Knowledge that Transforms

[In an economy with incomplete markets, firms' profits at different dates and contingencies cannot be aggregated into a single index and so profit maximization is not well-defined. In this paper we propose an objective for firms to pursue which is a generalization of the idea of profit maximization. We show that, if firms' managers can transfer current income between shareholders at the first date, and if shareholders have what we call competitive perceptions concerning the effect of a change in production plan on share prices, then each firm will maximize a weighted sum of shareholders' private valuations of the firm's production plan, where the weights are the initial shareholdings. We then define, and prove the existence of, a competitive equilibrium in which firms pursue this proposed objective. Finally, we analyze the optimality properties of the competitive equilibrium.]

It is proved that Groves’ scheme is unique on restricted domains which are smoothly connected, in particular convex domains. This generalizes earlier uniqueness results by Green and Laffont and Walker. An example shows that uniqueness may be lost if the domain is not smoothly connected.

[It is well known that in the Sidrauski monetary intertemporal optimizing model the steady state capital stock is invariant to the rate of inflation. This paper shows that the rate of accumulation of capital is not invariant to the rate of inflation and that, for the constant relative risk aversion family of utility functions (except logarithmic), the rate of capital accumulation is faster the higher the growth rate of money. Money is thus not neutral on transition paths.]

Sample selection bias as a specification error This paper discusses the bias that results from using non-randomly selected samples to estimate behavioral relationships as an ordinary specification error or «omitted variables» bias. A simple consistent two stage estimator is considered that enables analysts to utilize simple regression methods to estimate behavioral functions by least squares methods. The asymptotic distribution of the estimator is derived.

Collective choice problems are studied from the Bayesian viewpoint. It is shown that the set of expected utility allocations which are feasible with incentive-compatible mechanisms is compact and convex, and includes the equilibrium allocations for all other mechanisms. The generalized Nash solution proposed by Harsanyi and Selten is then applied to this set to define a bargaining solution for Bayesian collective choice problems.

[The purpose of this paper is to amend some of Hannan's [6] identification results for ARMAX models and to discuss identification in ARMAX models when identities are present. In addition, we briefly discuss how the ARMAX results can be adapted to obtain identification conditions for dynamic simultaneous equations models with autoregressive disturbances.]