The canonical model of strategic complementarities between individual actions, which exhibits multiple equilibria under perfect information, is extended with heterogeneous agents and imperfect information. Agents observe their own cost of action and the history of the levels of aggregate activity. The distribution of individual characteristics evolves through a random process, and individuals are rational Bayesians. Under plausible conditions, there is a unique equilibrium with phases of high and low activity and random switches. Applications may be found in macroeconomics and revolutions.

This paper tests models of mutual fund market timing that allow the manager's payoff function to depend on returns in excess of a benchmark, and distinguish timing based on publicly available information from timing based on finer information. We simultaneously estimate parameters which describe the public information environment, the manager's risk aversion, and the precision of the fund's market-timing signal. Using a sample of more than 400 U.S. mutual funds for 1976–94, our findings suggest that mutual funds behave as highly risk averse, benchmark investors. Conditioning on public information improves the model specification. After controlling for the public information, we find no evidence that funds have significant market-timing ability.

Using two studies, the author examines the influence of the inferred motive for a firm's price increase on perceptions of price unfairness. Prior to the research presented here, the only established causal antecedent of perceived price unfairness was increased relative profit. In Study 1, the author extends the existing research by demonstrating that the inferred motive, as well as inferred relative profit, provides causal explanation of perceived price unfairness. When participants inferred that the firm had a negative motive for a price increase, the increase was perceived as significantly less fair than the same increase when participants inferred that the firm had a positive motive. In addition, the author shows in Study 2 that the firm's reputation can influence the inferred motive, thereby altering perceptions of price unfairness. Specifically, participants sometimes gave a firm with a good reputation the benefit of the doubt when inferring motive. If the “good” firm did not profit from the price increase, participants inferred significantly more positive motives than if it did profit. The firm with a poor reputation did not receive this benefit; inferred motive was equally negative regardless of whether the firm profited from the price increase. Together, these studies provide evidence that consumer inferences of the motive for a price increase influence the perceived fairness of the increase. Furthermore, reputation is shown to moderate the effect of inferred relative profit on inferred motive. Finally, analyses show that perceived unfairness leads to lower shopping intentions and demonstrate that perceived unfairness mediates the effects of inferred motive and relative price on consumers’ shopping intentions.

The Economic Performance of African-American-Owned Banks: The Role of Loan Loss Provisions by Christopher C. Henderson. Published in volume 89, issue 2, pages 372-376 of American Economic Review, May 1999

This paper discusses some major categories of nonpecuniary income: noncash benefits for lower-income households and for the elderly, and the imputed rent of owner-occupied housing. These are three of the 15 categories in the comprehensive income definition developed by Timothy M. Smeeding and Daniel H. Weinberg (1998). They are certainly important, and their measurement has been controversial. Government outlays on Medicare in 1998 totaled $190 billion; outlays on the three major low-income benefit programs (Medicaid, food stamps, and housing subsidies) were $145 billion. The rental value of owneroccupied housing is harder to measure, but larger; as of 1995 the market sales value of the stock may have been over $10 trillion (Arthur B. Kennickell and R. Louise Woodburn, 1997), and conventional rules of thumb in the housing industry yield an annual rental value of at least $1 trillion. The paper considers both conceptual issues and their policy significance. Economists and policymakers are most interested in three statistics of income: the well-being of the average American, the well-being of those at the bottom of the income distribution, and the overall distribution of income, usually measured as median household or family income, the poverty rate, and the Gini ratio. As many economists have noted, we as a society are most interested in how these measures change over time and differ between groups. Such comparisons provide the context for the current numbers. When the data are announced, the media immediately compare the current income and poverty figures to last year, the last cyclical peak or trough, or the all-time best or worst; and also compare households by race, ethnicity, and gender of household head. (The Gini ratio attracts less attention because it has no intuitive explanation for the layman.) In this paper, I focus on how the measurement issues affect these statistics.