... as voters forced Mayor Karl Dean to withdraw a plan to borrow $200M to help cover Nashville's unfunded pension liability.
Future Nashvillians are on the hook for about 2.5B (2B for medical pensions, 0.5B for regular pension) to city workers. To help cover the short fall, the city proposed to borrow $200M at 4% interest, invest it and earn 7.5%.
If the investments work out, then we can expect to net 3.5%, money that would ostensibly be used to pay down our unfunded liabilities. In reality, it would likely fund more current government spending.
If the investments don't work out, our unfunded liabilities get even bigger.
This is a very interesting way of creating an incentive to sale an item at desired price. This event happens once in a year and every year, and looks like very successful with inclusive drinks and appetizers, live band, live glassblowing, and more.
ReplyDeleteA reserve price allows setting a low starting price to generate interest and bidding, but protects the item to be sold at low price. It shows the items values and in the auction usually if the auctioneer did not get the reserved price from bidders, can withdraw the item from auction. As an option, the seller can lower the reserve price, but can’t raise it. The reserve price auctions usually have two messages: reserve not met or reserve met. If reserve is not met, the seller has a choice to extend a second chance offer to the highest bidder in which gives the highest bidder a chance to purchase the unit at a price equal to his /her maximum bid amount. However, Glass on the Track’s choice is that if the company didn’t get the desired price will smash the item!
As mentioned in the text book by Froeb, this looks like a common value auction, in which each bidder has an estimate of unknown value that is identical amongst bidders. The bidder wins the auction if he or she overestimates the monetary value of an item, and pays more than its reserved value (it is called winner’s curse). To encourage aggressive bidding, the auctioneer releases information about the value of the item. The given information reduces the value of the item’s uncertainty and prevent bidders from overestimate (or winner’s curse) the item with bidding closer to the estimated value. One way to release information in common value auction is to run an oral auction. In this setting, bidders are motivated to bid aggressively; it is also provides an opportunity to auctioneer to achieve higher/desired prices and return.
References:
https://www.govplanet.com/pop/reserve_price.jsp. Accessed 13 April 2017
http://pages.ebay.com/help/sell/reserve.html. Accessed 13 April 2017
Froeb & et al. Manegeral Economics: A Problem Solving Approach. Cengage Learning. Boston, MA. 2007. Print.