We analyze entry, pricing, and product design in a model with differentiated products. Market equilibrium can be “separating,” with multiple sellers and a sorting of heterogeneous consumers across goods, or “exclusionary,” with one seller serving all customer types. Entry into an initially monopolized market can occur because of cost reductions or product improvements, but entry need not lower the incumbent’s price, improve efficiency, or raise consumer welfare. Postentry design incentives favor a softening of price competition and stronger market segmentation, whereas exclusionary design changes typically raise consumer welfare. Potential, as distinct from actual, entry always benefits consumers.

Allegations of Bidder collusion at Forest Service timber sales in the Pacific Northwest were common in the 1970s. Of course, prices may be low for reasons other than collusion. We formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions. Noncooperative behavior in which a single unit is sold (the standard auction model) is a special case: it is found to be definitively outperformed by a model of collusion. We also find that supply effects are dominated by collusion in determining the winning bids in the market.

In this paper we explore various criteria for risky decision making and examine the relationship among these rules, full cost pricing, and safety margin maximization. The three rules are alternative versions of the "safety-first" principle; each is concerned with expected profits and with the probability of loss. Since the probability of loss can be identified with the firm's margin of safety, these rules can be viewed as alternative ways of making a compromise between expected profit maximization and high safety margins. They result in various output policies which can be most simply characterized as "full cost" or"safety margin" pricing. Rules of thumb related to recovering full cost are therefore explained by the marginal analysis that was supposed by some to refute them.

Macroeconomic news announcements are elaborate and multidimensional. We consider a framework in which jumps in asset prices around announcements reflect both the response to observed surprises in headline numbers and to latent factors, reflecting other news in the release. Non-headline news, for which there are no expectations surveys, is unobservable to the econometrician but nonetheless elicits a market response. We estimate the model by the Kalman filter, which efficiently combines OLS and heteroskedasticity-based event study estimators in one step. With the inclusion of a single latent surprise factor, essentially all yield curve variance in event windows are explained by news.

It has long been recognized that commodity movements and factor movements are, to a degree, substitutes for each other in international exchange (see Carl Iverson, Mountifort Longfield, James Meade, Bertil Ohlin, John H. Williams). Yet, until recently, the dominant theory of international trade, the Heckscher-Ohlin (H-O) model, had been rather thoroughly analyzed under the rigid assumption of the immobility of factors. Only in 1957, with the publication of Robert Mundell's important article, was capital mobility in a H-O model explored. This paper presents a fuller treatment of capital mobility in the H-O model. We discuss the model under conditions of tariffs on goods flows and taxes on capital relocations. Nations may trade by exchanging goods or by exchanging their relatively abundant factors which produce those goods. We demonstrate that the substitutability between these two avenues of exchange continues to hold even under conditions of tariffs and taxes. The dynamics and equilibria are demonstrated, showing that a nation will pay for its imports either through exports of goods or through earnings on foreign-placed capital, not through both of these methods. Tariffs and tax rates will dictate which will occur, i.e., tariffs and taxes will be shown to affect the pattern of trade, not merely the quantities of commodities traded. We also correct a hitherto general and unrecognized error. We show that the levying of a tariff does not necessarily generate a relative price differential (of final goods prices) between the trading countries equal to the tariff proportion. The relative price differential will often be less than the tariff proportion, and this holds even though the good is still imported into the country. Further, contrary to previous results (see Ronald Jones 1967), we show that, generally, a tariff-cum-tax levy will not result in the complete specialization of production.

Myths and legends about the Great Depression have dominated the public's perception of the business cycle. They have shaped government policy and, until recently, they have even held powerful sway among economists. In the immediate aftermath of the Great Depression, many economists came to question the fundamental concept of economic equilibrium. Velocity was thought to be highly unstable -as in the case of the liquidity trap-so that the quantity of money supplied was consistent with any level of nominal income. In the real sector, there was the frightening specter of underemployment

Using Student Performance Data to Identify Effective Classroom Practices by John H. Tyler, Eric S. Taylor, Thomas J. Kane and Amy L. Wooten. Published in volume 100, issue 2, pages 256-60 of American Economic Review, May 2010

We examine the risky choices of contestants in the popular TV game show "Deal or No Deal" and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory, and suggest that path-dependence is relevant, even when the choice problems are simple and well defined, and when large real monetary amounts are at stake.