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Nonmyopic Strategic Behavior in the MDP Planning Procedure

Econometrica 1984 52(5), 1179
This paper addresses the question of nonmyopic strategic behavior in an MDP planning procedure which is terminated when the rate of adjustment in the quantity of the public good is below some prespecified threshold. The problem is formulated as a dynamic game in which utility functions are additively separable. It is shown that the game possesses perfect Nash equilibria whose outcomes are Pareto optima. Moreover, any individually rational Pareto optimum can be attained through one of these Nash equilibria. Strategies in these equilibria involve a rate of revision in the quantity of the public good that is equal to the threshold level and insures monotonic convergence of the procedure in finite time.

Using Exogenous Elasticities to Induce Factor Substitution in Input-Output Price Models

The Review of Economics and Statistics 1984 66(2), 329
A device is presented that allows the user of any input-output price model to induce modifications in some selected coefficients in response to changes in prices. These modifications are induced by specifying the values of some elasticities, whenever they are defined. These values may come from other studies, from the user's own knowledge or beliefs about the situation, or from those of experts. If subjective elasticities are used, a simple rationality rule greatly reduces the task of determining their values when the substitution between two inputs or two groups of inputs is assumed to be a function of their prices only. This assumption does not prevent there being, in a second stage, substitution between these two inputs treated as a group and other inputs or groups of inputs.