The use of modern microeconomics in policy is illustrated by the markets for spectrum, electricity, greenhouse-gas reductions, defense procurement, and Treasury bills. Further examples are antitrust divestiture rules, market-based redistribution, fishery conservation, and privatization. The limits of the use of theory are also discussed, by reference to China's economy-wide reforms. Lessons on the policy use of theory are drawn.

The internet is bringing profound changes in scholarly publishing. The American Economic Association maintains a web site ( www.AEAweb.org ) containing the three AEA journals, bibliographic information, links to various economics information, and various services for AEA members. This note surveys the AEA's on-line initiatives.

This paper presents a method for assessing the relative importance of price increases and strengthened individual incentives due to the introduction of the responsibility system for the post-1978 increase in China's agricultural productivity. Data on post-1978 Chinese agricultural performance suggest that a little over three-quarters of the measured productivity increase is due to payment system changes and the remainder to price increases. The authors also use their method to calculate incentive indices, giving an estimate of the fraction of their marginal product that peasants received under the pre-1978 regime.

A firm maximizing expected discounted profits, taking account of the actions of its competitors, choosing price and output before (stochastic) demand is known, and holding inventories or unfilled orders to accommodate discrepancies between output and demand, is shown to respond to a change in demand by changing its output whether the demand change is transitory or permanent, but by changing the price it charges only if the demand change is permanent. This proposition is shown to be consistent with German data. The data are qualitative. The empirical analysis uses the multivariate conditional logit model; the empirical results are summarized by gamma coefficients.

R. Preston McAfee, John McMillan, Michael D. Whinston; Multiproduct Monopoly, Commodity Bundling, and Correlation of Values*, The Quarterly Journal of Econ