This paper concerns the classification of biases in the set of produced varieties in a monopolistically competitive equilibrium in the natural oligopoly setting. That is, we analyze the relationship between the set of produced goods in equilibrium when fixed costs are small and the set of produced goods by a social planner when fixed costs equal zero. It is shown that if all of the goods are substitutes, there are never too few varieties, and there may be too many. Conversely, if the goods are all complementary, there are never too many, and there may be too few

This paper presents some evidence on expenditure patterns over the lifecycle that has a direct bearing on the question of whether households are significantly credit constrained. Our particular test looks at the consumption of food, alcoholic beverages, and tobacco to see whether the consumption of the latter two “goods” falls as couples have children. The latter usually involves a decrease in household current income and an increase in needs. If households are not credit constrained, they should maintain their consumption of alcoholic beverages and tobacco. We find no significant decrease in the consumption of these goods

Francois Melese, William Transue; Unscrambling Chaos through Thick and Thin: An Explanation, The Quarterly Journal of Economics, Volume 102, Issue 1, 1 Feb

This paper shows that under plausible assumptions, the inability of lenders to discover all of the relevant characteristics of borrowers results in investment in excess of the socially efficient level. Raising the rate of interest above the free market level will restore optimality. This conflicts with generally held views and is contrasted with the Stiglitz-Weiss model. It is shown that the assumptions which yield overinvestment support debt as the equilibrium method of finance. However, under the Stiglitz-Weiss assumptions, used to derive an underinvestment result, equity is shown to be the equilibrium method of finance

Don L. Coursey, John L. Hovis, William D. Schulze; The Disparity Between Willingness to Accept and Willingness to Pay Measures of Value*, The Quarterly Jou

We demonstrate that stochastic bubbles which have a constant, exogenous, probability of collapsing may exist, in general equilibrium, on an intrinsically useless and unbacked asset (money). This may happen provided that the probability q that the bubble will persist next period is large enough and exceeds a threshold level Q which we call the minimum rate of confidence. This condition is always violated when the economy without bubble is dynamically efficient. It is more likely to be satisfied, in dynamically inefficient economies, the larger the “size” of the inefficiency (as measured by the excess of the growth rate over the no-bubble interest rate). We study both exchange and production economies.

This paper undertakes three sets of tasks: (i) it analyzes positive and normative aspects of price scissors (the domestic terms of trade between agriculture and industry) within nonsocialist as well as socialist LDCs. The critical role of the economy's institutional features (e.g., external trade environment, wage and income determination, and wage-productivity effects) is emphasized. Certain aspects of the Soviet Industrialization Debate and subsequent collectivization are interpreted, (ii) It develops simple rules to delineate who gains and who loses (within agriculture) from changes in terms of trade, (iii) It presents powerful (and informationally parsimonious) rules for Pareto-improving price reforms for cash crops and agricultural inputs

This paper examines consumption changes of workers following experiences of unemployment in different stochastic environments. The model developed in the paper predicts that consumption changes following unemployment spells should be small for workers the higher are their layoff and recall probabilities. These predictions are confirmed in estimates with panel data

Jack L. Knetsch, J. A. Sinden; The Persistence of Evaluation Disparities*, The Quarterly Journal of Economics, Volume 102, Issue 3, 1 August 1987, Pages 69

We consider two kinds of “outside opportunity” that a seller of an indivisible good might have: selling to a different buyer and consuming the good herself. In both models the seller is uncertain about the buyer's valuation, and becomes more pessimistic over time. When the seller becomes sufficiently pessimistic, she prefers the outside opportunity, so she will not bargain indefinitely with the current buyer. Despite the resulting finite-horizon nature of negotiations, the link between the buyer's willingness to accept an offer and the seller's eagerness to go “outside” generates multiple equilibria.