Knowledge that Transforms

This paper analyzes bundling decisions of a rnultiproduct monopolist facing uncertain demand. The monopolist sells his products using an auction mechanism and the market is analyzed as a game with incomplete information in which the buyers as well as the seller are strategic agents. With a small number of buyers, a profit maximizing seller will bundle all his output. This makes buyers uniformly worse off compared to the case where the same monopolist does not bundle, in the sense that any buyer is worse off regardless of his demand for the monopolist's outputs. With a larger number of buyers, the seller will have a tendency to unbundle his output and "high-demand" buyers are worse off than they would be if the monopolist bundled his output. "Low-demand" buyers. on the other hand. are always better off when the monopolist unbundles his output, regardless of the number of competing buyers. Despite the fact that "high demand" buyers are the typical purchasers of the monopolist's output, the net effect of increasing the number of buyers is greater market efficiency since bundling creates market inefficiencies both ex post and ex ante.

This paper is concerned with the efficient estimation of structural parameters in closed linear systems of higher order stochastic differential equations when the data are in discrete form and the model generally includes both stock and flow variables. A general existence and uniqueness theorem for the solution of such a system is proved and used in the rigorous derivation of exact discrete models satisfied by the various types of data. It is shown how these models can be used in the computation of various asymptotically efficient estimates obtained by the maximization of the Gaussian likelihood or approximations to it.

[Income inequality as observed tends to overstate the true inequality. This is due to the fact that income observations are contaminated by measurement errors. On the other hand, the usual income classification tends to reduce observed income inequality. Without appropriate correction for both phenomena the value of comparing income inequality over various populations is dubious. In this paper the impact of both factors is assessed and a correction procedure suggested. Empirical evidence is provided on the basis of a large survey of Dutch families.]

This article proposes a new approach to small sample theory that achieves a meaningful integration of earlier directions of research in this field. The approach centers on the constructive technique of approximating distributions developed recently by the author in [10]. This technique utilizes extended rational approximants (ERA's) which build on the strengths of alternative, less flexible approximation methods (such as those based on asymptotic expansions) and which simultaneously blend information from diverse analytic, numerical and experimental sources. The first part of the article explores the general theory of approximation of continuous probability distributions by means of ERA's. Existence, characterization, error bound, and uniqueness theorems for these approximants are given and a new proof is provided for the convergence result obtained earlier in [10]. Some further aspects of finding ERA's by modifications to multiple-point Pade approximants are presented and the new approach is applied to the noncircular serial correlation coefficient. The results of this application demonstrate how ERA's provide systematic improvements over Edgeworth and saddlepoint techniques. These results, taken with those of the earlier article [10], suggest that the approach offers considerable potential for empirical application in terms of its reliability, convenience, and generality.

[Forward and spot exchange rates are modelled as an unrestricted bivariate autoregression from weekly data on the New York foreign exchange market for June, 1973 to April, 1980. The null hypothesis that the forward exchange rate is an unbiased estimate of the corresponding future spot exchange rate is tested by means of a nonlinear Wald test and is rejected for all six currencies considered. The results cast doubt on a central assumption in many current models of exchange rate behavior.]

Chew Soo Hong, A Generalization of the Quasilinear Mean with Applications to the Measurement of Income Inequality and Decision Theory Resolving the Allais Paradox, Econometrica, Vol. 51, No. 4 (Jul., 1983), pp. 1065-1092

[The paper considers a world in which one public good is financed by commodity taxes. It concentrates on the global study of the set of tax equilibria (corresponding to any possible taxation scheme). In particular conditions for "regularity" and connectedness of this set are exhibited. Consequences obtain both for the positive theory of tax incidence in general equilibrium (existence, continuity, uniqueness) and for normative theory ("regularity" of optimal solutions, algorithms of tax reform...).]

[In contrast to current counterfactual linear programming definitions of labor values this paper introduces an at least equivalent definition of such values for the general case of joint production which is exclusively based on actual data. This task is accomplished by extending Marx's concept of "individual values" from multiple activities to joint production by means of certain price ratios at those points where production data are insufficient to ensure the positiveness of "embodied labor time." Our approach generalizes the simple formula that relates labor values to monetary input-output tables, and it reformulates the labor theory of value in such a way that the "theoretical priority" of the case of a uniform composition of capital is reaffirmed.]

This paper reconsiders the aliasing problem of identifying the parameters of a continuous time stochastic process from discrete time data. It analyzes the extent to which restricting attention to processes with rational spectral density matrices reduces the number of observationally equivalent models. It focuses on rational specifications of spectral density matrices since rational parameterizations are commonly employed in the analysis of the time series data.

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