theory. The first essay gives an easily accessible overview of the most important insights of auction theory. The second essay, motivated by the UMTS-auctions that took place in Europe, studies auctions in which, in contrast to standard auction theory, losing bidders benefit from a high price paid by the winner(s). Under this assumption, the first-price sealed-bid auction and the second-price sealed-bid auction are no longer revenue equivalent. The third essay analyzes how well different kinds of auctions are able to raise money for charity. It turns out that standard winner-pay auctions are inept fund-raising mechanisms because of the positive externality bidders forgo if they top another’s high bid. As this problem does not occur in all-pay auctions, where bidders pay irrespective of whether they win or lose, all-pay auctions are more effective in raising money. The fourth essay studies a particular auction type, a so-called simultaneous pooled auction with multiple bids and preference lists, that has been used for example in the Netherlands and Ireland to auction available spectrum. The results in this essay show that this type of auction does not satisfy elementary desirable properties such as the existence of an efficient equilibrium. The fifth essay argues that inefficient auction outcomes due to strong negative (informational) externalities (created by post-auction interactions) can be avoided by asking bidders prior to the auction to submit any publicly observable payment they would like to make.

Optimal Auctions with Financial Externalities

We construct optimal auctions when bidders face financial externalities.In a Coasean World, in which the seller cannot prevent a perfect resale market, nor withhold the object, the lowest-price all-pay auction is optimal.In a Myersonean World, in which the seller can both prevent resale after the auction, and fully commit to not selling the object, an optimal two-stage mechanism is derived.In the first stage, bidders are asked to pay an entry fee.In the second stage, bidders play the lowest-price all-pay auction with a reserve price.In both worlds, the expected revenue is increasing in the financial externality, and each bidder's expected utility is independent of the financial externality

How (not) to raise money

We show that standard winner-pay auctions are inept fund-raising mechanisms because of the positive externality bidders forgo if they top another's high bid. Revenues are suppressed as a result and remain finite even when bidders value a dollar donated the same as a dollar kept. This problem does not occur in lotteries and all-pay auctions, where bidders pay irrespective of whether they win. We introduce a general class of all-pay auctions, rank their revenues, and illustrate how they dominate lotteries and winner-pay formats. The optimal fund-raising mechanism is an all-pay auction augmented with an entry fee and reserve price