In the Edgeworth non-tatonnement process, trade occurs if there exists some coalition of agents able to make a Pareto-improving trade among themselves at current prices. It is known that the coalition size required is bounded by the number of commodities and that, provided all agents always have strictly positive endowments, bilateral trade suffices. These results are generalized, but it is shown that, when some agents do not hold all commodities, the information requirements for coalition formation can be very severe. Coalition size is not the only problem; very detailed information on preferences may be needed. Copyright 1989 by The Review of Economic Studies Limited.

This paper proposes nonparametric tests of additive constraints on the first and second derivatives of a model E(y|x) = g(x), where the true function g is unknown. Such constraints are illustrated by the economic restrictions of homogeneity and symmetry, and the functional form restrictions of additivity and linearity. The proposed tests are based on estimates of regression coefficients, that statistically characterize the departures from the constraint exhibited by the data. The coefficients are based on weighted-average derivatives, that are reformulated in terms of derivatives of the density of x. Coefficient estimators are proposed that use nonparametric kernel estimators of the density and its derivatives. These statistics are shown to be √N consistent and asymptotically normal, and thus are comparable to estimators based on a (correctly specified) parametric model of g(x).

Latent variable tests of asset pricing models make assumptions about the joint distribution of observable returns and unobservable benchmark returns. These tests can falsely accept models when a mean-variance efficient portfolio other than the benchmark satisfies the distributional assumptions imposed on the benchmark portfolio. Also, because the assumptions are untestable, there is no way to discover whether a model is being rejected because the assumptions are false. Without these assumptions, however, latent variable tests can be viewed only as tests of distributional hypotheses about mean-variance efficient portfolios of unknown composition.

The Alaska Native Claims Settlement Act of 1971 (ANCSA) established thirteen diffusely held profit-seeking corporations that were saddled with unusual organization restrictions, the most important of which is that stock cannot be traded. We find that these firms are characterized by poor financial performance, a high incidence of control contests, and high turnover among directors and managers. These and other findings about ANCSA firms are consistent, overall, with the theory of the firm. The results illustrate the importance of organizational form in accomplishing productive activities, and particularly the importance of freely transferrable shares for organizational efficiency in diffusely held corporations.

Conventional analysis predicts that workers pay part of their on-the-job training costs by accepting a lower starting wage and subsequently realize a return to this investment in the form of greater wage growth. Missing from the conventional treatment of on-the-job training is a discussion of the process by which heterogeneous workers are matched to jobs requiring varying amounts of training. This matching process constitutes a key feature of the on-the-job training model presented in this article and tested with a unique data set containing extensive information concerning on-the-job training, employer search, wages, and wage and productivity growth.

Most models of financial structure embody an assumption about financial distress that causes debt to be costly to the issuing firm. This approach has been criticized on the grounds that the assumed costs could be avoided by a costless financial reorganization. In this article we show that despite the possibility of costless reorganization, it may be rational for firms to incur significant costs in the resolution of financial distress. The main assumptions that give rise to our results are the existence of asymmetric courts to impose a reorganization on the claimants of a firm. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

[Most models of financial structure embody an assumption about financial distress that causes debt to be costly to the issuing firm. This approach has been criticized on the grounds that the assumed costs could be avoided by a costless financial reorganization. In this article we show that despite the possibility of costless reorganization, it may be rational for firms to incur significant costs in the resolution of financial distress. The main assumptions that give rise to our results are the existence of asymmetric information and of judicial discretion that allows courts to impose a reorganization on the claimants of a firm.]