Ricardo is shown to be right that machinery can hurt wages and reduce output. A dramatic robot example reveals Wicksell's error in believing that Pareto optimality calls for no drop in total output from a viable invention. Under Ricardo's axiom that labor supply adjusts to keep wages at the subsistence level, he can correctly deduce on a market-clearing basis a rise in his net product (rent plus interest), while the greater drop in population and total wages result in a reduction in his gross product (rent plus interest plus wages).
[The paper presents a simple explanation of price dispersion by a monopolist assuming only that consumers arrive in a random order and are served on a first-come-first-served basis. A firm can sometimes increase its profits by charging two different prices for the same good and rationing sales at the lower price. However, it is never necessary to charge more than two prices, and a single price is sufficient as long as either the marginal revenue curve is everywhere downward sloping or the marginal cost of production is constant.]
This paper analyzes a monopolist that markets successive generations of new and improving nondurable products. Prices, research intensity, and product innovations are derived as sequential equilibrium outcomes to a dynamic game with incomplete information. Asymmetric information is an important feature of the model. The monopolist is fully aware of the current product's quality, as are consumers who have tried it. However, the beliefs of other people are characterized by a probability distribution that depends on the monopolist's marketing strategy and the product's popularity. The analysis illustrates a new context in which price signaling might serve as a mechanism for ensuring that only high-quality products are marketed. More important, it shows how product life cycles are generated in the absence of signaling and how a reputation for producing high-quality goods becomes established in such cases.
Ricardo is shown to be right that machinery can hurt wages and reduce output. A dramatic robot example reveals Wicksell's error in believing that Pareto optimality calls for no drop in total output from a viable invention. Under Ricardo's axiom that labor supply adjusts to keep wages at the subsistence level, he can correctly deduce on a market-clearing basis a rise in his net product (rent plus interest), while the greater drop in population and total wages result in a reduction in his gross product (rent plus interest plus wages).
The paper presents a simple explanation of price dispersion by a monopolist assuming only that consumers arrive in a random order and are served on a first-come-first-served basis. A firm can sometimes increase its profits by charging two different prices for the same good and rationing sales at the lower price. However, it is never necessary to charge more than two prices, and a single price is sufficient as long as either the marginal revenue curve is everywhere downward sloping or the marginal cost of production is constant.
The classical economists engaged in a vigorous debate over whether Britain's tariff reductions in the 1840s should be made contingent on tariff liberalization abroad. Some, notably Robert Torrens, believed that a unilateral tariff reduction would so deteriorate British terms of trade as to outweigh efficiency gains and make the country worse off. In this paper, Britain's foreign trade elasticities are estimated for this period in a simultaneous equation model. They are used in a simple general equilibrium model that explicitly takes the terms of trade into account to assess the welfare impact of tariff reductions. The results indicate that Britain would have been made worse off from a unilateral tariff reduction. However, foreign tariff reductions mitigated the terms of trade deterioration and could easily have made Britain better off.
This paper analyzes a monopolist that markets successive generations of new and improving nondurable products. Prices, research intensity, and product innovations are derived as sequential equilibrium outcomes to a dynamic game with incomplete information. Asymmetric information is an important feature of the model. The monopolist is fully aware of the current product's quality, as are consumers who have tried it. However, the beliefs of other people are characterized by a probability distribution that depends on the monopolist's marketing strategy and the product's popularity. The analysis illustrates a new context in which price signaling might serve as a mechanism for ensuring that only high-quality products are marketed. More important, it shows how product life cycles are generated in the absence of signaling and how a reputation for producing high-quality goods becomes established in such cases.
The paper analyzes the impact of a stabilization policy based on a temporary reduction in the rate of devaluation. Against a background in which a constant rate of devaluation has no real effects, it is shown that the temporary policy does and, furthermore, that the real effects tend to become bigger (in absolute value) as the horizon of the temporary policy is shortened. The central discussion is carried out in terms of a one-good, cash-in-advance model, with perfect capital mobility and Ramsey-type consumers. Results are extended to account for home goods and variable velocity; the roles of capital mobility and banking liberalization are briefly discussed.