This paper examines the Tokyo Round negotiation (1973-1979) under various cooperative game solution concepts. Out of the many tariff-cutting proposals in the Tokyo Round, the Swiss proposal was finally agreed upon by all major players. The choice of the Swiss proposal suggested that egalitarian considerations are important for this type of cooperative game. Since the Kalai-Smorodinsky solution, the Shapley value (modified) and the nucleolus solution have this egalitarian property, they all predict the outcome of the negotiation very well. THIS paper investigates the types of cooperative game solution concepts that best describe the tariff reduction negotiations in the Tokyo Round (1973-1979). Since the objective is to infer the type of game that can closely model the actual negotiation, the best game concept for our purposes is the one which predicts the actual outcome (the Swiss tariff-cutting formula) most successfully under periodic resurgence of protectionist ideology as occurred during the Tokyo Round negotiations. There are various cooperative solution concepts: Some emphasize the egalitarian nature of the outcome, some the efficiency nature of the outcome and some emphasize both aspects (see section II). The present paper concludes that when the change in a country's trade balance becomes an important consideration for negotiators, the egalitarian aspect emerges as the most important cooperative game solution concepts. An interesting finding of the present paper is the bargaining powers of the four major players (United States, EEC, Japan, and Canada) were roughly equal. As shall be explained, this is because each of these players was equally destructive to the Tokyo Round negotiation. There are currently four simulation studies on the impacts of the Tokyo Round (Deardorff and Stern (1983), Baldwin et al. (1980), Brown and Whalley (1980), and Cline et al. (1978)). The present paper uses the simulation studies by Cline et al. for our analysis for three reasons: (1) The Brookings study is based on Keynesian short-run impacts of the Tokyo Round, which seems to fit the objectives of negotiators; (2) it represents the most complete welfare analysis of various proposals; and (3) it was the most influential study done around that time; perhaps it can reflect the conventional wisdom of negotiators in that period.' The present paper is organized as follows: Section I discusses the basic assumptions. Section II examines various game solution schemes or concepts. Section III presents the case of the five major proposals. Section IV extends the result of section III to twelve proposals. Section V discusses the robustness of various assumptions followed by a conclusion in section VI.

For the last twenty years economists have debated the advantages of free and fixed exchange-rate regimes. Milton Friedman argues that if internal prices and wages were inflexible, it would be preferable to allow adjustment to occur through a depreciation of domestic currency. Svend Laursen and Lloyd Metzler, Egon Sohmen, and Murray Kemp argue in favor of free (floating) exchange rates by the familiar insulation properties of free rates. Jerome Stein classifies a conflict (compatible) economy as one in which a decline in output is accompanied by an excess demand (supply) of foreign exchange. When output falls for a compatible economy in a free (fixed) exchange-rate regime, the resultant appreciation of domestic currency (increase in the level of money balances) tends to reinforce (mitigate) the initial decrease in output. When output falls for a conflict economy in a free (fixed) exchangerate regime, the resultant depreciation of domestic currency (decrease in the level of money balances) tends to mitigate (reinforce) the initial decline in output. Stein then concludes that a free (fixed) exchange-rate regime is optimal for the conflict (compatible) economy. There are two major shortcomings of previous comparisons of different exchangerate regimes: the first is the lack of disequilibrium behavior. In this paper, I develop a disequilibrium model for the analysis.' It will be assumed that the money wage adjusts slowly and transactions can occur at labor market disequilibrium. Unemployment gein erated from this type of economic behavior is typically involuntary. The second shortcoming is that the results are limited to static short-run comparisons. Most of the previous analyses are based on the standard Keynesian variable income model with rigid wages and prices.2 Though wages and prices may be considered as fixed in the short run, they must adjust in the long run. In the literature, these long-run aspects have never been satisfactorily analyzed.3 Indeed, this leaves a good part of the problem out of the picture. In order to evaluate the overall efficiency of exchange-rate regimes, in addition to short-run comparisons, we should also consider the shapes (or speeds of adjustment) of long-run time paths of different exchangerate regimes. To overcome these setbacks, I construct a disequilibrium model that traces out the long-run time path of different exchange-rate regimes. Not only will the short-run comparative statics be considered, but also the long-run adjustments of those sticky prices. My analysis shows that Stein's classification can be extended to a long-run dynamic framework. For a conflict (compatible) economy, a free (fixed) exchange-rate regime is superior to a fixed (free) exchange-rate regime, even though the latter regime may have a faster speed of adjustment than the former. In Section I, the analytical framework of the model is developed. Section II analyzes the short-run level of unemployment for each exchange-rate regime; and Section III is an examination of the long-run time paths for

This paper is concerned with the theory of implicit labor contracts. The implications of introducing hours worked or effort as an argument both in workers' utility functions (in addition to the wage rate) and in firms' production functions (in addition to the number of workers) are considered. It is shown that layoffs can occur at equilibrium in the absence of unemployment compensation and value of leisure, but only because of the inclusion of this additional variable.