This paper describes a stochastic model of the process of competition via technological innovation as it might occur within a single industry. Individual firms undertake R&D projects in the hope of acquiring a decisive competitive advantage over their rivals. But such advantages and the economic rents arising from this are only temporary; they eventually disappear in the face of imitation, entry, and innovation by other firms. At the industry's long-run equilibrium, concentration and the pace of technological innovation are jointly determined by the conditions of entry and the extent of innovative opportunity. The model implies relationships among these variables that have in fact been detected in the empirical R&D literature.

The paper discusses how advertising and economies of scale in production interact to produce economies of scale. The latter are defined to occur when costs per dollar of revenues decline with revenues. It is argued that, in an industry with differentiated products and advertising, it is the declining costs per collar of revenues rather than declining production costs per unit of output that directly affects entry barriers and the profitability of established firms.

This paper presents an analysis of a quasi-risk-averse bank facing uncertainty with respect to demand deposit flows and default risk on loans. On the basis of a formal model, testable hypotheses of bank attitude toward risk and the qualitative behavior of the index of relative risk aversion for commercial banks are developed. Through the use of data on the member banks of the Tenth Federal Reserve District, the empirical tests that were conducted indicated that banks are strongly risk-averse and that their index of relative risk aversion is increasing in profits. These results suggest that favorable (unfavorable) environmental changes will generate income effects that will result in proportionately less (more) risk taking by banks.

This paper develops a stochastic framework for determining transactions and precautionary demand for money. Through application of the principles of inventory management, the analysis integrates and extends the work of Baumol, Tobin, and Miller and Orr. Optimal money holdings are shown to depend on the rate of interest, on the mean and the variance of net disbursements and on the cost of portfolio adjustment. The properties of the distribution of the payment period are analyzed. The optimal solution is obtained by minimizing net present value of cost. This solution is compared with the one obtained by the conventional method of minimizing the steady-state cost.

We analyze Schumpeterian entrepreneurship within a general equilibrium model of a competitive economy patterned after Lucas. All individuals have access to exogenously growing knowledge. Those who acquire sufficient knowledge become entrepreneurs. If learning is only a function of ability, the faster the progress, the fewer the entrepreneurs, and the higher their pay relative to workers' wages. If knowledge is only a function of lifetime, the faster the progress is, the earlier the entry will be into the entrepreneurial group. When age and ability are considered together, the individuals (if any) who become entrepreneurs with faster progress are younger and more able than those (if any) who drop out of the group.

This paper examines adherence to social customs. Models of social customs are found to be inherently multi-equilibrial. It is found that social customs which are disadvantageous to the individual may nevertheless persist without erosion, if individuals are sanctioned by loss of reputation for disobedience of the custom. One example of such a social custom is the persistence of a fair (rather than a market-clearing) wage. In this fashion, involuntary unemployment is explained.

Journal Article On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households Get access Robert A. Becker Robert A. Becker Indiana University, Bloomington Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 95, Issue 2, September 1980, Pages 375–382, https://doi.org/10.2307/1885506 Published: 01 September 1980

This paper studies trade theory for the case of a continuum of goods, two factors, two countries, and Cobb-Douglas demand functions. If factor endowments are similar, factor price equalization obtains and geographic patterns of production are indeterminate; nonetheless the effects of changes in factor endowments on prices and welfare in each country are well defined. Factor price equalization does not obtain if factor endowments are far apart, and the geographic pattern of specialization is then determinate. The effects of changes in endowments on the range of goods produced in each country and on prices of goods and factors are analyzed for this case, and the elasticity of substitution in production is shown to play an important role in determining comparative static outcomes.

This paper explores the consequences of the timing of payments for the demand for money. It is found that if payments are the minimum of the money in the bank account or bills due, the demand for money will respond slowly to changes in income. This prediction disagrees with some formulations of the short-run demand for money (e.g., Irving Fisher's) but agrees with empirical estimates. The demand for money is adjusted to supply by changes in quantities (i.e., payments flows) rather than by changes in prices or interest rates.