This paper offers a new theory of destructive competition. We compare minimum resale price maintenance (RPM) to retail market-clearing in a model with a monopolistic manufacturer selling to competitive retailers. In both the RPM and flexible-price games, retailers must order inventories before the realization of demand uncertainty. We find that manufacturer profits and equilibrium inventories are higher under RPM than under market-clearing. Surprisingly, consumer surplus can also be higher, in which case unfettered retail competition can legitimately be called "destructive."

The World Bank has been the single most important international institution to promote the practice of professional project appraisal over the past five decades. Although at times conventional project lending has been a relatively small share of total lending by the World Bank, key members of the Bank staff have continued to be active in improving the understanding of what creates success or failure in the performance of development projects. Their influence on governments and practitioners in this field has been significant and widespread.

In their seminal study on interindustry wage differentials, Krueger and Summers (1988) expressed estimated industry differences as deviations from a hypothetical employment-share weighted mean. Virtually the whole labor literature has followed their approach, yet most studies avoid calculating the exact standard errors of these differences. This note relates this problem to the general literature on dummy variables and their interpretation. It is demonstrated that the implementation of exact estimates involves only simple matrix operations, making any approximative procedure difficult to justify. Disregarding this conclusion will in practice, even with large samples, lead to substantially overstated standard errors of the estimated differentials and to the understatement of their overall variability.

The authors consider a repeated game between two long-run players, one of whom is relatively patient. Each player has a small amount of uncertainty about the other's strategy. Given a weak assumption about the support of this uncertainty, the more patient player obtains (in any Nash equilibrium) approximately the highest payoff consistent with the individual rationality of the other player, if the latter is patient enough. If the less patient player is relatively impatient, any Nash equilibrium gives the more patient player at least the Stackelberg payoff: this generalizes K. M. Schmidt's (1993) result, which applies only to games of conflicting interests.

Pownall et al. (1993) document that nearly 80 percent of their sample of voluntary management earnings forecasts are not precise point forecasts. Imprecise forecast forms include closed-interval forecasts (i.e., ranges), open-interval forecasts (i.e., minimums and maximums), and general impressions about firms' earnings prospects. We perform cross-sectional logistic regressions to document determinants of forecast precision. Our sample consists of 1,212 annual and interim management forecasts. After controlling for firm-specific and horizon- specific earnings uncertainty, we find that managers produce more precise forecasts of annual earnings for firms with greater analyst following (our proxy for private information) and for smaller firms (our proxy for public information). The results are robust across subsamples. The majority of the results, however, do not hold for interim forecasts.

We develop a framework to extract information regarding subsequent spot rate movements from the term structure of forward exchange premiums while admitting possible deviations from rationality and the presence of risk premiums. Using weekly dollar–sterling, dollar– mark, and dollar–yen data, the restrictions implied by our framework are not rejected, and spot and forward exchange rates together are well represented by a vector error correction model (VECM). Dynamic out-of-sample forecasts up to one year ahead indicate that the VECM is strikingly superior to a range of alternative forecasts, including a random walk and standard spot-forward regressions.

This paper uses three different approaches to investigate whether the declining provision of public capital is a major cause of declining labor productivity. The juxtaposition of approaches removes the variability in estimates due to dissimilar variable definitions and econometric methodologies. Estimates are based on U.S. time-series data and are evaluated by the implied elasticities of substitution, the prediction of labor productivity trends, and the impact of public capital on productivity. As the three approaches yield very different estimates, it will be hard to ever settle the debate about the effect of public capital on private productivity.

We test both the unconditional and conditional Mean Variance Efficiency of the UK stockmarket, paying particular attention to choosing a suitable set of instruments for the conditional version of the model. By considering more carefully than previous authors the pricing of economic risk within the mean-variance framework we show that certain instruments can enhance the basic model structure. Given the tendency for financial market data to display non-constancy in variance and non-normality we employ the GMM procedure described in Hansen (1982), which requires much weaker distributional assumptions than the more traditional OLS techniques. We discuss forming portfolios of stocks using both size and dividend yield as a criterion to achieve a suitable spread of risk and return, and find that our conclusions are sensitive both to the method of portfolio formation and to the choice of estimator. This is an important finding given the problem of thin trading associated with the size ordering of UK stocks. We find some support for both the unconditional and conditional version of the CAPM, though we are cautious about our conclusions given the instability of the parameter estimates.

This work compares a dealer market and a limit-order book. Dealers commonly observe order flow and collect information from multiple market orders. They may be better informed than other traders, although they do not earn rents from this information. Dealers earn rents as suppliers of liquidity, and their decisions to enter or exit the market are independent of the degree of adverse selection. Introduction of a limit-order book lowers the execution-price risk faced by speculators and leads them to trade more aggressively on their information. Introduction of the book also lowers dealer profits, but increases the informational efficiency of prices.