The Golden Rule of accumulation in an economy with an endogenously determined growth rate of labor has been examined by Eric Davis. Davis finds that if the growth rate is an increasing function of per capita net income, steady-state per capita consumption is maximized not at the equality of the propensity to save and capital's share of output, but at a propensity to save smaller than capital's share of output and an interest rate which exceeds rather than equals the growth rate. The supply of labor in an economy is affected by both the growth and participation rates of its population. Davis' results and the traditional Golden Rule depend upon the implicit assumption that the latter rate is constant. Davis calls for a more flexible treatment of the participation rate, allowing the possibility of optimal unemployment in a theory of optimal savings. This note examines a simple model with a varying participation rate. It is seen that one common assumption describing the participation rate leads to a recommendation opposite that of Davis.

We study a population of agents, each of whom can be an Altruist or an Egoist. Altruism is a strictly dominated strategy. Agents choose their actions by imitating others who earn high payoffs. Interactions between agents are local, so that each agent affects (and is affected by) only his neighbors. Altruists can survive in such a world if they are grouped together, so that the benefits of altruism are enjoyed primarily by other Altruists, who then earn relatively high payoffs and are imitated. Altruists continue to survive in the presence of mutations that continually introduce Egoists into the population.

Abstract We consider a repeated interaction between a long-run player and a sequence of short-run players, in which the long-run player may either be rational or may be a mechanical type who plays the same (possibly mixed) action in every stage game. We depart from the classical model in assuming that the short-run players make inferences by analogical reasoning, meaning that they correctly identify the average strategy of each type of long-run player, but do not recognize how this play varies across histories. Concentrating on 2 × 2 games, we provide a characterization of equilibrium payoffs, establishing a payoff bound for the rational long-run player that can be strictly larger than the familiar “Stackelberg” bound. We also provide a characterization of equilibrium behavior, showing that play begins with either a reputation-building or a reputation-spending stage (depending on parameters), followed by a reputation-manipulation stage.

Hierarchical organizations often perform poorly in inducing the adoption of innovations. We examine a principal offering contracts to agents who make unobservable effort and adoption-of-innovation choices (yielding moral hazard), who occupy jobs of differing, unobserved productivities (yielding adverse selection), and who engage in a repeated relationship with the principal (causing a ratchet effect to arise). Increasing the rate of adoption of an innovation in such an organization causes the incentive costs of adoption to increase at an increasing rate. Relatively low rates of adoption may then be a response to the prohibitive incentive costs of higher adoption rates.

This article quantifies the role of plant construction, expansion, contraction, and closing in generating net and gross changes in U.S. manufacturing employment over the 1963-82 period. A new longitudinal data set, constructed from the plant-level observations collected in the last five Census of Manufactures, is utilized. The reallocation of employment opportunities across and within sectoral, regional, and cohort boundaries is measured. Over 70% of the turnover in employment opportunities occurs across plants within the same two-digit industry and geographic region. Systematic differences in the employment fluctuations of plants of different ages are also found.

We consider an economy in which long-lived experts are matched with short-lived clients. Experts choose the type of client with whom they match, unobserved by the market. The interaction outcome depends on both the expert’s and the client’s type. We study the effects of supplying information about otherwise unobservable outcomes, such as “medical report cards,” to help clients identify better experts. Such information can lead to inefficient matches, as experts reject risky clients to build their reputation. Hence, information can reduce welfare. Withholding information can mitigate these perverse incentives at the cost of misallocating experts known to be inept. (JEL C78, D82, D83)

We consider the problem of a monopolist who must sell her inventory before some deadline, facing buyers with independent private values. The seller faces a basic trade-off between imperfect price discrimination and maintaining an effective reserve price. When there is only one unit and only a few buyers, the seller essentially posts unacceptable prices up to the very end, at which point prices collapse in a series of jumps to a “reserve price” exceeding marginal cost. When there are many buyers, the seller abandons this reserve price in order to more effectively screen buyers, with prices decreasing continuously over time.

We argue that the notion of Pareto dominance is not as compelling in the presence of uncertainty as it is under certainty. In particular, voluntary trade based on differences in tastes is commonly accepted as desirable, because tastes cannot be wrong. By contrast, voluntary trade based on incompatible beliefs may indicate that at least one agent entertains mistaken beliefs. We propose and characterize a weaker, No-Betting, notion of Pareto domination which requires, on top of unanimity of preference, the existence of shared beliefs that can rationalize such preference for each agent.