[The lecture investigates some consequences of a frequently observed phenomenon: There are once and for all costs of switching from one good to one of its substitutes. The decision to substitute then is an investment decision. Such substitution costs, in conjunction with problems of oppportunism, have frequently been seen as a reason for vertical integration. Reputation for a fair treatment of customers may enable suppliers to maintain market relations for goods involving substitution costs. A model looks at "competitive distance" between two goods with substitution costs. If future tastes are uncertain the model shows that with low rates of discount or high rates of market growth competitive distance declines as substitution costs rise. It is also shown that competitive distance rises with a rising rate of discount. Given the effectiveness of the reputation mechanism, numerical analysis shows that competitive distance is smaller in most cases with substitution costs than without substitution costs.]

This paper explores the extent to which standard, general equilibrium analysis of Pareto optima and of competitive equilibria can be applied to environments with moral hazard and adverse selection problems.Allowing for lotteries, contracts with random components, we first establish that an adverse-selection insurance economy, a moral-hazard insurance economy, a signaling economy, and a private-information labor market economy are all special cases of a simple, general structure.We then show that techniques for characterizing Pareto optimal contracts as solutions to concave programming problems are useful and nice and appear to be broadly applicable; allowing for lotteries, we show how to characterize the optimal allocations for the adverse-selection insurance and labor market economies.We then show that standard existence and optimality theorems for competitive equilibria apply in the linear space containing lotteries if agents with characteristics which are distinct and privately observed at the time of initial trading enter the economy-wide resource constraints in a homogeneous way (other kinds of diversity are not critical).For economies with moral hazard which satisfy the homogeneity condition, competitive contract markets single out a subset of the optima and thus can be consistent with apparent unemployment and with a random allocation of labor supplied though all households are averse to risk.The adverse-selection insurance and signaling economies, however, do not satisfy the homogeneity condition and are difficult to decentralize efficiently with a price system.

[Introduction] To a large extent the cooperative theory of games has an altogether different appearance from the noncooperative theory. The noncooperative theory generally deals with games in either extensive form or normal form, while the cooperative theory is usually described in characteristic function form. One of the central concepts in the cooperative theory is that of the core, which is the set of utility allocations which no coalition can improve upon. This notion of the core and of the characteristic function form of a game depends heavily on the existence of a utility representation for players' preferences. Recently Gale and Mas-Colell [3] and Shafer and Sonnenschein [6] have proven theorems on the existence of a Nash equilibrium for noncooperative games in normal form in which the players' preferences over strategy vectors are not necessarily complete or transitive and so may fail to have a utility representation. Thus it might appear that the noncooperative theory is applicable in environments where the cooperative theory is not. In order to formulate theorems in the cooperative theory of games which can be applied to environments in which players may have nonordered preferences, the characteristic function must be reformulated in terms of physical outcomes as opposed to utility outcomes. The players' preferences can then be expressed in terms of the physical outcomes without the use of a utility function.

When zero mean measurement error is added to the dependent variable for the nonlimit observations of the censored normal regression model, the conventional maximum likelihood estimator (Tobit) is inconsistent. Correct maximum likelihood estimation appears to be computationally difficult under various specifications for the distribution of the measurement error. Estimators based on either the expectation function or the conditional expectation function for uncensored observations remain consistent in the presence of measurement error. Eight such estimators are examined. The results of a numerical experiment suggest that several of these estimators are substantially more efficient than the conventional maximum likelihood estimator when measurement error exists and that they also will do reasonably well when it does not.

Pseudo maximum likelihood techniques are applied to basic Poisson models and to Poisson models with specification errors. In the latter case it is shown that consistent and asymptotically normal estimators can be obtained without specifying the p.d.f. of the disturbances. These estimators are compared both from the finite sample and the asymptotic point of view. Quasi generalized PML estimators, which asymptotically dominate all PML estimators, are also proposed. Finally, bivariate and panel data Poisson models are discussed. THE ANALYSIS OF ECONOMIC BEHAVIOR often leads to the study of characteristics taking a small number of positive values. The classical linear model is not adapted to explain how such discrete variables depend on other quantitative or qualitative variables. The reasons are similar to those usually given in the case of an endogenous qualitative variable: the shape of the observation set does not correspond to a linear model, the assumption of normality of the disturbances cannot be made, since the endogenous variables take a small number of values with strictly positive probabilities, and the prediction formulae which are deduced from a linear model give impossible values. In the models considered in the literature to describe discrete variables (Cox and Lewis [2], El. Sayyad [3], Frome, Kutner, and Beauchamp [4], Gilbert [5], Hausman, Hall, and Griliches [8]; see also Lancaster [12]) the endogenous variable is assumed to have a Poisson distribution conditional upon the exogenous variables. The parameter of this distribution is a function of the values of the exogenous variables. The choice of such a model is justified if the dependent variable counts the occurrence of a given event during a fixed period and if the usual assumptions of the Poisson process are satisfied. For instance, the model is adapted to describe daily numbers of oil tankers' arrivals in a port, the number of accidents at work by factory, or the number of patents applied for and received by firms (Hausman, Hall, and Griliches [8]).

Econometrie;Regressiemodellen;

It is shown that cardinal value allocations may fail to be symmetric. Specifically, agents with identical preferences and identical endowments can be treated very differently at a cardinal value allocation. This casts further doubt on the interpretation of the weights as endogenous utility comparisons.

Estimators obtained by maximizing a likelihood function are studied in the case where the true p.d.f. does not necessarily belong to the family chosen for the likelihood function. When such a procedure is applied to the estimation of the parameters of the first order moments, it is possible to prove a necessary and sufficient condition for its consistency. Asymptotic normality is shown as well as the existence of a lower bound for the asymptotic covariance matrix. It is also seen that this bound can be reached if consistent estimates are available for the parameters of the second order moments. Finally, a necessary and sufficient condition for the consistency if the pseudo maximum likelihood estimation of the first and second moments is given.