In a repeated partnership game with imperfect monitoring, we distinguish among the effects of (1) reducing the interest rate, (2) shortening the period over which actions are held fixed, and (3) shortening the lag with which accumulated information is reported.All three changes are equivalent in games with perfect monitoring.With imperfect monitoring, reducing the interest rate always increases the possibilities for cooperation, but the other two changes always have the reverse effect when the interest rate is small.
An allocation for an exchange economy with smooth preferences is shown to be Walrasian if there is a set of net trades that is closed under addition, contains the negations of net trades that would improve any agent's final bundle, and is such that each agent's final bundle is weakly preferred to the sum of the initial endowment and any allowed net trade. These conditions characterize the sets of net trades available in equilibria of market games in which randomly paired agents bargain repeatedly and imply that steady state equilibria are Walrasian. Copyright 1991 by The Econometric Society.
This paper is concerned with the theory of saving when consumers are not permitted to borrow, and with the ability of such a theory to account for some of the stylized facts of saving behavior.When consumers are relatively impatient, and when labor income is independently and identically distributed over time, assets act like a buffer stock, protecting consumption against bad draws of income.The precautionary demand for saving interacts with the borrowing constraints to provide a motive for holding assets.If the income process is positively autocorrelated, but stationary, assets are still used to buffer consumption, but do so less effectively, and at a greater cost in terms of foregone consumption.In the limit, when labor income is a random walk, it is optimal for impatient liquidity constrained consumers simply to consume their incomes.As a consequence, a liquidity constrained representative agent cannot generate aggregate U.S. saving behavior if that agent receives aggregate labor income.Either there is no saving, when income is a random walk, or saving is contracyclical over the business cycle, when income changes are positively autocorrelated.However, in reality, microeconomic income processes do not resemble their average, and it is possible to construct a model of microeconomic saving under liquidity constraints which, at the aggregate level, reproduces many of the stylized facts in the actual data.While it is clear that many households are not liquidity constrained, and do not behave as described here, the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life-cycle models.
This paper concerns the design of the firm organization to obtain and use information efficiently in organization decision making. The focus is on coordination of shop managers' operating decisions through the choice of the organization structure such as the coordination system (hierarchical or horizontal) and information processing capacities of subordinates (specialists or generalists). Assuming that information acquiring, rocessing, and communication are costly, we show that in "volatile" environments, the optimal organization structure is the one typically found in Japanese firms, where coordination tasks are delegated to bordinates who are nonspecialized in tasks and information acquiring so that they can share each other's cn-the-spot knowledge.
This paper demonstrates that an optimizing model of a monetary economy can produce perfect foresight equilibria in which the price level fluctuates forever. Cyclically or chaotically fluctuating equilibria are more likely to exist when the rate of money supply growth is high. Furthermore, the set of equilibrium prices may have a complicated topological structure, which poses a more serious problem concerning the validity of comparative statics method than any sort of indeterminacy previously discussed in the literature. Copyright 1991 by The Econometric Society.
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The decentralization of decision-making is analyzed when agents may have information that is incomplete and possibly exclusive. Theorems provide conditions under which there exists a mechanism whose Bayesian equilibria coincide with a desired collection of social choice functions. The first theorem characterizes Bayesian implementation in economic environments with three or more individuals. The second theorem extends the analysis to noneconomic environments. An example exhibits differences between Bayesian implementation and Nash implementation. Copyright 1991 by The Econometric Society.
A normal Roy model with four sectors is developed. It allows to derive tests of several assumptions on the working of the labor market: strongly or weakly competitive or segmented. It shows that more important a feature of labor markets than segmentation is the presence of comparative advantages for individuals between the various economic sectors. The model is applied to data on women's labor-force participation in the main towns of Colombia in 1980. It uses multivariate probit and Tobit techniques. Copyright 1991 by The Econometric Society.