An index of Inequality is constructed which decomposes into two components, corresponding to vertical and "horizontal" equity respectively.Horizontal equity Is defined in terms of changes in the ordering of a distribution.The proposed index is a function to two inequality aversion parameters.One empirical application is for comparison of a pre-tax distribution with a post-tax distribution, and an example of this is given for the distribution of incomes in the UK in 1977.There is a trade-off between "horizontal" and vertical equity, and for particular combinations of the inequality aversion parameters the original distribution.willbe preferred to the final distribution.The paper concludes with an application of the proposed index to a model of optimal taxation.

This paper deals with a situation of middle-man behavior between two otherwise separated economies. A two-person noncooperative exchange game is proposed whereby each player's strategy consists of two parts taken in a sequence: a price strategy, to be followed by a demand strategy. The concept of a special kind of mixed strategies is introduced, and a solution is defined in terms of a Nash equilibrium pair of such mixed strategies. It is shown that a trivial class of equilibria always exists, and that under certain conditions, more interesting nontrivial equilibria can exist as well.

The authors attempt to account for the covariances between stock markets and to assess their integration. They estimate a factor model for sixteen national stock market returns whose volatility is induced by changing volatility in the factors. Unanticipated returns depend on innovations in economic variables and 'unobservable' factors. Assets risk premia are linear combinations of the factors risk premia. The authors find that idiosyncratic risk is priced and the 'price of risk' is different across stock markets. Besides, only a small proportion of their covariances can be accounted for by 'observable' economic variables. Correlation changes are driven primarily by movements in 'unobservables.'