The theory of stationary job search predicts that, controlling for other factors that affect the probability of leaving unemployment, duration and reservation wages are likely to be positively associated. The paper tests this prediction for British cross-sectional data from 1982 using an estimating equation implied by search theory. Simultaneity is crucial in the evaluation of this prediction, with single-equation and instrumental-variable estimates differing markedly. Perhaps surprisingly, given the extreme paucity of both job interviews and offers in the sample, the main finding is that reservation wages play a significant role in the determination of duration.

This paper extends financial option theory by developing a methodology for the valuation of claims on a real asset: an offshore petroleum lease. Several theoretical and practical problems, not present in applying option pricing theory to financial assets, are addressed. Most importantly, we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset (petroleum reserves). The advantages of this approach over conventional discounted cash flow techniques are emphasized. The methodological development provides important insights for both company behavior and government policy. Promising empirical results are reported.