American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article On Doctors, Mechanics, and Computer Specialists: The Economics of Credence Goods UweDulleck RudolfKerschbamer 5 42 Most of us need the services of an expert when our apartment's heating or our washing machine breaks down, or when our car starts to make strange noises. And for most of us, commissioning an expert to solve the problem causes concern. This concern does not disappear even after repair and payment of the bill. On the contrary, one worries about paying for a service that was not provided or receiving some unnecessary treatment. This article studies the economics underlying these worries. Under which conditions do experts have an incentive to exploit the informational problems associated with markets for diagnosis and treatment? What types of fraud exist? What are the methods and institutions for dealing with these informational problems? Under which conditions does the market provide incentives to deter fraudulent behavior? And what happens if all or some of those conditions are violated? http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=1&issue_date=March 2006 10.1257/002205106776162717 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article What Determines Cartel Success? Margaret C.Levenstein Valerie Y.Suslow 43 95 Following George Stigler (1964), many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output. But the potential profits from collusion can create a powerful incentive as well. Theory cannot tell us, a priori, which effect will dominate: whether or when cartels succeed is thus an empirical question. We examine a wide variety of empirical studies of cartels to answer the following questions: (1) Can cartels succeed? (2) If so, for how long? (3) What impact do cartels have? (4) What causes cartels to break up? We conclude that many cartels do survive, and that the distribution of duration is bimodal. While the average duration of cartels across a range of studies is about five years, many cartels break up very quickly (i.e., in less than a year). But there are many others that last between five and ten years, and some that last decades. Limited evidence suggests that cartels are able to increase prices and profits, to varying degrees. Cartels can also affect other non-price variables, including advertising, innovation, investment, barriers to entry, and concentration. Cartels break up occasionally because of cheating or lack of effective monitoring, but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions. Cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive. Price wars that erupt are often the result of bargaining issues that arise in such circumstances. Sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=2&issue_date=March 2006 10.1257/002205106776162681 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article The Big Push Déjà Vu: A Review of Jeffrey Sachs's The End of Poverty: Economic Possibilities for Our Time WilliamEasterly 96 105 Jeffrey Sachs's new book (The End of Poverty: Economic Possibilities for Our Time, Penguin Press: New York, 2005) advocates a "Big Push" featuring large increases in aid to finance a package of complementary investments in order to end world poverty. These recommendations are remarkably similar to those first made in the 1950s and 1960s in development economics. Today, as then, the Big Push recommendation overlooks the unsolvable information and incentive problems facing any large-scale planning exercise. A more promising approach would be to design incentives for aid agents to implement interventions piecemeal whenever they deliver large benefits for the poor relative to costs. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=3&issue_date=March 2006 10.1257/002205106776162663 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article The Great Escape: A Review of Robert Fogel's The Escape from Hunger and Premature Death, 1700–2100 AngusDeaton 106 114 In this essay, I review Robert Fogel's The Escape from Hunger and Premature Death, 1700–2100, which is concerned with the past, present, and future of human health. Fogel's work places great emphasis on nutrition, not only for the history of health, but for explaining aspects of current health, not only in comparing poor and rich countries, but in thinking about rich countries now and in the future. I discuss Fogel's analysis alongside alternative interpretations that place greater emphasis on the historical role of public health, and on the current and future role of improvements in medical technology. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=4&issue_date=March 2006 10.1257/002205106776162672 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article The International Monetary Fund in a Time of Crisis: A Review of Stanley Fischer's IMF Essays from a Time of Crisis: The International Financial System, Stabilization, and Development PatrickConway 115 144 Stanley Fischer was deputy managing director of the IMF from 1994 to 2001 and, perhaps more than any other individual, he personifies the international "rapid response" to financial crises in the 1990s. This book is a collection of essays written during his tenure at the IMF; taken together, the essays represent the strongest and most logical defense of IMF initiatives in the 1990s in print. My review essay comprises six parts. In parts 2 through 4, I provide an overview of Fischer's arguments in three central areas of contention: stabilization policy, the impact of IMF programs on poverty, and the IMF's anticipation of and response to international financial crisis. I then compare Fischer's arguments to those raised by the IMF's critics during that period. The controversial issues of these parts can be resolved only through empirical investigation but, on the issues of greatest importance from the financial crises of the 1990s, both Fischer and the IMF's critics make logically consistent arguments with little empirical support. In part 5, I review the recent empirical literature to illuminate what evidence has been found in support of—or counter to—the assertions of Fischer and the IMF's critics. Part 6 provides conclusions and suggestions for follow-on empirical research. http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=5&issue_date=March 2006 10.1257/002205106776162690 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article Book Reviews 145 193 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=6&issue_date=March 2006 10.1257/002205106776162708 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article Annotated Listing of New Books 194 308 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=7&issue_date=March 2006 10.1257/002205106776162726 American Economic Association Nashville, TN 0022-8282 Journal of Economic Literature http://www.aeaweb.org/journal.html 44 1 March 2006 http://www.aeaweb.org/articles/issue_detail.php?journal=JEL&volume=44&issue=1&issue_date=March 2006 Journal Article JEL Classification System 309 321 http://www.aeaweb.org/articles/article_detail.php?journal=JEL&volume=44&issue=1&article=8&issue_date=March 2006 10.1257/002205106776162735