THE TERM universal discount, abbreviated u.d., is used to indicate that a percentage discount (or a percentage bounty if the discount is negative) applies to all payments. Thus, payments for wholesale, retail, and producer goods, payments for capital stock, bonids, debts, dividends, interest, rent, and taxes, payments for wages, salaries, and fees; in short, all transfers of funds where the control of the funds is also transferred are included. Transfers of funds where storage is intended and the control of the funds is not altered, as in the case of bank demand deposits for example, would not be considered payments and would not carry the u.d. It is shown that in a model economic system roughly representative of a free economy the u.d. adjusted according to a simple formula removes instability. There is reason to believe without reference to this particular model that the same u.d. adjustment would be a powerful stabilizing influence under actual conditions. Fortunately, since the adjustment would raise (lower) prices when they are tending upward (downward) there would apparently be no serious policing problem in the enforcement of the u.d. adjustment. Since the u.d. changes prices, wages, rents, interest, fees, taxes, etc. all by the same ratio, there is no direct effect of the u.d. on real income as measured currently. Stating it differently, those with unchanging monetary reserves are not directly affected by the u.d. Consequently the introduction of the u.d. for stabilization purposes would involve significant loss only to those who persist in contributing to instability. Conversely only those contributing to stability would be rewarded. The latter would aid sections of an economy that are hard pressed by business-cycle changes. For example, during a rising price level the shrinkage of real income of those on a fixed money income would be reduced. With the u.d. method, such devices as ordinary price control, control of investment, tax-rate variation during the phases of the business cycle, active monetary policy, government spending, would be unnec-

Economists have often found it useful to look at the average length of an unemployment spell in evaluating labor market conditions and in considering the labor market experience of the unemployed. Usually this statistic has to be estimated from grouped observations on interrupted (incomplete) unemployment spells. This paper is a comparative study of some nonparametric and parametric methods of estimating this quantity using Australian Department of Social Security data on unemployment benefit recipients.

We investigate how contractual incompleteness affects asset ownership in trucking by examining cross-sectional patterns in truck ownership and how truck ownership has changed with the diffusion of on-board computers (OBCs). We find that driver ownership of trucks is greater for long than short hauls, and when hauls require equipment for which demands are unidirectional rather than bidirectional. We then find that driver ownership decreases with OBC adoption, particularly for longer hauls. These results are consistent with the hypothesis that truck ownership reflects trade-offs between driving incentives and bargaining costs, and indicate that improvements in the contracting environment have led to less independent contracting and larger firms.

Salary data from a single firm are analyzed in an effort to identify the firm's wage policy. We find that employees are partly shielded against changes in external market conditions; that wage variation within a job level is large both cross-sectionally and for individuals over time, often leading to substantial real wage declines; that wage increases are serially correlated even controlling for observable characteristics; and that promotions and wage growth are strongly related, even though promotion premiums are small relative to the large wage differences between job levels. None of the major theories of wage determination can alone explain the evidence.

We analyze twenty years of personnel data from one firm. The hierarchical structure is quite simple and stable. Career movements suggest that the employee's rate of learning and the firm's learning about ability are important. There are promotion “fast tracks.” Exit rates vary little with tenure or salary. The firm has personnel policies like those described in the internal labor markets literature, although several theoretical preconditions for ILMs, such as ports of entry and exit, are lacking. Job levels are important to compensation, but there is also substantial individual variation in pay within levels. Our companion paper (in this issue) explores the wage policy of this firm.

Relational contracts—informal agreements sustained by the value of future relationships—are prevalent within and between firms. We develop repeated-game models showing why and how relational contracts within firms (vertical integration) differ from those between (nonintegration). We show that integration affects the parties' temptations to renege on a given relational contract, and hence affects the best relational contract the parties can sustain. In this sense, the integration decision can be an instrument in the service of the parties' relationship. Our approach also has implications for joint ventures, alliances, and networks, and for the role of management within and between firms.

Incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures. This paper explores the combined use of subjective and objective performance measures in (respectively) implicit and explicit incentive contracts. We show that the presence of sufficiently effective explicit contracts can render all implicit contracts infeasible, even those that would otherwise yield the first-best. We also show, however, that in some circumstances objective and subjective measures are complements: neither an explicit nor an implicit contract alone yields positive profit, but an appropriate combination of the two does. Finally, we consider subjective weights on objective measures.