Linda Cohen, Steven Matthews; Constrained Plott Equilibria, Directional Equilibria and Global Cycling Sets, The Review of Economic Studies, Volume 47, Issu

The determination of wage rates and skill requirements for jobs is studied in a model where workers, who vary in ability, acquire skill through (costly) training. If firms' skill requirements are fixed, there exists a unique Nash equilibrium in wage rates, but the resulting allocation of labor is inefficient. The Nash equilibrium wage rates and allocation of labor approach the competitive equilibrium if and only if the number of job types increases on every skill range and no firm remains a monopsonist on any skill range. If firms choose both skill requirements and wage rates, no Nash equilibrium in pure strategies exists.

Bequest patterns to children are important in intergenerational models of the distribution of income and wealth. Economies that feature primogeniture will have a greater degree of inequality than those featuring equal division. This paper presents evidence on estate division among children by sex, birth order, family size, estate size, and asset composition. The results presented here are preference-generated not tax-induced due to the tax characteristics within the sampling region. It is shown that equal sharing among children is the rule, a result that casts doubt upon the "altruist" model of inheritance as advanced by Becker and Tomes.

A simple linear programming framework is used to simulate various forms of cooperation between representative farms of two villages in prewar China. The results suggest that even though the two farms individually were quite efficient revenue maximizers, significant mutual benefit would result from the formation of an elementary agricultural producers' cooperative. A move to an advanced cooperative in which dividend payments for land brought into the cooperative initially would be eliminated and income distributed solely according to labor contribution, however, would meet with strong resistance because a sizeable income loss would be involved for the farm with the larger initial land endowment.

A so-called "incentive contract " is a linear payment schedule, where the buyer pays a fixed fee plus some proportion of audited project cost. That remaining proportion of project cost borne by the seller is called the "sharing ratio. " A higher sharing ratio creates more incentive to reduce costs. But it also makes the agent bear more cost un-certainty, requiring as compensation a greater fixed fee. The tradeoff between incen-tives and risk in determining the sharing ratio of an efficient contract is the central theme of the present paper. A formula is derived that shows how the optimal sharing ratio depends on such features as uncertainty, risk aversion, and the contractor's ability to control costs. Some numerical examples are calculated from the area of defense contracting. SUMMARY This paper analyzes the widely used "incentive contract"—a linear payment schedule where the buyer pays a fixed fee plus some proportion of project cost. The remaining proportion of project cost borne by the seller is usually called the "sharing ratio. " A higher

This paper builds a formal theory of consumer behavior under imperfect information when goods are described by multiple characteristics which vary in their degree of "observability." An optimal strategy for the consumer is shown to exist. In general, this strategy is shown to involve both inspection (sampling to observe general characteristics of goods) and evaluation (consumption of goods to observe specific characteristics). Comparative statics of the optimal strategy are also analyzed.

Journal Article Target Controllability Get access Alfred L. Norman, Alfred L. Norman Board of Governors of the Federal Reserve System, Washington, and University of Texas at Austin Search for other works by this author on: Oxford Academic Google Scholar Woo S. Jung Woo S. Jung Vanderbilt University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 47, Issue 2, January 1980, Pages 451–457, https://doi.org/10.2307/2297004 Published: 01 January 1980 Article history Received: 01 January 1977 Accepted: 01 November 1978 Published: 01 January 1980

In a recent article Vanek and Jovicic [1975] (VJ) have analyzed interindustry income differences in Yugoslavia. Their main argument is that in Yugoslavia worker-managed firms accumulate capital and grow mainly by means of their internal (collective) savings. This implies that the income per worker of any firm at any moment of time is composed of a "pure labor income " component and an implicit rental on capital previously accumulated. That is, y = Y/L = a + rK/L, where y is income per worker of any firm, a is the "pure labor income" component, r is the shadow rental on capital, and KIL is capital intensity. They estimate each income component by a cross-sectional re-gression of the form, y = a + bk + u, where y is output per unskilled-labor equivalent, k is capital per un-skilled-labor equivalent, a, b are constants, and u is a random dis-turbance term. The result is, (1) y = 2.50 + 0.0908 k (s.e.) (0.29) (0.040) (t) (8.63) (2.25) R2 = 0.23. A second part of the paper considers factors that could influence the "pure income " component, mainly, inflation rates (Xi), monopoly power (X2), and price controls (X 3). A regression of the residuals from equation (1) on X 1 to X3 is run in order to determine the relative importance of the latter in explaining variation in income per worker among industrial branches. The coefficients obtained are statistically insignificant and the conclusion is that "the variables used do not explain sufficiently the differences in incomes " [VJ, 1975]. Our main criticism is that you cannot try to decompose income per worker variation into a "pure income " and a capital intensity-* E. D. Domar, L. Thurow, and L. Toharia read previous drafts of the manuscript. Errors, of course, remain my sole responsibility.

Terry Dielman, Timothy J. Nantell, Roger L. Wright, Price Effects of Stock Repurchasing: A Random Coefficient Regression Approach, The Journal of Financial and Quantitative Analysis, Vol. 15, No. 1 (Mar., 1980), pp. 175-189