Knowledge that Transforms

[When a principal with private information designs a mechanism to coordinate his subordinates, he faces a dilemma: to conceal his information, his selection of mechanism must not depend on his information; but his information may influence which mechanism he prefers. To resolve this dilemma, this paper develops a theory of inscrutable mechanism selection. The principal's neutral optima are defined as the smallest possible set of unblocked mechanisms. They are shown to exist and are characterized using parametric linear programs. Any safe and undominated mechanism is a neutral optimum. Any neutral optimum is an expectional equilibrium and a core mechanism.]

A firm maximizing expected discounted profits, taking account of the actions of its competitors, choosing price and output before (stochastic) demand is known, and holding inventories or unfilled orders to accommodate discrepancies between output and demand, is shown to respond to a change in demand by changing its output whether the demand change is transitory or permanent, but by changing the price it charges only if the demand change is permanent. This proposition is shown to be consistent with German data. The data are qualitative. The empirical analysis uses the multivariate conditional logit model; the empirical results are summarized by gamma coefficients.

[It is shown that wquilibria with dispersed prices exist in environments with identical and rational agents on both sides of the market. In particular, the original Stigler model of nonsequential search often has many equilibria, some with price dispersion. Also, price dispersion holds in equilibrium in general if search is "noisy," i.e., there is some chance of learning two or more prices when an agent is looking for one price.]

This series of programs solve a Bewley model with production(This abstract was borrowed from another version of this item.)

[Definitions are proposed for weak and strong exogeneity in terms of the distribution of observable variables. The objectives of the paper are to clarify the concepts involved, isolate the essential requirements for a variable to be exogenous, and relate them to notions of predeterminedness, strict exogeneity and causality in order to facilitate econometric modelling. Worlds of parameter change are considered and exogeneity is related to structural invariance leading to a definition of super exogeneity. Throughout the paper, illustrative models are used to exposit the analysis.]

[Under the assumption that demand behavior depends on intertemporal preferences as well as (point) expectations concerning future prices, it is demonstrated that under plausible conditions rationality imposes no observable restrictions on the demand function and expectations and preferences are observationally indistinguishable.]

[This paper presents an implicit-contract model in which workers are allowed to differ in both their productive abilities and their preferences. It is shown that if firms are able to vary hours costlessly among their workers, workers are risk averse, and there are no outside payments to laid-off workers, then efficient contracts between firms and their workers will never provide for layoff unemployment. If, however, such hours variations are not costless, layoffs are no longer generally inefficient since they are an alternative means by which firms can adjust the labor inputs of selected groups of workers.]

In this paper [the authors] develop and implement an econometric methodology estimating a family-specific exogenous component of life-expectancy in order to determine the responsiveness of fertility to exogenous changes in child mortality. [They] use a generalized waiting time regression model applied to length of life which is viewed as the output of a production process. [They] allow for family-specific heterogeneity in duration of life and for time-varying explanatory variables. The heterogeneity component retrieved from the production function estimation is used to estimate the impact of exogenous child mortality on a measure of fertility. The data concern 1938 children from 311 families included in the 1976 Malaysian Family Life Survey. This paper was previously published in Econometrica (Chicago Ill.) Vol. 51 No. 3 May 1983 pp. 731-49. (EXCERPT)

[A utility maximizing consumer with a completely known system of ordinary demand functions q = h(p,C) is considered. Let (p extasciicircumo, q extasciicircumo) and (p extasciicircum1,q extasciicircum1) to two arbitrary equilibrium situations; the problem is to evaluate in which of the situations the utility is higher without knowing the utility function. Revealed preference theory tells that the ordinary demand functions (which are in principle observable) contain enough information to solve the problem. Remaining difficulties are therefore mainly computational. We present how the how the compensated income C extasciicircum1 = C(p extasciicircum1,q extasciicircumo) and the compensated demand q extasciicircum1 = h(p extasciicircum1,C extasciicircum1) are calculated with arbitrary accuracy using only the ordinary demand system. Our two efficient algorithms also have interesting interpretations in terms of index numbers and consumer surplus measures.]

This article is devoted to computable techniques for solving comparative static problems when only the sign of the partial derivatives of the model is considered. We first show how to extract unambiguously signed multipliers, or more generally qualitatively linked multipliers. This information then helps to reduce the size of the original system by means of a qualitative aggregation principle which we establish. As to the computation of solutions, a branch-and-bound algorithm is presented which considerably increases the efficiency of the Samuelson-Lancaster elimination principle. Finally we derive an efficient algorithm to check for signed determinants. The techniques are then applied to the analysis of an actual 20 equation model.