S. N. Afriat
- Published in print:
- 1987
- Published Online:
- November 2003
- ISBN:
- 9780198284611
- eISBN:
- 9780191595844
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198284616.003.0012
- Subject:
- Economics and Finance, Microeconomics
This is the last of six chapters in Part II about demand and utility cost, a typical area for what is understood as choice theory, and discusses efficiency and inefficiency. Economic theory ...
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This is the last of six chapters in Part II about demand and utility cost, a typical area for what is understood as choice theory, and discusses efficiency and inefficiency. Economic theory represents consumers or producers as perfectly efficient, according to various criteria, but in experience, inefficiencies of every kind abound. Models should incorporate this phenomenon, and this chapter investigates some ways of doing that, first for consumers and then for producers. There is also a development of questions about efficiency measurement. The four sections of the chapter are: consumer inefficiency; attainable efficiencies; utility approximation; and production efficiency.Less
This is the last of six chapters in Part II about demand and utility cost, a typical area for what is understood as choice theory, and discusses efficiency and inefficiency. Economic theory represents consumers or producers as perfectly efficient, according to various criteria, but in experience, inefficiencies of every kind abound. Models should incorporate this phenomenon, and this chapter investigates some ways of doing that, first for consumers and then for producers. There is also a development of questions about efficiency measurement. The four sections of the chapter are: consumer inefficiency; attainable efficiencies; utility approximation; and production efficiency.
Tony Prosser
- Published in print:
- 2005
- Published Online:
- March 2012
- ISBN:
- 9780199266692
- eISBN:
- 9780191699153
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199266692.001.0001
- Subject:
- Law, Competition Law, EU Law
To what extent should public services (for example public utilities such as telecommunications, energy, public transport, and postal services) be subject to ordinary competition law? This question ...
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To what extent should public services (for example public utilities such as telecommunications, energy, public transport, and postal services) be subject to ordinary competition law? This question has assumed great importance in the context of the activities of the European Union. On the one hand, it is argued (particularly in France) that competition law is a threat to the values of public services that underlie their distinctive objectives. On the other, the ‘Anglo-Saxon’ argument is that protecting public services from competition gives them an unfairly protected position and can mask their inefficiencies. This book examines the philosophical, political, economic, and social principles involved. It contrasts the mainly economic and utilitarian justifications for the use of competition law, with rights- and citizenship-based arguments for the special treatment of public services, and examines the varied conceptions of the differing traditions in the UK, France, and Italy. The book then considers the developing European law in this area. It examines decisions of the European Court of Justice, considers the development of the concept of ‘services of general interest’ by the Commission, and reviews the liberalization process in telecommunications, energy, and postal services. It also provides a detailed case-study of public service broadcasting. The book concludes by drawing general principles from the debates about the extent to which public services merit distinctive treatment and the extent to which competition law must be amended or limited to respect their distinctive roles.Less
To what extent should public services (for example public utilities such as telecommunications, energy, public transport, and postal services) be subject to ordinary competition law? This question has assumed great importance in the context of the activities of the European Union. On the one hand, it is argued (particularly in France) that competition law is a threat to the values of public services that underlie their distinctive objectives. On the other, the ‘Anglo-Saxon’ argument is that protecting public services from competition gives them an unfairly protected position and can mask their inefficiencies. This book examines the philosophical, political, economic, and social principles involved. It contrasts the mainly economic and utilitarian justifications for the use of competition law, with rights- and citizenship-based arguments for the special treatment of public services, and examines the varied conceptions of the differing traditions in the UK, France, and Italy. The book then considers the developing European law in this area. It examines decisions of the European Court of Justice, considers the development of the concept of ‘services of general interest’ by the Commission, and reviews the liberalization process in telecommunications, energy, and postal services. It also provides a detailed case-study of public service broadcasting. The book concludes by drawing general principles from the debates about the extent to which public services merit distinctive treatment and the extent to which competition law must be amended or limited to respect their distinctive roles.
A. S. Morrison
- Published in print:
- 2008
- Published Online:
- January 2009
- ISBN:
- 9780199547371
- eISBN:
- 9780191720710
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199547371.003.0009
- Subject:
- History, Asian History
Despite their military and technological superiority, the Russians were far from all-powerful in Turkestan, owing to lack of trained personnel, finance, and, perhaps most importantly, knowledge. ...
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Despite their military and technological superiority, the Russians were far from all-powerful in Turkestan, owing to lack of trained personnel, finance, and, perhaps most importantly, knowledge. Their paranoid fear of Islamic rebellion led to considerable administrative inertia, and the colonial regime was characterized by corruption, inefficiency, and a failure to modernize and reform. Although local clerical and aristocratic elites lost some of their power and significance, urban, mercantile, and village elites exploited Russian power for their own purposes, and controlled important elements of the administration. However, compared with India the regime was not particularly violent, and taxed very lightly, not least because, unlike their counterparts in India, Turkestan's peasants did not have to finance Imperial defence. Russian rule brought about a number of changes, but many were quite superficial, and few were on the rulers' terms.Less
Despite their military and technological superiority, the Russians were far from all-powerful in Turkestan, owing to lack of trained personnel, finance, and, perhaps most importantly, knowledge. Their paranoid fear of Islamic rebellion led to considerable administrative inertia, and the colonial regime was characterized by corruption, inefficiency, and a failure to modernize and reform. Although local clerical and aristocratic elites lost some of their power and significance, urban, mercantile, and village elites exploited Russian power for their own purposes, and controlled important elements of the administration. However, compared with India the regime was not particularly violent, and taxed very lightly, not least because, unlike their counterparts in India, Turkestan's peasants did not have to finance Imperial defence. Russian rule brought about a number of changes, but many were quite superficial, and few were on the rulers' terms.
John Landers
- Published in print:
- 2005
- Published Online:
- January 2010
- ISBN:
- 9780199279579
- eISBN:
- 9780191719448
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199279579.001.0001
- Subject:
- History, Social History, Economic History
This book offers a new approach to the pre-industrial past in Europe and the Mediterranean basin from the Roman Republic to the fall of Napoleon. It takes as its starting point E. A. Wrigley’s ...
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This book offers a new approach to the pre-industrial past in Europe and the Mediterranean basin from the Roman Republic to the fall of Napoleon. It takes as its starting point E. A. Wrigley’s concept of ‘organic economies’ and their reliance on the land for energy and raw materials. It first considers the constraints on productivity, transportation, and the spatial organization of the economy. The second section analyses the constraints imposed by military technology and by the organic economy on the tactical, operational, and strategic use of armed force, and the consequences of the spread of firearms in recorded history’s first energy revolution. This is followed by an analysis of the military and economic constraints on the political integration of space through the formation of geographically extensive political units. The volume concludes with the demographic and economic consequences of the investment of manpower and resources in war. This volume also considers why so much potential or organic economies to support economic and political development remained unrealized. Endemic mass poverty curtailed demand, limiting incentives for investment and innovation, and keeping output growth below what was technologically possible. Resource shortages prevented rulers from establishing a fiscal apparatus capable of appropriating such resources as were physically available. But economic inefficiency also created under-utilized resources that could potentially be mobilized in pursuit of political power. The volume gives an innovative account of this potential — and why it was realized in the ancient world rather than the medieval west — together with a new analysis of the gunpowder revolution and the inability of rulers to meet the consequential costs within the confines of an organic economy.Less
This book offers a new approach to the pre-industrial past in Europe and the Mediterranean basin from the Roman Republic to the fall of Napoleon. It takes as its starting point E. A. Wrigley’s concept of ‘organic economies’ and their reliance on the land for energy and raw materials. It first considers the constraints on productivity, transportation, and the spatial organization of the economy. The second section analyses the constraints imposed by military technology and by the organic economy on the tactical, operational, and strategic use of armed force, and the consequences of the spread of firearms in recorded history’s first energy revolution. This is followed by an analysis of the military and economic constraints on the political integration of space through the formation of geographically extensive political units. The volume concludes with the demographic and economic consequences of the investment of manpower and resources in war. This volume also considers why so much potential or organic economies to support economic and political development remained unrealized. Endemic mass poverty curtailed demand, limiting incentives for investment and innovation, and keeping output growth below what was technologically possible. Resource shortages prevented rulers from establishing a fiscal apparatus capable of appropriating such resources as were physically available. But economic inefficiency also created under-utilized resources that could potentially be mobilized in pursuit of political power. The volume gives an innovative account of this potential — and why it was realized in the ancient world rather than the medieval west — together with a new analysis of the gunpowder revolution and the inability of rulers to meet the consequential costs within the confines of an organic economy.
KEITH JEFFERY
- Published in print:
- 2008
- Published Online:
- January 2010
- ISBN:
- 9780199239672
- eISBN:
- 9780191719493
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199239672.003.0004
- Subject:
- History, Military History
Henry Wilson was clearly a rising star and returned from South Africa with a greatly enhanced reputation. Enjoying the patronage of Lord Roberts, he was stimulatingly ensconced in the War Office, ...
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Henry Wilson was clearly a rising star and returned from South Africa with a greatly enhanced reputation. Enjoying the patronage of Lord Roberts, he was stimulatingly ensconced in the War Office, right at the centre of things. He spent his first nine months working as Ian Hamilton's assistant on honours and rewards for service in South Africa, work which included preparing individual citations where soldiers were ‘mentioned in despatches’ and drawing up lengthy lists of medal-winners. It was a potential poisoned chalice. In a profession (and, indeed, society) so minutely hierarchical, army careers could be made or broken by the gaining — or not — of medals and distinctions. This chapter discusses Wilson's responsibilities in the War Office of Ireland, his frustration with the office's inefficiencies, and his role in the campaign for army reform in the country.Less
Henry Wilson was clearly a rising star and returned from South Africa with a greatly enhanced reputation. Enjoying the patronage of Lord Roberts, he was stimulatingly ensconced in the War Office, right at the centre of things. He spent his first nine months working as Ian Hamilton's assistant on honours and rewards for service in South Africa, work which included preparing individual citations where soldiers were ‘mentioned in despatches’ and drawing up lengthy lists of medal-winners. It was a potential poisoned chalice. In a profession (and, indeed, society) so minutely hierarchical, army careers could be made or broken by the gaining — or not — of medals and distinctions. This chapter discusses Wilson's responsibilities in the War Office of Ireland, his frustration with the office's inefficiencies, and his role in the campaign for army reform in the country.
P. Nikiforos Diamandouros, Richard Gunther, Dimitri A. Sotiropoulos, and Edward E. Malefakis
- Published in print:
- 2006
- Published Online:
- May 2009
- ISBN:
- 9780199202812
- eISBN:
- 9780191708008
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199202812.003.0001
- Subject:
- Political Science, European Union, Democratization
This chapter presents an overview of the central theme of the book—the overcoming of “Southern European exceptionalism” and approximation over the past four decades of state capacities and public ...
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This chapter presents an overview of the central theme of the book—the overcoming of “Southern European exceptionalism” and approximation over the past four decades of state capacities and public policies typical of other West European democracies—which the chapter hypothesizes is in large measure a product of the interaction among three forces, democratization, socioeconomic modernization, and Europeanization. The chapter presents a historical overview of the nature of Southern European exceptionalism, one aspect of which the chapter calls “state-heavy” characteristics: frequent resort to repression; corporatism and state intervention in the economy; excessive centralization of state power; and heavy reliance on patronage. At the same time, exceptionalism included several “weak-state” features: an inadequate and regressive system of taxation; strong and autonomous local elites; weak civilian control over the military; bureaucratic incompetence (in both civilian and military sectors); inadequate government services; weak legitimacy of the state; and economic inefficiencies that retarded economic development.Less
This chapter presents an overview of the central theme of the book—the overcoming of “Southern European exceptionalism” and approximation over the past four decades of state capacities and public policies typical of other West European democracies—which the chapter hypothesizes is in large measure a product of the interaction among three forces, democratization, socioeconomic modernization, and Europeanization. The chapter presents a historical overview of the nature of Southern European exceptionalism, one aspect of which the chapter calls “state-heavy” characteristics: frequent resort to repression; corporatism and state intervention in the economy; excessive centralization of state power; and heavy reliance on patronage. At the same time, exceptionalism included several “weak-state” features: an inadequate and regressive system of taxation; strong and autonomous local elites; weak civilian control over the military; bureaucratic incompetence (in both civilian and military sectors); inadequate government services; weak legitimacy of the state; and economic inefficiencies that retarded economic development.
Dimitri A. Sotiropoulos
- Published in print:
- 2006
- Published Online:
- May 2009
- ISBN:
- 9780199202812
- eISBN:
- 9780191708008
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199202812.003.0005
- Subject:
- Political Science, European Union, Democratization
Despite variations among Southern European state bureaucracies, there are certain common features of the Southern European bureaucratic model, such as political clientelism at the higher echelons of ...
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Despite variations among Southern European state bureaucracies, there are certain common features of the Southern European bureaucratic model, such as political clientelism at the higher echelons of the bureaucracy and at the entry level; an uneven distribution of resources and infrastructure in the public sector; legal rigidity and excessive legalism; and—with the exception of Spain—lack of an administrative elite. Corruption and inefficiency are also common, but their extent is debatable. During democratic transition and consolidation, Southern European bureaucracies were not “cleansed” from collaborators of the authoritarian regimes. In the period of democratic persistence, most attempts at implementing public management reforms in Southern Europe failed. However, decentralization progressed immensely it Italy and Spain, but hardly in Greece and Portugal. Except for Spain, professionalism was not achieved. Even though extensive politicization persists, the traditional features of South European bureaucracies have started fading.Less
Despite variations among Southern European state bureaucracies, there are certain common features of the Southern European bureaucratic model, such as political clientelism at the higher echelons of the bureaucracy and at the entry level; an uneven distribution of resources and infrastructure in the public sector; legal rigidity and excessive legalism; and—with the exception of Spain—lack of an administrative elite. Corruption and inefficiency are also common, but their extent is debatable. During democratic transition and consolidation, Southern European bureaucracies were not “cleansed” from collaborators of the authoritarian regimes. In the period of democratic persistence, most attempts at implementing public management reforms in Southern Europe failed. However, decentralization progressed immensely it Italy and Spain, but hardly in Greece and Portugal. Except for Spain, professionalism was not achieved. Even though extensive politicization persists, the traditional features of South European bureaucracies have started fading.
Chris Jones
- Published in print:
- 2005
- Published Online:
- July 2005
- ISBN:
- 9780199281978
- eISBN:
- 9780191602535
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199281971.003.0011
- Subject:
- Economics and Finance, Public and Welfare
This chapter provides a set of questions drawn from material presented in previous chapters. Most are designed to emphasize important points, and to illustrate practical examples of applied welfare ...
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This chapter provides a set of questions drawn from material presented in previous chapters. Most are designed to emphasize important points, and to illustrate practical examples of applied welfare analysis. A number of questions are quite long and are intended as assignments, while others are more suitable for tutorial exercises.Less
This chapter provides a set of questions drawn from material presented in previous chapters. Most are designed to emphasize important points, and to illustrate practical examples of applied welfare analysis. A number of questions are quite long and are intended as assignments, while others are more suitable for tutorial exercises.
Chris Jones
- Published in print:
- 2005
- Published Online:
- July 2005
- ISBN:
- 9780199281978
- eISBN:
- 9780191602535
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199281971.003.0006
- Subject:
- Economics and Finance, Public and Welfare
Governments rarely raise revenue with lump sum transfers. Instead, they use distorting taxes, and this must be reflected in cost-benefit studies. The conventional welfare analysis in previous ...
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Governments rarely raise revenue with lump sum transfers. Instead, they use distorting taxes, and this must be reflected in cost-benefit studies. The conventional welfare analysis in previous chapters is revised to include changes in tax inefficiency when distorting taxes are used to balance the government budget. This involves a simple revision to the conventional (lump sum) shadow prices, in which the revised shadow price of any good is its conventional shadow price plus the change in tax inefficiency on the revenue transfers made with distorting taxes. This adjustment is used in the next chapter to demonstrate the role played by the marginal social cost of public funds (MCF) in project evaluation. Finally, the Hatta (1977) decomposition is extended to revised shadow prices where the income effects are isolated in the revised shadow value of government revenue. It is used in following chapters to measure the distributional effects of policy changes when governments make revenue transfers with distorting taxes.Less
Governments rarely raise revenue with lump sum transfers. Instead, they use distorting taxes, and this must be reflected in cost-benefit studies. The conventional welfare analysis in previous chapters is revised to include changes in tax inefficiency when distorting taxes are used to balance the government budget. This involves a simple revision to the conventional (lump sum) shadow prices, in which the revised shadow price of any good is its conventional shadow price plus the change in tax inefficiency on the revenue transfers made with distorting taxes. This adjustment is used in the next chapter to demonstrate the role played by the marginal social cost of public funds (MCF) in project evaluation. Finally, the Hatta (1977) decomposition is extended to revised shadow prices where the income effects are isolated in the revised shadow value of government revenue. It is used in following chapters to measure the distributional effects of policy changes when governments make revenue transfers with distorting taxes.
Susan E. Whyman
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780199532445
- eISBN:
- 9780191714535
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199532445.003.0003
- Subject:
- History, Cultural History, British and Irish Modern History
The 18th-century Post Office is usually portrayed as mired in inefficiency. New private and public sources tell a different earlier story. Post office records and 34 letter collections show how ...
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The 18th-century Post Office is usually portrayed as mired in inefficiency. New private and public sources tell a different earlier story. Post office records and 34 letter collections show how people used the Royal Mail and how it affected their lives. In the 17th century, basic postal routines were established and the quantity of letters carried increased. In the 18th century, a national network served by coaches grew out of the old six roads. By 1800 the Royal Mail had become a commercial newsagent spreading papers throughout the nation. At the same time, it continued to open letters and censor mail. The newspaper, novel, and coffeehouse are often cited in regard to the rise of the public sphere, but the letter and the Post Office are rarely mentioned. Yet its arena of unrestricted discourse was as provocative to the state as any coffeehouse. By 1800, a service created to censor mail had become a private necessity and a public right.Less
The 18th-century Post Office is usually portrayed as mired in inefficiency. New private and public sources tell a different earlier story. Post office records and 34 letter collections show how people used the Royal Mail and how it affected their lives. In the 17th century, basic postal routines were established and the quantity of letters carried increased. In the 18th century, a national network served by coaches grew out of the old six roads. By 1800 the Royal Mail had become a commercial newsagent spreading papers throughout the nation. At the same time, it continued to open letters and censor mail. The newspaper, novel, and coffeehouse are often cited in regard to the rise of the public sphere, but the letter and the Post Office are rarely mentioned. Yet its arena of unrestricted discourse was as provocative to the state as any coffeehouse. By 1800, a service created to censor mail had become a private necessity and a public right.
Harold O. Fried, C. A. Knox Lovell, and S. Schmidt Shelton
- Published in print:
- 2008
- Published Online:
- January 2008
- ISBN:
- 9780195183528
- eISBN:
- 9780199870288
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195183528.003.0001
- Subject:
- Economics and Finance, Econometrics
This chapter begins with a brief discussion of variations in productive efficiency using airlines as an example. It then presents the main purpose of the book, which is to study inefficiency in ...
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This chapter begins with a brief discussion of variations in productive efficiency using airlines as an example. It then presents the main purpose of the book, which is to study inefficiency in production and its impact on economic and financial performance. The chapter then provides background material and focuses on hypotheses that have been proposed in literature that would explain variation in producer performance; lays the theoretical foundation for the measurement of productive efficiency; offers a brief introduction to alternative techniques that have been developed to quantify inefficiency empirically; introduces various econometric approaches to efficiency estimation; introduces variants of the mathematical programming approach to efficiency estimation; introduces the Malmquist productivity index and shows how to decompose it into various sources of productivity change, including variation in productive efficiency; and describes three ways of approximating a Malmquist productivity index: the use of superlative index numbers, the use of econometric techniques, and the use of mathematical programming techniques. An overview of the succeeding chapters is also presented.Less
This chapter begins with a brief discussion of variations in productive efficiency using airlines as an example. It then presents the main purpose of the book, which is to study inefficiency in production and its impact on economic and financial performance. The chapter then provides background material and focuses on hypotheses that have been proposed in literature that would explain variation in producer performance; lays the theoretical foundation for the measurement of productive efficiency; offers a brief introduction to alternative techniques that have been developed to quantify inefficiency empirically; introduces various econometric approaches to efficiency estimation; introduces variants of the mathematical programming approach to efficiency estimation; introduces the Malmquist productivity index and shows how to decompose it into various sources of productivity change, including variation in productive efficiency; and describes three ways of approximating a Malmquist productivity index: the use of superlative index numbers, the use of econometric techniques, and the use of mathematical programming techniques. An overview of the succeeding chapters is also presented.
János Kornai
- Published in print:
- 1992
- Published Online:
- November 2003
- ISBN:
- 9780198287766
- eISBN:
- 9780191596551
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198287763.003.0012
- Subject:
- Economics and Finance, Economic Systems
An examination is made of the multiple causes of the two related phenomena of shortage and inflation in the classical socialist system, addressing these causes at both the micro and the macrolevel. ...
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An examination is made of the multiple causes of the two related phenomena of shortage and inflation in the classical socialist system, addressing these causes at both the micro and the macrolevel. The first two sections of the chapter contrast the behaviour of the firm in short‐ and long‐term decision making under the capitalist system, with that under the socialist system. The next seven sections discuss the behaviour of the bureaucracy managing production; the role of relative prices; repressed inflation in interfirm relations and in the consumer sphere; excess demand on the macrolevel; the propensity to inflation, and the relationship between shortage and inflation; and the self‐inducement and reproduction of shortage. The last two sections give an overview of the socialist system–specific nature of the causes of shortage and inflation, and point out the economic inefficiency and lack of innovatory technical progress in the system.Less
An examination is made of the multiple causes of the two related phenomena of shortage and inflation in the classical socialist system, addressing these causes at both the micro and the macrolevel. The first two sections of the chapter contrast the behaviour of the firm in short‐ and long‐term decision making under the capitalist system, with that under the socialist system. The next seven sections discuss the behaviour of the bureaucracy managing production; the role of relative prices; repressed inflation in interfirm relations and in the consumer sphere; excess demand on the macrolevel; the propensity to inflation, and the relationship between shortage and inflation; and the self‐inducement and reproduction of shortage. The last two sections give an overview of the socialist system–specific nature of the causes of shortage and inflation, and point out the economic inefficiency and lack of innovatory technical progress in the system.
David M. Newbery
- Published in print:
- 1991
- Published Online:
- November 2003
- ISBN:
- 9780198287629
- eISBN:
- 9780191595912
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198287623.003.0014
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Gives an overview of the institutional implications of the economic theory of risk and associated market failures.
Gives an overview of the institutional implications of the economic theory of risk and associated market failures.
Pranab Bardhan and Christopher Udry
- Published in print:
- 1999
- Published Online:
- November 2003
- ISBN:
- 9780198773719
- eISBN:
- 9780191595929
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198773714.003.0007
- Subject:
- Economics and Finance, Development, Growth, and Environmental
One aspect of financial markets that is of great relevance to economic development is the study of credit mechanism design by lenders facing private information. This chapter first develops a model ...
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One aspect of financial markets that is of great relevance to economic development is the study of credit mechanism design by lenders facing private information. This chapter first develops a model of moral hazard in a rural credit market, beginning with the benchmark case of perfect competition under complete information. It then compares the loan contract offered by non‐local lenders who cannot monitor payoff‐relevant actions of borrowers with that offered by an informed local monopolistic moneylender and examines what happens in a fragmented market where villagers can choose between either contract. The next section develops, along similar lines, a model of adverse selection. The inefficiencies arising in these contracts, the potential mitigating role of collateral, and the possibility of local moneylenders earning informational rent are lessons that emerge from these models.Less
One aspect of financial markets that is of great relevance to economic development is the study of credit mechanism design by lenders facing private information. This chapter first develops a model of moral hazard in a rural credit market, beginning with the benchmark case of perfect competition under complete information. It then compares the loan contract offered by non‐local lenders who cannot monitor payoff‐relevant actions of borrowers with that offered by an informed local monopolistic moneylender and examines what happens in a fragmented market where villagers can choose between either contract. The next section develops, along similar lines, a model of adverse selection. The inefficiencies arising in these contracts, the potential mitigating role of collateral, and the possibility of local moneylenders earning informational rent are lessons that emerge from these models.
Jean‐Marie Baland and Jean‐Philippe Platteau
- Published in print:
- 2000
- Published Online:
- January 2005
- ISBN:
- 9780198290612
- eISBN:
- 9780191601613
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198290616.003.0003
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter analyses the ‘tragedy of the commons’, which attributes the inefficiency in managing natural resources to the absence of well-defined property rights and the regime of open access that ...
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This chapter analyses the ‘tragedy of the commons’, which attributes the inefficiency in managing natural resources to the absence of well-defined property rights and the regime of open access that characterizes them. It discusses the problem of open access and problem of common property, the Pareto-inefficiency of the Nash equilibrium under common property, and the Lindahl equilibrium.Less
This chapter analyses the ‘tragedy of the commons’, which attributes the inefficiency in managing natural resources to the absence of well-defined property rights and the regime of open access that characterizes them. It discusses the problem of open access and problem of common property, the Pareto-inefficiency of the Nash equilibrium under common property, and the Lindahl equilibrium.
Debraj Ray
- Published in print:
- 2007
- Published Online:
- January 2008
- ISBN:
- 9780199207954
- eISBN:
- 9780191709104
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199207954.003.0006
- Subject:
- Economics and Finance, Financial Economics
This chapter studies two applications of the theory developed so far. First, coalition formation in a Cournot oligopoly is examined. The second application studies coalition formation in a pollution ...
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This chapter studies two applications of the theory developed so far. First, coalition formation in a Cournot oligopoly is examined. The second application studies coalition formation in a pollution control problem. In both these applications, equilibrium agreements and coalition structures are characterized by applying the algorithm developed in Chapter 5. While there are some differences between the two applications, they share the following common features: (a) inefficient outcomes are endemic despite the ability to write any binding agreement; (b) inefficient outcomes in symmetric games typically involve asymmetric coalition structures; but (c) the degree of inefficiency cannot be ‘too high’, in a sense made precise in the chapter.Less
This chapter studies two applications of the theory developed so far. First, coalition formation in a Cournot oligopoly is examined. The second application studies coalition formation in a pollution control problem. In both these applications, equilibrium agreements and coalition structures are characterized by applying the algorithm developed in Chapter 5. While there are some differences between the two applications, they share the following common features: (a) inefficient outcomes are endemic despite the ability to write any binding agreement; (b) inefficient outcomes in symmetric games typically involve asymmetric coalition structures; but (c) the degree of inefficiency cannot be ‘too high’, in a sense made precise in the chapter.
Debraj Ray
- Published in print:
- 2007
- Published Online:
- January 2008
- ISBN:
- 9780199207954
- eISBN:
- 9780191709104
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199207954.003.0010
- Subject:
- Economics and Finance, Financial Economics
This chapter takes the second step in the study of reversible commitments by extending the framework given in Chapter 9 to cover situations with externalities across coalitions. Matters are quite ...
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This chapter takes the second step in the study of reversible commitments by extending the framework given in Chapter 9 to cover situations with externalities across coalitions. Matters are quite different now; the ubiquitous absorption results reported for characteristic functions break down in this setting. Equilibrium payoffs may cycle, and even if they don't, inefficient outcomes may arise and persist. Indeed, the ability to make sidepayments — presumably to eliminate such inefficiencies — may actually worsen the situation. In particular, the variant of this book's model with upfront transfers can heighten the prevalence of inefficiency.Less
This chapter takes the second step in the study of reversible commitments by extending the framework given in Chapter 9 to cover situations with externalities across coalitions. Matters are quite different now; the ubiquitous absorption results reported for characteristic functions break down in this setting. Equilibrium payoffs may cycle, and even if they don't, inefficient outcomes may arise and persist. Indeed, the ability to make sidepayments — presumably to eliminate such inefficiencies — may actually worsen the situation. In particular, the variant of this book's model with upfront transfers can heighten the prevalence of inefficiency.
Debraj Ray
- Published in print:
- 2007
- Published Online:
- January 2008
- ISBN:
- 9780199207954
- eISBN:
- 9780191709104
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199207954.003.0012
- Subject:
- Economics and Finance, Financial Economics
This chapter develops a theory of coalition formation under the blocking approach when all agreements are irreversible. The concept of equilibrium binding agreements is introduced: these are ...
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This chapter develops a theory of coalition formation under the blocking approach when all agreements are irreversible. The concept of equilibrium binding agreements is introduced: these are agreements that cannot be blocked by other equilibrium binding agreements. The obvious circularity of this description is cut through by presuming that only subgroups of existing coalitions can deviate, thus permitting a recursive construction. It is shown that such equilibrium outcomes are often inefficient. This observation reinforces similar findings for the bargaining model studied earlier. The chapter also studies an application of the solution concept to political party formation. The last part of the chapter relaxes the restriction that only subcoalitions of existing coalitions can block proposed agreements.Less
This chapter develops a theory of coalition formation under the blocking approach when all agreements are irreversible. The concept of equilibrium binding agreements is introduced: these are agreements that cannot be blocked by other equilibrium binding agreements. The obvious circularity of this description is cut through by presuming that only subgroups of existing coalitions can deviate, thus permitting a recursive construction. It is shown that such equilibrium outcomes are often inefficient. This observation reinforces similar findings for the bargaining model studied earlier. The chapter also studies an application of the solution concept to political party formation. The last part of the chapter relaxes the restriction that only subcoalitions of existing coalitions can block proposed agreements.
Debraj Ray
- Published in print:
- 2007
- Published Online:
- January 2008
- ISBN:
- 9780199207954
- eISBN:
- 9780191709104
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199207954.003.0013
- Subject:
- Economics and Finance, Financial Economics
This chapter studies reversible agreements under the blocking framework. It presumes that negotiations can open and reopen over an indefinite period of time. As before, a study of this phenomenon ...
More
This chapter studies reversible agreements under the blocking framework. It presumes that negotiations can open and reopen over an indefinite period of time. As before, a study of this phenomenon requires an explicitly dynamic model of coalition formation, though the task is now to construct a parallel theory under the ‘blocking approach’. The central contribution of this chapter is the development and examination of a new solution concept: an equilibrium process of coalition formation. This concept is carefully linked to traditional concepts such as the core, as well as newer concepts such as the largest consistent set, and is applied to a variety of situations. The chapter concludes the examination of a theory of coalition formation, though there are several permutations of the general methodology described in Chapter 2 that are left unexplored in this book.Less
This chapter studies reversible agreements under the blocking framework. It presumes that negotiations can open and reopen over an indefinite period of time. As before, a study of this phenomenon requires an explicitly dynamic model of coalition formation, though the task is now to construct a parallel theory under the ‘blocking approach’. The central contribution of this chapter is the development and examination of a new solution concept: an equilibrium process of coalition formation. This concept is carefully linked to traditional concepts such as the core, as well as newer concepts such as the largest consistent set, and is applied to a variety of situations. The chapter concludes the examination of a theory of coalition formation, though there are several permutations of the general methodology described in Chapter 2 that are left unexplored in this book.
Martine Quinzii
- Published in print:
- 1993
- Published Online:
- October 2011
- ISBN:
- 9780195065534
- eISBN:
- 9780199855063
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195065534.003.0005
- Subject:
- Economics and Finance, Financial Economics
This chapter considers the problem of the existence of a marginal cost pricing equilibrium. A recent study shows that a marginal cost pricing equilibrium exists under relatively weak assumptions. ...
More
This chapter considers the problem of the existence of a marginal cost pricing equilibrium. A recent study shows that a marginal cost pricing equilibrium exists under relatively weak assumptions. This chapter describes the proof of Bonnisseau and Cornet (1990a), which introduces some interesting techniques to show that the set of feasible production plans, although non-convex, is sufficiently regular to permit the use of the standard Kakutani fixed-point theorem. The methods of proof which have been successful for proving the existence of equilibrium for a convex economy do not directly apply to a non-convex economy. The properties of continuity and convexity of a Clarke normal cone lead to a straightforward application of the fixed point theorem. This chapter examines the single firm existence theorem and presents an example of productive inefficiency.Less
This chapter considers the problem of the existence of a marginal cost pricing equilibrium. A recent study shows that a marginal cost pricing equilibrium exists under relatively weak assumptions. This chapter describes the proof of Bonnisseau and Cornet (1990a), which introduces some interesting techniques to show that the set of feasible production plans, although non-convex, is sufficiently regular to permit the use of the standard Kakutani fixed-point theorem. The methods of proof which have been successful for proving the existence of equilibrium for a convex economy do not directly apply to a non-convex economy. The properties of continuity and convexity of a Clarke normal cone lead to a straightforward application of the fixed point theorem. This chapter examines the single firm existence theorem and presents an example of productive inefficiency.
