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5 - The Economics of Multidimensional Screening
- Edited by Mathias Dewatripont, Université Libre de Bruxelles, Lars Peter Hansen, University of Chicago, Stephen J. Turnovsky, University of Washington
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- Book:
- Advances in Economics and Econometrics
- Published online:
- 19 January 2010
- Print publication:
- 20 January 2003, pp 150-197
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Summary
MOTIVATION AND INTRODUCTION
Since the late 1970s, the theory of optimal screening contracts has received considerable attention. The analysis has been usefully applied to such topics as optimal taxation, public good provision, nonlinear pricing, imperfect competition in differentiated industries, regulation with information asymmetries, government procurement, and auctions, to name a few prominent examples. The majority of these applications have made the assumption that preferences can be ordered by a single dimension of private information, largely to facilitate finding the optimal solution of the design problem. However, in most cases that we can think of, a multidimensional preference parameterization seems critical to capturing the basic economics of the environment. For example, consider the case of duopolists in a market where each firm competes with nonlinear pricing over its product line. In many examples of nonlinear pricing (e.g., Mussa and Rosen 1978 and Maskin and Riley 1984), it is natural to think of consumers' preferences being ordered by the willingness to pay for additional units of quantity or quality. But, if we believe that competition between duopolists is imperfect in the horizontal dimension as suggested, for example, by models such as Hotelling's (1929), then we need to introduce a form of horizontal heterogeneity as well. As a consequence, a minimally accurate model of imperfect competition between duopolists suggests including two dimensions of heterogeneity – vertical and horizontal.
There are several additional economic applications that naturally lend themselves to multidimensional heterogeneity.
2 - Barter relationships
- Edited by Paul Seabright, Université de Toulouse
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- Book:
- The Vanishing Rouble
- Published online:
- 05 May 2010
- Print publication:
- 30 November 2000, pp 35-70
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Summary
Introduction
Economists interested in barter and non-monetary exchange often talk at cross-purposes to anthropologists and sociologists. Central to the anthropological literature is the notion of ‘delayed reciprocity’, where barter deals ‘require delays in payment and several exchanges before the transactors are satisfied’ (Humphrey, chapter 3 in this volume). This observation has been a central theme in the anthropology of exchange since Mauss (1990[1954]) and Malinowski (1961), and an important component of this research has focused on the realisation that such exchange requires institutions that persuade people to reciprocate favours. However, traditional monetary economics has largely dealt with cases in which such enforcement issues are absent, either by assuming simultaneous barter or enforceable long-term borrowing and lending contracts. Missing from this literature is the importance of implicit arrangements which are based on trust. The purpose of this chapter is to redress this somewhat, relying on a large, recent literature on self-enforcing contracts, which often examines trade where money is absent. We argue that useful insights on barter can be obtained by using an economic analysis of repeated exchange with little or no money or external enforcement mechanisms, but where trust plays a central role.
This chapter is not meant to provide a holistic view of non-monetary social exchange in general, which involves an array of moral, religious, cultural and economic aspects. Instead, its objective is to address some aspects of repeated exchange which operate in the wild economic environment of Russia.