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PET 1998

Program for the 1998 International Conference for the

Association for Public Economic Theory

University of Alabama

Tuscaloosa, Alabama

May 28 –31, 1998

The International Conference on Public Economic Theory was held in conjunction with the launch of the Journal of Public Economic Theory. A wide variety of methodologies were represented, including general equilibrium theory, cooperative and noncooperative game theory, dynamics, simulation, and first order methods, to name only a few. Despite the range of approaches, an important common thread binds this work together. With few exceptions, the papers listed in the program below in their various ways focus on the interface between the government and the economy. The main purpose of this the first conference of the Association for Public Economic Theory was to encourage communication between scholars working in different methodological traditions by making their common interests more obvious. Our hope is that this type of conference and the presence of the Journal of Public Economic Theory will contribute to coherence of theoretical public economics as a field in itself, and will highlight the importance of theoretical results to scholars working in more applied traditions.

Program Committee

Marcus Berliant, Washington University

John Conley, University of Illinois

Leonid Hurwicz, University of Minnesota

Herve Moulin, Duke University

Frank H. Page, Jr., University of Alabama (Chair)

Akram Temimi, University of Alabama

Shlomo Weber, Southern Methodist University

Myrna Holtz Wooders, University of Toronto

Local Organizing Committee

Paul Pecorino, University of Alabama

Marisa Galick, University of Alabama

Ken Johnson, University of Alabama

Student Volunteers

Undergraduate Students: Matt Clink (Finance), Felica Creel (Finance), James Harvey (Chemistry), Shenne Nalls (Finance), Mike Rimler (Economics), Kelly Schwartz, Kurt Uhlir (Finance).

Graduate Students: Derek Berry (Economics), Stan Davis (Accounting), Heui Fang (Engineering), Amy Gibson (Economics), Harry Griffin (Finance), Bin Huangfu (Economics), Frank Michello (Finance), Sean Salter (Finance), Quan Wen (Finance).


University of Alabama,

Culverhouse College of Commerce and Business Administration

Mercedes-Benz U. S. International Inc.

Department of Economics, Finance, and Legal Studies, University of Alabama

National Science Foundation

Session Listings

Plenary Lecture

Thursday May 28, 9:00, Alston 10

"Experimentally Observed Bounded Rationality in Game Interaction" Reinhard Selten, University of Bonn

CHAIR: John Ledyard

Social Choice

Thursday May 28, 10:00, 110 Bidgood

"A Welfarist Version of Harsanyi's Aggregation Theorem," Claude d' Aspremont, CORE

"Utopia Point Solution for Multiobjective Choice Problems," Richard P. McLean, Rutgers University, John Conley University of Illinois and Simon Wilkie, Caltech

"Strategy Proofness of Social Choice Correspondences with Restricted Domains," Nicholas Baigent, Graz University and Ben Lane

CHAIR: Claude d' Aspremont


Thursday May 28, 10:00, 119 Bidgood

"Altruism, Public Safety and Redistribution," Robert Schwager, Otto-von-Guericke-Universitaet and Dominique Demougin

"Social Causes, Gifts, and Efficiency," Stefani, C. Smith, Tulane University

"Altruism and Incomplete Markets," Felipe Perez, University of Alicante and Francisco Marhuenda, University of Alicante

CHAIR: Stefani Smith

GE and Public Economics

Thursday May 28, 10:00, 115 Bidgood

"Hedonic Prices and Implicit Markets Estimating the Demand for Local Public Services," Stephen L. Ross, University of Connecticut

"Efficiency in an Economy with Fixed Costs: A Sequential Approach," Rajiv Vohra, Brown University and Andrea Dall'Ollio, Brown University

"Project Evaluation, the Arrow-Lind Theorem and the Hyperfinite Law of Large Numbers," M. Ali Khan, Johns Hopkins and Yeneng Sun, National University of Singapore

CHAIR: Ali Khan

Coalition Formation and Public Goods

Thursday May 28, 10:00, 125 Bidgood

"Income Distribution, Taxation and the Private Provision of Public Goods," Gareth D. Myles, University of Exeter, David de Meza, University of Exeter and Jun-ichi Itaya, Otaru University of Commerce

"Coalitional Provision of Public Goods and the Tragedy of the Commons," Robert P. Gilles

"Incentive Mechanism Design for Production Economies with both Private and Public Ownership," Guoqiang Tian, Texas A&M University

CHAIR: Gareth D. Myles

Cooperative Game Theory

Thursday May 28, 1:45, 125 Bidgood

"Gradual Nash Bargaining," Eyal Winter, Washington University and Zvi Wiener, Washington University

"Some Recursive Definitions of the Shapley Value and Other Linear Values of Cooperative T.U. Games," Irinel Dragan, UTArlington

"The Least Increment Function of a TU-Game," Juan Enrique Martinez-Legaz, Universitat Autonoma de Barcelona,

CHAIR: Martinez-Legaz

Theoretical Issues in GE

Thursday May 28, 1:45, 119 Bidgood

"Forward Intergenerational Goods," Antonio Rangel, Caltech

"Empirical consistency of general equilibrium models," Susan K. Snyder, VPI

"On the General Relevance of Choice of Numeraire in Public Economics," Ronald S. Warren, Jr., University of Georgia and Arthur Snow, University of Georgia

CHAIR: Antonio Rangel

Public Goods

Thursday May 28, 1:45, 110 Bidgood

"On the Private Provision of Public Goods: an Application to the Spanish Case," Nuno Garoupa, Universitat Pompeu Fabra and Stanford Law School and Maria Jesus Martinez, Universitat Pompeu Fabra

"Voluntary Provision of Public Goods by Correlated Equilibria," Alberto Cavaliere, Universita' degli Studi di Pavia

"A Dynamic Tiebout Theory of Voluntary Versus Involuntary Provision of Public Goods," Roger Lagunoff, Georgetown University and Gerhard Glomm

CHAIR: Roger Lagunoff

Political Economy

Thursday May 28, 1:45, 115 Bidgood

"The New Federalism: Voting, Voluntarism and Devolution," Kimberley Scharf, University of Warwick and IFS and Ignatious Horstmann, University of Western Ontario

"Endogenous Coalition Formation in Rivalry," Ruqu Wang, Queen's University and Guofu Tan, UBC

"Social Choice and Implementation in a Delegation Problem," Frederic Gaspart, Facultes Universitaires Notre-Dame de la Paix,

CHAIR: Kimberley Scharf

Macroeconomics and Labor

Thursday May 28, 3:30, 110 Bidgood

"An Explanation of Wage Rigidity and Some Macroeconomic Implications," Truman Bewley, Yale University

"Incentive Compatible Reward Schemes for Labour Managed Economies," Salvador Barbera, Universitat Autonoma de Barcelona and Bhaskar Dutta

"Money in a Model with Overlapping Production Activities," Miguel Faig, University of Toronto

CHAIR: Truman Bewley

Local Public Goods

Thursday May 28, 3:30, 115 Bidgood

"Tiebout and Redistribution in a Model of Residential and Political Choice," Christoph Luelfesmann, University of Bonn and Anke S. Kessler, University of Bonn

"Spillover Effects and the Stability of Community Structures in a Local Public Good Model," E. Unal Zenginobuz, Bogazici University

"A Positive Theory of Inter-Regional Redistribution and Constitutional Choice," Anke, S. Kessler, University of Bonn and Nico A. Hansen, University of Bonn

CHAIR: E. Unal Zenginobuz

Late Papers

Thursday May 28, 3:30, 119 Bidgood

"On a Special Class of Externalities in Preferences," Stan Reiter, Northwestern University

"When Being First is Being Late," Marie-Odile Yanelle, University of Chicago

"Specialization and Trade: The Perspective of Club and Local Public Good Theories," David Pines, Tel-Aviv University

CHAIR: David Pines

Plenary Lecture

Friday May 29, 9:00, Alston 10

"Questions for Public Economics in the Field of International Trade" Roger Guesnerie, DELTA – Paris

CHAIR: Peter Hammond


Friday May 29, 10:00, 110 Bidgood

"Tax Structure and Government Behavior: A Principal-Agent Model of Government," John ('Jay') Wilson,

Indiana University and Roger H. Gordon, University of Michigan

"Production Efficiency and the Principles of International Taxation," Michael Keen and David Wildasin, Vanderbilt University

"Nonlinear Pricing, Redistribution and Optimal Tax Policy," Firouz Gavhari, University of Illinois and Helmuth Cremer, Toulouse

CHAIR: Jay Wilson

Economic Growth

Friday May 29,10:00, 125 Bidgood

"Formation of Communities by Natives and New comers," Midori Hirokawa, Hosei University and Harvard Univertsity

"Schumpeterian Growth, Product Differentiation, and the Scale Effects Problem," Peter Thompson,

University of Houston and Elias Dinopoulos, University of Florida

"Complementarity, Growth and Welfare in Open Economies," Arja Turunen-Red, University of New Orleans and Seppo Honkapohja, University of Helsinki

CHAIR: Peter Thompson

Social Choice and Mechanisms

Friday May 29, 10:00, 115 Bidgood

"Consistency and Egalitarianism: The Egalitarian Set," Elena Inarra, University of Bilboa and J. Arin, University of Bilboa

"Distributive Justice and Strategyproof Cost Sharing of a Public Good," Indranil K. Ghosh, SMU

"The Conservative Equal Costs Rule, the Serial Cost Sharing Rule and the Pivotal Mechanism: Asymptotic

Welfare Loss Comparisons," Laura Razzolini, University of Mississippi

CHAIR: Elena Inarra

Bargaining and Bankruptcy

Friday May 29, 10:15, 119 Bidgood

"Fallback Bargaining," D. Marc Kilgour, Wilfrid Laurier University and Steven J. Brams, NYU

"Multilateral Bargaining under Proportional Rules," Daniel Cardona-Coll, Northwestern University

"A New Solution to Bankruptcy Problems," William Thomson, University of Rochester and Youngsub Chun

CHAIR: William Thomson

Network Games

Friday May 29, 1:45, 110 Bidgood

"Efficient Networks: Computation and Implementation," Simon Wilkie, Caltech

"Communication and Coordination in Social Networks," Michael Chwe, University of Chicago

"A Dynamic Model of Network Formation," Alison Watts, Vanderbilt University

CHAIR: Simon Wilkie

Taxation and Redistribution

Friday May 29, 1:45, 115 Bidgood

"Flat Tax Rreform," Michael Smart, University of Toronto

"The Effect of Redistribution on the Provision of Social Capital," Martin C. McGuire, UC Irvine

"Tax Competition and Foreign Debt," Thomas A. Gresik, Pennsylvania State University and Ronald B. Davies, Pennsylvania State University

CHAIR: Martin C. McGuire

Free Riding and Cooperation

Friday May 29, 1:45, 119 Bidgood

"Threshold Public Goods with Incomplete Information," Akram Temimi, University of Alabama, Flavio Menezes, ANU and Paulo Monteiro, University of Copenhagen

"Free Riders Do Not Like Uncertainty," David Kelsey, University of Birmingham

"Desirability and Sustainability of Cooperation," Shlomo Weber, SMU and Michel Le Breton

CHAIR: Shlomo Weber

Topics in Dynamic GE

Friday May 29, 1:45, 125 Bidgood

"A Model of Optimal Growth Strategy," Cuong Le Van, CEPREMAP

"Intergenerational Risk Sharing: How to Improve Inefficient Equilibria," Gabrielle Demange, DELTA - ENS, and Guy Laroque, DELTA - ENS

"On Optimal Taxation in Overlapping Generations Economies," Thomas Renstroem, University of Birmingham

CHAIR: Gabrielle Demange

Public Goods and Cooperation

Friday May 29, 3:30, 110 Bidgood

"Rotten Kids, Purity and Perfection," Richard Cornes, Keele University and Emilson Silva, University of Oregon

"Recipes for Turnovers: Rotten Contributors Become Good Samaritarians," Emilson Silva, University of Oregon and Richard Cornes, Keele University

"Designing Mechanisms for Inducing Cooperative Behavior in Non-Cooperative Environments: Theory and Applications," Christopher J. Ellis, University of Oregon

CHAIR: Richard Cornes

General Equilibrium

Friday May 29, 3:30, 115 Bidgood

"Decentralizing Edgeworth Equilibria in Economies with Many Commodities," Monique Florenzano, CEPREMAP and Messaoud Deghdak, CEPREMAP

"Gains from Trade and Gains from Migration: What Makes Them Different?," Peter J. Hammond, Stanford University and Jaime Sempere, C.E.E., El Colegio de Mexico

"Coalition-Proof Nash Allocation in a Barter Game with Multiple Indivisible Goods," Jun Wako, Gakushuin University

CHAIR: Peter Hammond


Friday May 29, 3:30, 119 Bidgood

"Filling the Institutional Vacuum: Understanding the Rise of Crime in Russia," Katri Saari-Sieberg, Northwestern University

"Partisanship, Corporativism and Economic Performance," Giovanni Di Bartolomeo, Univeritat Pompeu Fabra

"Crime and Poverty," Derek Laing, Pennsylvania State University, Ping Wang, Pennsylvania State University and Chien-chieh Huang, National Dong-Hwa University

CHAIR: Giovanni Di Bartolomeo

Plenary Lecture

Friday May 29, 5:15, Alston 10

"Factor Mobility and Redistributive Policy: Local and International Perspectives" David Wildasin, Vanderbilt University

CHAIR: Todd Sandler

Plenary Lecture

Saturday May 30, 9:15, Alston 10

"Revisiting Externalities" Leonid Hurwicz, University of Minnesota

CHAIR: William Thomson

Incentive Mechanisms

Saturday May 30, 10:15, 110 Bidgood

"Interim Efficient Excludable Public Good Mechanisms," John O. Ledyard, Caltech and Thomas Palfrey, Caltech

"Optimal Auction of Identical Goods," Paulo K. Monteiro, University of Copenhagen

"Mechanism Design with Collusion and Correlation," David Martimort, Toulouse and Jean-Jacques Laffont, Toulouse

CHAIR: John Ledyard

Public Goods and Externalities

Saturday May 30, 10:15, 119 Bidgood

"Public Good Contributions in an Overlapping Generations Economy," Sergio Currarini, Iowa State University

"Axiomatizations of Lindahl and ratio equilibria in public good economies," Anne van den Nouweland, University of Oregon, Myrna Wooders, University of Toronto; and Stef Tijs, Tilburg University

"On the Core with Public Goods," Manfred Dix, University of Illinois and John P. Conley, University of Illinois

CHAIR: Anne van den Nouweland

Fiscal Competition and Taxation

Saturday May 30, 10:15, 115 Bidgood

"Fiscal Externalities and Migration," D. Andrew Austin, University of Houston

"Pareto Improving Redistribution and Pure Public Goods," Todd Sandler, Iowa State University and Richard Cornes, Keele University

CHAIR: Todd Sandler

Industrial Organization

Saturday May 30, 10:15, 125 Bidgood

"Economies of Scale and Scope, Contestability and Regulatory Risk," Michael J. Ryan, University of Hull

"To Merge or not to Merge: This is the Question," Luis Corchon, University of Alicante and Ramon Fauli-Oller

"A Critique on the Theory of Linear Price Monopoly," Nir Dagan, Universitat Pompeu Fabra

CHAIR: Luis Corchon

Evolution and Games

Saturday May 30, 1:45, 110 Bidgood

"Gale-Shapley Matching in an Evolutionary Trade Network Game," Leigh Tesfatsion, Iowa State University

"Risk and Insurance: A Biological Approach," Phil Curry, University of Western Ontario

"Evolution, Externalities, and Public Goods in Families of Humans and Other Animals," Ted Bergstrom,


CHAIR: Leigh Tesfatsion

Club Theory

Saturday May 30, 1:45, 115 Bidgood

"Revisiting the Club: Second-Best Provision of Congestible and Excludable Goods, Clive D. Fraser, Leicester University

"Provision of Public Goods, Voting and Bias in Spatial Club Size," Andreas Kopp, University of Kiel

"Local Public Goods and Clubs: A Unified Theory of First Best," Marcus Berliant, Washington University and John Edwards, Tulane University

CHAIR: Marcus Berliant


Saturday May 30, 1:45, 125 Bidgood

"The Informational Value of Sequential Fundraising," Lise Vesterlund, Iowa State University

"Psychic Incomes and Subsidies for Artists," Moshe Adler, Rutgers University

"An Economic Model of Fund-Raising," Al Slivinski, University of Western Ontario and Rich Steinberg, IUPUI

CHAIR: Al Slivinski


Saturday May 30, 1:45, 119 Bidgood

"Insurance Taxation and Insurance Fraud," M. Martin Boyer, HEC - Universite de Montreal

"Is Pigou wrong? Can distortionary taxation cause public spending to exceed the efficient level?," Charles de Bartolome, University of Colorado

"Voting on Taxation in a Simple General Equilibrium Model," Philippe De Donder, Groupe de Recherches en Economie du Bien-Etre (GREBE)

CHAIR: Charles de Bartolome

Optimal Income Taxation

Saturday May 30, 3:30, 115 Bidgood

"Optimal Budget Balancing Income Tax Mechanisms and the Provision of Public Goods," Frank H. Page, Jr., University of Alabama and Marcus Berliant, Washington University

"Optimal income taxation: an ordinal approach," Francios Maniquet and Marc Fleurbaey, University of Cergy-Pontoise

"Subgame Perfect Optimal Nonlinear Income Tax," Steve Slutsky, University of Florida and Johnathan Hamilton, University of Florida

CHAIR: Steve Slutsky

Topics in Game Theory

Saturday May 30, 3:30, 125 Bidgood

"Algebriac and Computational Complexity of Choice Implementing Automata," Mark Johnson, Tulane University

"Continuum Game Models," Erik Balder, University of Utrecht

"Uncertainty and Strategic Interaction in Economics," Jurgen Eichberger, UNIVERSITÄT DES SAARLANDES and David Kelsey, University of Birmingham

CHAIR: Erik J. Balder

Taxation and Supply

Saturday May 30, 3:30, 119 Bidgood

"Excess Supply Could Be Second Best Optimal," Leslie J.Reinhorn, Utah State University

"Optimal Taxation of a Class of Quality-Differentiated Products," Rudy Santore, Louisiana Tech University

"Decomposing the Redistributive Effect of Taxes: New Measures of Vertical Equity and Inequity," John P. Formby, University of Alabama, Hoseong Kim, University of Alabama and W. James Smith, University of Colorado

CHAIR: John Formby


Saturday May 30, 3:30, 110 Bidgood

"Trade, Income Inequality, and Government Policies: Redistribution of Income or Education Subsidies," Eckhard Janeba, Indiana University

"Mobility, Targeting and Private School Vouchers," Thomas Nechyba, Stanford University

"The Design of Optimal Education Policies," Gianni De Fraja, University of York

CHAIR: Tom Nechyba

Plenary Lecture

Saturday May 30, 5:15, Alston 10

"Game Theory" Reinhard Selten, University of Bonn

CHAIR: Truman Bewley

Plenary Lecture

Sunday May 31, 9:15,Alston 10

"Voting for Voters: A Model of Electoral Evolution" Michael Maschler, Hebrew University

CHAIR: Gabrielle Demange

Private Provision and Externalities

Sunday May 31, 10:15, 110 Bidgood

"Coasian Equilibrium," John Conley, University of Illinois

"Regulation of International Environmental Externalities," Faycal Mansouri, University of Tunis

CHAIR: Herve Moulin

Topics in Applied Microeconomics

Sunday May 31, 10:15, 119 Bidgood

"Factor Ownership and Strategic Governmental Interaction," Kangoh Lee, Towson University

"Public Good Provision in a Repeated Game Setting: An Analysis of Some Special Cases," Paul Pecorino, University of Alabama

"Kidney Transplants, Fields Medals, and Early Rounds of the Kappell Piano Competition," Donald E. Campbell, William & Mary University and Jerry S. Kelly, Syracuse University

CHAIR: Paul Pecorino

Mathematical Economics

Sunday May 31, 10:15, 115 Bidgood

"A Welfare Analysis of Rational Expectations Equilibria: The Core," Anthony Kwasnica, Caltech

"No-arbitrage Condition and Existence of Equilibria in Asset Markets with a Continuum of Traders," François Magnien, INSEE-Paris and Cuong Le Van, CNRS - CEPREMAP

"The Tiebout Hypothesis: On the Existence of Pareto Efficient Competitive Equilibrium," Myrna Wooders, University of Toronto and John Conley, University of Illinois

CHAIR: François Magnien