A game is better-reply secure if for every nonequilibrium strategy x* and every payoff vector limit u* resulting from strategies approaching x*, some player i has a strategy yielding a payoff strictly above ui* even if the others deviate slightly from x*. If strategy spaces are compact and convex, payoffs are quasiconcave in the owner's strategy, and the game is better-reply secure, then a pure strategy Nash equilibrium exists. Better-reply security holds in many economic games. It also permits new results on the existence of symmetric and mixed strategy Nash equilibria.

In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms facing stochastic fixed adjustment costs. Instead of the standard sharp (S,s) bands, firms' adjustment policies take the form of a probability of adjustment (adjustment hazard) that responds smoothly to changes in firms' capacity gap. The model has appealing aggregation properties, and yields nonlinear aggregate time series processes. The passivity of normal times is, occasionally, more than offset by the brisk response to large accumulated shocks. Using within and out-of-sample criteria, we find that the model performs substantially better than the standard linear models of investment for postwar sectoral U.S. manufacturing equipment and structures investment data.

It is shown that the linkage principle (Milgrom and Weber (1982)) does not extend to the multi-unit auction setting. An analysis of the equilibium bidding strategies is carried out for the general two-agent/two-unit Vickrey auction in order to provide economic insight into the nature of the failure.