This paper investigates the design of trade policies in an uncertain world. Governments in each of two countries select between direct quantity controls and subsidies in an attempt to shift profits in favour of domestic, imperfectly competitive firms. The equilibrium of this bilateral policy game depends critically on the variability of the environment. In a world of certainty, both governments would choose to regulate the behaviour of their firms through direct quantity controls. With a sufficient amount of uncertainty, both governments regulate their firms through subsidies. This result reflects an important tradeoff between the strategic advantages of direct quantity controls and flexibility gained by the use of subsidies

M EASUREMENT of productivity, or of output per unit of input, has generally been limited to the input factor of labor. Failure to make similar calculations for other factors has left misinterpretations in the minds of many. This failure also has prevented a proper understanding of the production process and the close interrelationship of the factors of production. Research in the Bureau of Agricultural Economics over the last several years has provided data which make possible an examination of trends in productivity of factors other than labor in agriculture.2 The eight charts used in this article give examples of output-input relationships for agriculture as a whole. These charts do a reasonably good job of portraying the significant changes in agricultural productivity over the last third of a century. The story is certainly worth telling. But of equal importance to many are the techniques and problems of measurement which arise in an attempt to outline the story in a statistical fashion. A general knowledge of the nature of agriculture and of the agricultural production process is necessary to an understanding of the problems of measurement of output-input relationships in farm production. Agriculture in the United States comprises nearly 6 million individual farm units, although less than half of these farms account for the bulk of agricultural production. Only one-fourth of the farm labor is hired; the rest is supplied by farm operators and members of their families who are not paid stipulated wages. Around 6o per cent of the land is owned by the people who farm it, and the remainder is rented. The major products of agriculture are crops and livestock. Although all, or a major portion, of some crops are produced for direct human use, a large part of crop production is for livestock feed, as is the production from pasture and range lands. Not only is there close interdependence among the crop and livestock enterprises on individual farms, but because of specialization there is interdependence among farms and among areas. Dairy and poultry production in the New England area, for example, depends to a large extent upon supplies of feed grain from the Corn Belt States. And interdependence between agriculture and nonfarm industry is increasing. The outstanding development here relates to the input of farm power. About the time of World War I, farm power was furnished mainly by horses and mules. In the subsequent third of a century, animal power has been rapidly replaced by mechanical power in the form of tractors, trucks, and automobiles. This shift in form of power has had two notable results: (i) an increase in the productivity of farm labor and (2) an increase in the volume of farm output for human use, as land and labor formerly used to grow horse and mule feed have been diverted to production of products for the market. The latter development has been chiefly a change in utilization of feed crops. For example, much of the corn formerly fed to horses and mules is now fed to hogs, cattle, and poultry. Production of farm power has been transferred in large part from the farm to industry. Many more of the complexities and interrelationships in agriculture are brought out in the discussions of individual factors of production. These complexities present as a first problem what is to be measured in both the numerator and denominator of output-input ratios. Equally difficult problems emerge in 'This article is a revision of a paper originally presented before the Productivity Conference Panel, Washington, D. C., May 8, I947. The authors appreciate the cooperation of the Bureau of the Budget in preparing the charts used in this article. Both authors are economists at the Bureau of Agricultural Economics, U. S. Department of Agriculture. 2 The results of one study dealing with the measurement of changes in farm production have been published in the BAE processed report, Farm Production in War and Peace, by Glen T. Barton and Martin R. Cooper. A second and more comprehensive study is USDA Misc. Pub. 630, Progress of Farm Mechanization, by Martin R. Cooper, Glen T. Barton, and Albert P. Brodell.

This paper investigates the Automobile Industry code negotiated in 1933 and modified in 1935 under the National Industrial Recovery Act. The amended code contained a provision calling for automobile producers to alter the timing of new model introductions and the annual automobile show as a means of regularizing employment in the industry. Our analysis of this period provides evidence against the hypothesis that changes in fundamentals led to the dramatic changes in the seasonal pattern of production and sales starting in 1935. Instead, it appears that the National Industrial Recovery Act succeeded in coordinating activity on an alternative Nash equilibrium.

The possibility of sunspot equilibria and endogenous cycles are explored in a two-sector overlapping-generations model with entry. It is shown that if prospective entrants act oligopolistically as producers but competitively as consumers then a strategic complementarity between the entry decisions of agents across sectors and across time may arise. If the complementarity is sufficiently strong, the economy will have multiple, Pareto-ranked steady states. Stationary sunspot equilibria can then be constructed as a randomization between allocations in the neighbourhood of the multiple steady states providing a source of aggregate fluctuations.

We present experimental evidence on nonbinding, preplay communication in bilateral coordination games. To evaluate the effect of "cheap talk, " we consider two communication structures (one-way and two-way communication) and two types of coordination games (one with a cooperative strategy and a second in which one strategy is less "risky"). In games with a cooperative strategy, one-way communication increases play of the Pareto-dominant equilibrium relative to the no communication baseline; two-way communication does not always decrease the frequency of coordination failures. In the second type of game, two-way communication always leads to the Pareto-dominant Nash equilibrium, while one-way communication does not.