"July 1984, revised November 1985."

Bibliography: p. 38-40.

Reformulating marginal productivity theory by replacing productivity with respect to commodities with productivity with respect to persons and then defining perfectly competitive equilibrium as an allocation at which each person receives the marginal product of his/her contribution called a no-surplus allocation there emerges a competitive theory of price determination. Characterizations of no-surplus allocations are given in models with a nonatomic continuum of agents and an infinite-dimensional commodity space. Comparisons between the no-surplus and Walrasian equilibrium definitions of competitive equilibrium are made and some sufficient conditions are obtained for the existence of a no-surplus allocation.

[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 the necessary and sufficient conditions for determining the signs of the solution variables of a system of linear equations based only upon a knowledge of the signs of the coefficient matrix and the signs of the right hand side variables. This problem was initially formulated in economics due to the idea that the signs of an equation's derivatives might have a stronger empirical basis than that of a particular functional form. A new interest in qualitative problems has arisen in connection with the need to develop analytic measures in order to better manage the understanding and use of large, computer-based mathematical systems. The conditions for the qualitative determinancy of nonhomogeneous systems are developed in terms of a small number of necessary conditions which are jointly sufficient. Algorithmic approaches are given for testing a given system for qualitative determinancy. For nonhomogeneous systems algorithms are given for constructing all possible qualitatively determinate systems of a given size. For the homogeneous case conditions are also given for the qualitative invertibility of the (irreducible) coefficient matrix. These conditions are then related to the problem of partially qualitatively determinate systems and the signs in the qualitative inverse of a matrix.

[This paper examines the effect of the capital gains tax on investors' optimal consumption and investment behavior and on equilibrium asset prices in an intertemporal economy. It explictly considers the fact that capital gains and losses on stock are taxed only when the investor sells the stock. Ownership of stock then confers upon the investor a timing option which enables him to realize capital losses immediately and defer capital gains. This option is a large fraction of the total benefit which accrues to the stockholder, and is the prime reason for the novel implications of capital gains taxation, discussed in this paper.]

THIS PAPER PRESENTS a simple model of the manner in which person-specific information on productive capabilities is put to use in the firm. The analysis is then employed to examine the impact of improved information quality on equilibrium output, wage rates, and degree of specialization. Much effort has been devoted to studying the process through which personspecific information is accumulated. Burdett-Mortensen [1], MacDonald [8], Prescott-Visscher [10], Hartog [3], and Johnson [5] examine the process of learning about person-specific parameters through investment of resources in activities that yield information. Jovanovic [6] analyses the more specific problem of inferring the quality of a particular job-worker match. Little attention has been given to the question of just how the firm utilizes this kind of information. For information to play an interesting role in production, two things are necessary. One is that workers be heterogeneous in a meaningful sense. That is, in the space of productive characteristics, workers must not all be simply scalar multiples of one another. Second, the firm must have some choice about the kind of activities in which workers are engaged. If either of these conditions fails, the optimal assignment of workers is not a problem.2

This paper presents a model of general equilibrium stability in which agents understand that they are not at equilibrium. Rather, agents expect prices to change and contemplate the possibility that they may not be able to complete their own transactions. They optimize their actions taking account of such price changes and transaction constraints. It is shown that a necessary condition for instability is the continuing perception of new, previously unforeseen opportunities (real or imagined). Without this, old opportunities will be arbitraged away and the system will converge to equilibrium. The equilibrium approached will depend on the history of the system and may not be Walrasian if transaction constraints are present.

between schooling and wages: Schooling raises wages. The standard empirical questions of when are wages raised and by how much have gone unaddressed. The purpose of this paper is to demonstrate that the conventional efficiency units model of human capital accumulation provides answers to these questions. The model deals with investment both in school and on the job. The existence of post-schooling investment implies a path of wages that rises over time. Proposition 1 is that the marginal impact of schooling on the log of wages at each point in time is a constant equal to the interest rate if and only if the human capital production function is locally unit elastic in accumulated stocks of capital. A constant marginal effect on log wages is what is usually assumed in empirical work. Further, extrapolating from a model with no post-schooling investment, the constant effect is expected to equal the interest rate. Proposition 1 indicates that this assumption severely restricts the underlying structure. Propositions 2 and 3 deal with intertemporal variation in the marginal effect of schooling on wages. For example, if the output elasticity of accumulated stocks in the human capital production function falls short of one, the marginal impact of schooling on log wages is shown to decline over time. Further, under a reasonable additional assumption, the marginal impact of schooling on the level of wages rises over time. The propositions arise from the fact that wealth maximization involves maximization of an appropriately discounted flow of rents. Wages at a point in time provide information on the current flow of rents. The relationship between wealth maximization and the implied optimal pattern of flow rents yields the results. The model is laid out in Section 2. Section 3 deals with optimal schooling choice. Propositions 1-3 are presented in Section 4. In Section 5 the results are employed to discuss several stylized facts in the empirical literature on the wage-schooling relation. Proofs of the propositions are straightforward and are therefore presented in an appendix.

[A dynamic noncooperative game in which firms choose output and cost-reducing investment sequences is developed. The sequences exhibit several properties of manufacturing industries. Several steady states exist. Under some reasonable conditions only industry structures in which firms have different market shares can be locally stable steady states. So the model presents one explanation of the source of differences among firms in homogeneous good oligopolies.]