Knowledge that Transforms

[This paper proposes a simple theory to explain bargaining impasses, which is based on Schelling's view of the bargaining process as a struggle between bargainers to commit themselves to favorable bargaining positions. Because bargaining impasses are generally Pareto-inefficient, anything involving a positive probability of impasse is Pareto-inefficient as well. It is demonstrated that in spite of this avoidable inefficiency, when successful commitment is uncertain and irreversible it can still be rational for individuals to attempt commitment and thereby risk an impasse; in a leading special case, the model reduces to a Prisoner's Dilemma game, in which only strategic-dominance arguments are needed to establish this conclusion. Further, making commitment more difficult, or changing the costs of disagreement in a way that makes available a wider range of settlements that are better for both bargainers than disagreement, need not always lower the probability of impasse, in spite of the conventional wisdom to the contrary.]

THE MAIN PURPOSE of this paper is to provide an axiomatic approach to marginal cost (MC) pricing and to point out its similarity with Aumann-Shapley (A-S) pricing. The latter is a cost-sharing price mechanism discussed in [3 and 6] that is derived from a set of five natural axioms. In this paper we consider models in which there is one producer with a given technology who faces fixed input prices and produces a finite number of consumption goods. Thus, we can uniquely derive the cost function that describes the minimal cost of producing a given vector of consumption goods. By a price mechanism P(., ) we mean a rule or a function that associates with each cost function F and vector a of quantities, a vector of prices:

[A class of decompositions is derived for the variance-covariance matrix Ω of a generalized error components model, introduced in [18 and 19]. The spectral decomposition of Ω is a member of this class. For estimation purposes certain other members of the class are preferred, especially those that allow for simplifying transformations of the model not depending on unknown parameters. The transformations suggest simple and asymptotically efficient estimators of both the parameters in Ω and the parameters in the systematic part of the model.]

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Examples are given which show that:(i) normality is not Necessary for the consistency of the quasi maximum likelihood estimator in the nonlinear simultaneous equations model (nonlinear FIML) even when there are major departures from linearity; and (ii) the lemma which is used extensively by Amemiya [2] in the theoretical development of the properties of nonlinear FIML under the assumption of normality is, as presently stated, incorrect.

An update of a classic book in the field, Modern Portfolio Theory examines the characteristics and analysis of individual securities as well as the theory and practice of optimally combining securities into portfolios. It stresses the economic intuition behind the subject matter while presenting advanced concepts of investment analysis and portfolio management. Readers will also discover the strengths and weaknesses of modern portfolio theory as well as the latest breakthroughs.