The von Neumann-Morgenstern theory of games does not yield determinate solutions (corresponding to unique payoff vectors) for two-person variable-sum games and for n-person games. The present paper outlines a general theory of rational behavior in game situations which does yield determinate solutions for all classes of games. The theory is based on two classes of rationality postulates: those defining rational behavior as'such, and those defining rational expectations concerning the other players' behavior. It is argued that this new approach greatly increases the possibilities for the application of game theory in economics and the other social sciences.

T HIS paper reports on a study of the relation between peoples' incomes and the way they allocate their time to income and leisure. Time can be spent either on the earning of income (work) or on a host of alternative noneconomic activities (leisure). It is a question of real significance whether, as incomes rise, people systematically change their distribution of time between these activities. However, it is a question to which economics provides no agreed upon answer. No a priori or theoretical answer is possible because we know that, as sellers of their own time, people are pulled in opposite directions by conflicting income and substitution effects. On the other hand, no empirical evidence has thus far been widely accepted despite surprisingly consistent empirical results. But since economic growth and rising incomes are part of a pervasive economic climate, this aspect of peoples' behavior the way they respond to increased economic well-being is of very real importance, in part because it will feed back as an influence on the rate and pattern of growth itself, both in advanced and in underdeveloDed countries.' This subject, of course, is discussed in the theory of public finance as the incentive effect of tax and expenditure, in macro and labor theory as the shape of the long-run aggregate labor supply curve, and in the literature of economic development as the response to changing sectoral terms of trade. This study is empirical. It uses aggregate international cross-sectional data to reveal the typical relation between incomes and hours of work-i.e., between incomes and the allocation of effort (as synonymous with time) to the acquisition of income. Previous empirical studies either have shown that relationship to be negative -work effort decreases with increasing incomes or at the least, have failed to show a positive correlation. The data used in those earlier studies were intercity and interindustry cross-sections [2, 7, 8], industry data over time [71, and cross-sections of occupational sub-groups within a society [2]. The major purpose of this study is to test the conclusions of those earlier investigations to see if these very different international aggregate data confirm that the relation is negative. A secondary objective is to use these data to evaluate possible influences, additional to income, on a society's allocation of effort.

F LUCTUATIONS in economic activity depend not only on variation in investment but also on variation in saving. How flexible or inflexible saving will be depends partially on previous commitments to save. The concept of saving, has been defined ' by the Survey Research Center of the University of Michigan to include life insurance premium payments,2 payments into retirement or pension funds,3 and principal payments on mortgage debt.4 Non-contractual forms of saving may be called discretionary. All of the components included in the Survey Research Center's definition have common characteristics: (1) Each hinges on a previous contract limiting the possibility of spending on consumer goods. (2) The contractual commitment is of a long-term nature. Two factors would seem to make contractual saving relatively stable: (1) the habitual response to previous decisions, and (2) the economic loss suffered by prematurely discontinuing a long-term commitment to save. The primary purpose of this study is to search for the factors influencing the level of contractual saving. Tests of significance are applied by comparing the coefficients of the selected variables in multiple regressions with their respective standard errors. Our work is different and more comprehensive than the analysis of life insurance premiums by Professors Kreinin. Lansing. and Morgan.5 We are concerned with the aggregate amount of contractual saving rather than with only one of its components. Also, the population is divided into a low-income group and la high-income group with separate analyses for each. The analysis of contractual saving is becoming increasingly important since the trend of contractual saving as a per cent of total saving is upward. In 1949, contractual saving was almost as large as total saving since discretionary dissaving largely offset positive discretionary saving. In explaining aggregate contractual saving both for the high-income group and for the low-income group, our basic theory was clearly confirmed. Disposable income, marital status and the presence or absence of children, and educational level all proved to be significant.6 The power of their influence was in the order stated with disposable income dominant. Race did prove to be significant for the high-income group while age was significant within the lowincome group. Further details must wait.

This paper considers several related problems in the theory of optimal capital structure for corporations. It is divided into four sections, which may be briefly summarized as follows.1. Modigliani and Miller (MM) proposed that under the assumption of perfect markets and in the absence of taxes on corporate income, the total market value of the firm is unaffected by leverage. They showed that the leverage irrelevance proposition holds for “non-growth” firms when all investors agree in their estimates of the expected amount and the risk of each firm's future earnings. In section I, we show that this conclusion is not affected by growth trends or heterogeneous investor expectations. However, our analysis uncovers several additional assumptions which must be made explicitly for MM's Proposition I to hold. These additional assumptions pertain to the effects of leverage on the firm's future financing needs and future investment decisions. The generalized state-preference framework used for this demonstration is retained for subsequent discussion.

In recent years, a number of power spectra have been estimated from economic data and the majority have been found to be of a similar shape. A number of implications of this shape are discussed, particular attention being paid to the reality of business cycles, stability and control problems, and model building.

Journal Article Biases in Empirical Estimates of the Elasticities of Substitution of C.E.S. Production Functions Get access G. C. Harcourt G. C. Harcourt Trinity Hall, Cambridge Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 33, Issue 3, July 1966, Pages 227–233, https://doi.org/10.2307/2974416 Published: 01 July 1966

I. Introduction, 400.—II. The initial situation, 401.—III. The entry of the government firm, 401. — IV. Price discrimination by the government firm, 407. — V. The government firm's size, 409. — VI. A numerical example, 410.— VII. Concluding remarks, 412.