An experiment was conducted to test whether discounted repeated play leads to greater cooperation and coordination than one-shot play, in a public good environment with incomplete information. The experiment was designed so that, theoretically repeated play can sustain equilibria with higher group earnings than result in the one-shot Bayesian Nash equilibrium. The design varied a number of environment al parameters, including the size of the group, the marginal rate of transformation between the public and private good, and the statistical distribution of marginal rates of substitution between the public and private good. Marginal rates of substitution were private information but the statistical distribution was common knowledge. The results indicate that repetition leads to greater cooperation, and that the magnitude of these gains depends both on the ability of players to monitor each other's strategy and on the underlying environmental parameters.

This paper examines the short-run dynamics of manufacturing costs by detailing how plants in the U. S. automobile industry change output. Weekly data show a variety of margins on which firms adjust production. These margins, which are distinct from the usual factor demand choices, differ in their lumpiness, their adjustment costs, and their variable costs. The existence of these margins explains several empirical puzzles of output fluctuations. Using a theory of the short-run dynamic cost function, we are able to infer some of the characteristics of the underlying cost function from the dynamic behavior of the different margins.

Terrence B. O'Keefe, Dan A. Simunic, Michael T. Stein, The Production of Audit Services: Evidence from a Major Public Accounting Firm, Journal of Accounting Research, Vol. 32, No. 2 (Autumn, 1994), pp. 241-261

This paper considers the optimal approach to reducing inflation when the cost of inflation is its conditional variability. Inflation is stochastically related to money growth, with unobservable time-varying autonomous and induced components. A sharp reduction in money growth provides information about the responsiveness of inflation to money, but also induces variability as the economy heads into unknown territory. Gradual policy is always optimal and the model explains why moderate-inflation countries adopt a much more gradual money growth reduction than high-inflation countries. Additionally, the analysis sheds light on the more general problem of learning with two unobservable parameters.

Ananth N. Madhavan, Robert T. Masson, William H. Lesser, Cooperation for Monopolization? An Empirical Analysis of Cartelization, The Review of Economics and Statistics, Vol. 76, No. 1 (Feb., 1994), pp. 161-175

When the responsibility for output decisions was shifted from the state to the firm, and when firms were allowed to retain more of their profits, managers of Chinese state-owned enterprises strengthened workers' incentives. The managers paid more in bonuses and hired more workers on fixed-term contracts. The new incentives were effective: productivity increased with increases in bonus payments and in contract workers. The increase in autonomy raised workers' incomes (but not managers' incomes) and investment in the enterprise, but tended not to raise remittances to the state.

Most finance students will do short-term finance assignments when they go to work. In recent survey of CEO's, Controllers, and Treasurers that appeared in Financial Practice & Education, the question was asked which elective is the most important and 81% responded a short-term financial management course should be required. Both authors hold a Certified Cash Manager credential. Strengths include broader and better integrated coverage of treasury and working capital management, while using valuation and the cash flow timeline as integrating themes. Up to date presentations of developments in treasury management, banking deregulation, globalization of financial services delivery, electronic commerce, international cash management, and foreign exchange risk with a decision making emphasis throughout offers a complete view for students. This text is appropriate for upper level undergraduate finance courses in short-term financial management, working capital management, treasury management, and cash and cash flow management. It can also fit the MBA level financial management and short-term financial management courses.

Multivariate tests due to Johansen (1988, 1991) as implemented by Baillie and Bollerslev (1989a) and Diebold, Gardeazabal, and Yilmaz (1994) reveal mixed evidence on whether a group of exchange rates are cointegrated. Further analysis of the deviations from the cointegrating relationship suggests that it possesses long memory and may possibly be well described as a fractionally integrated process. Hence, the influence of shocks to the equilibrium exchange rates may only vanish at very long horizons.