Knowledge that Transforms

This paper shows how fluctuations of an erratic and unstable nature can emerge from the classical, deterministic economic growth process. Implications of the analysis would appear to be at least two. First, pronounced changes in the way an economy behaves need not cause us to reject our understanding of how it works. Second, we need not seek in exogenous forces an explanation as to why behavioral patterns change and why it may be so difficult to anticipate future events from the profile of past experience.

Journal Article A Simple Rational Expectations Keynes-type Model Get access John Bryant John Bryant Rice University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 98, Issue 3, August 1983, Pages 525–528, https://doi.org/10.2307/1886025 Published: 01 August 1983

A seller encountering risk-neutral buyers one at a time should, if commitments are feasible, quote a single take-it-or-leave-it price to each. This strategy is superior to any other for finite or infinite buyer populations, whether there is learning or the distribution of buyer prices is known at the outset, with one object for sale or many. Although haggling may offer advantages in terms of price discrimination, these gains are more than offset by the losses it generates by encouraging buyers to refuse purchases at high prices.

In a Federal system of government, each unit of government decides independently how much of each type of public good to provide, and what types of taxes, and which tax rates, to use in funding the public goods. In this paper we explore what types of problems can arise from this decentralized form of decision-making. In particular, we describe systematically the types of externalities that one unit of government can create for nonresidents, through both its public goods decisions and its taxation decisions. The paper also explores briefly what the central government might do to lessen the costs of decentralized decision-making.

The optimal timing of real investment is studied under the assumptions that investment is irreversible and that new information about returns is arriving over time. Investment should be undertaken in this case only when the costs of deferring the project exceed the expected value of inforrnation gained by waiting. Uncertainty, because it increases the value of waiting for new information, retards the current rate of investment. The nature of investor's optimal reactions to events whose implications are resolved over time is a possible explanation of the instability of aggregate investment over the business cycle.

The consequences of a horizontal merger are typically studied by treating the merger as an exogenous change in market structure that displaces the initial Cournot equilibrium. In the new equilibrium the merged firm is assumed to behave like a multiplant Cournot player engaged in a noncooperative game against other sellers. The purpose of this article is to evaluate an unnoticed comparative-static implication of this approach: some exogenous mergers may reduce the endogenous joint profits of the firms that are assumed to collude. Cournot's original example is used to illustrate this and other bizarre results that can occur in the Cournot framework if the market structure is treated as exogenous.

This paper derives an equilibrium price-quality schedule for markets in which buyers cannot observe product quality prior to purchase. In such markets there is an incentive for sellers to reduce quality and take short-run gains before buyers catch on. In order to forestall such quality cutting, the price-quality schedule involves high quality items selling at a premium above their cost. This premium also serves the function of compensating sellers for their investment in reputation. The effects of improved consumer information and of a minimum quality standard on the equilibrium price-quality schedule are studied. In general, optimal quality standards exclude from the market items some consumers would like to buy.

This paper presents a theory of competition among pressure groups for political influence. Political equilibrium depends on the efficiency of each group in producing pressure, the effect of additional pressure on their influence, the number of persons in different groups, and the deadweight cost of taxes and subsidies. An increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers. This analysis unifies the view that governments correct market failures with the view that they favor the politically powerful: both are produced by the competition for political favors.