Market responses to legislative reforms often mitigate the expected gains that reformers promise in legislation. Contemporaries hailed workers' compensation as a boon to workers because it raised the amount of postaccident compensation paid to injured workers. Despite the large gains to workers, employers often supported the legislation. Analysis of several wage samples from the early 1900s shows that employers were able to pass a significant part of the added costs of higher postaccident compensation on to some workers in the form of reductions in wages. The size of the wage offsets, however, was smaller for union workers.

Sellers sometimes practice a form of false advertising known as bait and switch. A low-priced good is advertised but replaced by a different good at the showroom. the practice is surprising since advertising the wrong good discourages the appropriate buyers from shopping, attracting customers who will be disappointed when they see the good. Firms bait and switch to draw a greater number of shoppers. The cost is that some who would have bought the good that is for sale may not bother to look. Under a variety of conditions, bait and switch is a profitable strategy resulting in a fully rational equilibrium with false advertising.

Sellers sometimes practice a form of false advertising known as bait and switch. A low-priced good is advertised but replaced by a different good at the showroom. the practice is surprising since advertising the wrong good discourages the appropriate buyers from shopping, attracting customers who will be disappointed when they see the good. Firms bait and switch to draw a greater number of shoppers. The cost is that some who would have bought the good that is for sale may not bother to look. Under a variety of conditions, bait and switch is a profitable strategy resulting in a fully rational equilibrium with false advertising.

With the same normalization as that for standard parametric statistics, and centered at a parameter of interest, many semiparametric estimates based on n observations have been shown to be root-n-consistent and asymptotically normal. In the context of semiparametric averaged derivative estimates, the author goes further by showing that the rate of convergence of the finite-sample distribution to the normal limit distribution can equal that of standard parametric statistics.

This paper proposes a model of the process by which players learn to play repeated coordination games, with the goal of understanding the results of some recent experiments.In those experiments the dynamics of subjects' strategy choices and the resulting patterns of discrimination among equilibria varied systematically with the rule for determining payoffs and the size of the interacting groups, in ways that are not adequately explained by available methods of analysis.The model suggests a possible explanation by showing how the dispersion of subjects' beliefs interacts with the learning process to determine the probability distribution of its dynamics and limiting outcome.

Using a sample of 856 management earnings forecasts, we provide evidence that managers release larger shock‐earnings forecasts in nontrading periods. Our results do not depend on whether the magnitude of the shock is measured exogenously (unexpected accounting earnings) or endogenously (security market reaction). The timing effects are more pronounced for less‐precise (i.e., open‐interval and closed‐interval) forecasts. Also, we provide evidence of an overnight reaction to closed‐period management forecast releases. Our results are consistent with explanations for voluntary disclosure that rely on a precommitted policy of information asymmetry reduction (see Diamond 1985; King, Pownall, and Waymire 1990). These explanations lead to predictions of strategic timing of greater shocks in the nontrading period in order to provide the less‐informed with a period for information evaluation. Résumé. À partir d'un échantillon de 856 prévisions de bénéfices publiées par la direction de diverses entreprises, les auteurs démontrent que les prévisions publiées par les gestionnaires en période où les titres ne sont pas négociés ont davantage d'impact. Les résultats qu'ils obtiennent ne dépendent pas du caractère exogène (bénéfices comptables inattendus) ou endogène (réaction du marché des valeurs mobilières) de la mesure de l'impact. L'effet du choix du moment est plus prononcé pour les prévisions moins précises (c'est‐à‐dire à intervalle ouvert et à intervalle fermé). Les auteurs démontrent aussi qu'il se produit une réaction à la publication de prévisions par la direction en période de fermeture, dans les vingt‐quatre heures qui suivent la publication. Les résultats de l'étude sont conformes au principe de la présentation facultative d'information dont l'explication repose sur une politique, préalablement adoptée, de réduction de l'asymétrie de l'information (voir Diamond, 1985; King, Pownall et Waymire, 1990). Cette explication mène à des prédictions voulant que l'on choisisse, à des fins stratégiques, les périodes de non‐négociation des titres pour publier les prévisions de bénéfices dont l'impact est plus grand, de manière à laisser aux investisseurs moins bien informés un certain laps de temps pour évaluer l'information.

In the competitive model, externalities lead to inefficiencies, and inefficiencies increase with the size of externalities. However, as argued by Coase, these problems may be mitigated in a decentralized system through voluntary coordination. We show how coordination is limited by the combination of two factors: respect for individual autonomy and the existence of private information. Together they imply that efficient outcomes can only be achieved through coordination when external effects are relatively large. Moreover, there are instances in which coordination cannot yield any improvement at all, despite common knowledge that social gains from agreement exist. This occurs when external effects are relatively small, and this may help to explain why coordination is so seldom observed in practice. When improvements are possible, we describe how simple subsidies can be used to implement second-best solutions and explain why standard solutions, such as Pigovian taxes, cannot be used. Possible extensions to issues arising in the structure of research joint ventures, assumptions in the endogenous growth literature, and the location of environmental hazards are also described.

That firms employ internal labor markets, in which wages and careers are partly shielded from the vagaries of external labor markets, seems well accepted. Yet, Peter Doeringer and Michael Piore's (1985) seminal work on internal labor markets has had a rather limited impact on the economics profession. In contrast to textbooks on human-resource management, which have adopted their paradigm wholeheartedly, labor economics texts tend to pay only cursory attention to internal labor markets. The competitive model, in which wages reflect an individual's marginal product, remains the paradigm of choice. There are many reasons for this lackluster reception, including intellectual convenience. A more acceptable excuse is that while Doeringer and Piore's study, which was based on interviews with 75 companies, identified several key regularities (ports of entry, career ladders, etc.) that have come to shape our perception of internal labor markets, the book never presented a theory to explain these findings. With the advent of information economics and contract theory, models of internal labor markets-or at least selected features of these markets-have begun to emerge. The objective of these theories is to show that internal-labor-market outcomes can be construed as second-best solutions to contracting problems under incomplete information. For instance, tournament theory (Edward Lazear and Sherwin Rosen, 1981) sees the attachment of wages to jobs as part of an efficient incentive scheme. Michael Waldman (1984) explains the same phenomenon as an insurance arrangement against variations in individual productivity. Seniority rules in promotion and wagesetting can be understood as responses to problems of collusion or influence activities (Paul Milgrom and John Roberts, 1988). The list could be extended. At this point, there is hardly any feature of internal labor markets that cannot be given some logical explanation using the right combination of uncertainty, asymmetric information and opportunism. Doeringer and Piore (1985), in the preface to the second printing of their book, take exception with this line of theoretical research. They believe that internal labor markets are inherently a social (group) phenomenon and that something fundamental is missed by pursuing individualistic models. Be that as it may, we think there is another, more serious problem with the direction that this research has taken: too much of it relies on the old empirical stereotype. The original study was done 25 years ago and focused almost exclusively on blue-collar, male, unionized, manufacturing workers. One might rightly wonder how relevant these findings are in today's environment and whether they extend to white-collar work as most discussions seem to assume. Before proceeding with the theory, it is prudent to ask: do we have the facts right? In this paper we report on two recent case studies of individual firms that use personnel records to analyze wage and career paths of managerial workers: Lazear (1992) and Baker et al. (1994a,b).1 Person-

Economics

We assess the empirical validity of the life-cycle model using a time series of cross sections and a novel parametrization of preferences. The main findings are as follows: (i) The excess sensitivity of consumption growth to labor income disappears when we control for demographic variables. (ii) The elasticity of intertemporal substitution (EIS) is a function of several variables, including the level of consumption. The EIS increases with the level of consumption. (iii) The variables that change the EIS are also important in explaining excess sensitivity over the business cycle. We are able to reconcile our results with those in the macro and micro literature.