Knowledge that Transforms

This paper considers pricing and depletion of an exhaustible nonrenewable resource in an economy wherein domestic consumption is provided for by supplementing extraction from the economy's own resource stock with imports, the future supply of which is not assured. The socially optimal response to threat of trade disruption is a more conservationist depletion program for the domestic resource stock than would be called for, if import supplies were assured to persist. Competitive domestic firms adopt the socially optimal conservationist program. However, firms anticipating domestic market power after the disruption of import supplies are revealed to overextract the domestic resource stock.

Journal Article The Limits of Market-Oriented Regulatory Techniques: The Case of Automotive Fuel Economy Get access John E. Kwoka, Jr. John E. Kwoka, Jr. George Washington University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 98, Issue 4, November 1983, Pages 695–704, https://doi.org/10.2307/1881784 Published: 01 November 1983

This paper provides an explanation of involuntary umemployment arising as a consequence of asymmetric information between firms and workers. Involuntary unemployment is defined as a situation where ex post gains to trade exist. A model of labor contracts is developed where the allocations are not ex post optimal. It is shown that inferiority of leisure is a necessary and sufficient condition for the existence of involuntary unemployment.

Journal Article Tax Neutrality in the Presence of Adjustment Costs Get access Andrew B. Abel Andrew B. Abel Harvard University and National Bureau of Economic Research Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 98, Issue 4, November 1983, Pages 705–712, https://doi.org/10.2307/1881785 Published: 01 November 1983

The paper addresses the effects of international liquidity conventions on the conduct and success of short-run income stabilization. Two interdependent and noncooperative nations attempt to minimize output variance subject to the international convention that adequate international reserve stocks be maintained. We demonstrate that the Nash outcome of nations which are bound by international reserve constraints is Pareto superior to the Nash outcome of unconstrained nations. With a formal model, we derive the set of Pareto-optimal liquidity conventions and explore the sensitivity of this set to the macroeconomic structural and stochastic characteristics of the nations and to the stabilization instruments that are employed.

Robert H. Smiley, S. Abraham Ravid; The Importance of Being First: Learning Price and Strategy*, The Quarterly Journal of Economics, Volume 98, Issue 2, 1

This paper seeks to cast some light on the importance of adverse selection in competitive markets by examining the market for the sale of slaves in pre-Civil War New Orleans. Estimates of the degree of adverse selection in the New Orleans market are obtained by examining the relative prices of slaves from different regions of origin. These estimates indicate that slaves brought to market may on average have been of 20 percent to 40 percent lower quality than the slave population in general, and that good slaves were perhaps three times less likely to be sold than low quality ones.

The paper examines the effect of the presence of a commodity futures market upon the price formation process in a stochastic rational expectations framework. An optimizing model with price uncertainty and risk aversion is used in order to solve equilibrium distributions of prices for nonstorable commodities. The existence of futures trading does not affect the degree of short-term spot price fluctuations. However, if the commodity market disturbance that originates from stochastic consumption demand is serially dependent, then the long-term price variation is smaller with a futures market than without it. Futures prices fluctuate less variably over time than spot and expected prices. Finally, there exists a futures intervention rule whereby the authority can stabilize spot prices and raise the overall welfare of society.

The paper develops new testable implications for monopolistic competition in the open economy. Within a two-sector model we explore how international trade affects plant size, the degree of product diversity, and excess capacity. The analysis then focuses on how trade affects the degree of domestic and international concentration, intersectoral capital mobility, and output in the competitive sector. Finally, we compare the model to the traditional Hecksher-Ohlin model and find that many of the central propositions still hold.

A two-period model of temporary equilibrium with rationing is presented, paying particular attention to agents' expectations of future constraints. It is shown that with arbitrary constraint expectations many different types of current equilibrium may be consistent with the same set of (current and expected future) wages and prices, and that constraint expectations exhibit "bootstraps" properties (e.g., a higher expectation of Keynesian unemployment tomorrow increases the probability that it will prevail today). In addition, the concept of rational constraint expectations (i.e., perfect foresight of future constraints) is introduced and shown to enhance rather than reduce the effectiveness of government policy.