This paper is concerned with the design of non-cooperative game forms for economic decision problems. A decision problem is presented which admits non-dictatorial game forms with the following properties: Nash equilibria exist and all Nash equilibrium outcomes are Pareto optimal; or dominant strategies exist and all dominant strategy equilibria are Pareto optimal; but not both. This is, any (non-dictatorial) game form whose Nash equilibria are well behaved does not have dominant strategies, and any game form with well behaved dominant strategy equilibria must have at least one non-optimal non-dominant strategy Nash equilibrium.

Several studies of mergers and tender offers examine the changes in the value of ownership claims associated with corporate acquisitions and use the observed value changes to address the degree of competition in the market for corporate acquisitions. These studies conclude that the takeover market is competitive on the basis of the abnormal stock price changes of bidding firms, the time series behavior of the market value of target firms, and the proportion of gains that accrue to target and bidding firms. Unfortunately, none of these tests are sufficient to conclude that the takeover market is competitive. A competitive acquisition market implies that the potential gain to unsuccessful bidders at the successful offer price is nonpositive. This implication is tested using data on tender offers in which there are multiple bidders. The results appear to be consistent with competition in the market for corporate acquisitions.

This paper presents a theory of competition among pressure groups for political influence. Political equilibrium depends on the efficiency of each group in producing pressure, the effect of additional pressure on their influence, the number of persons in different groups, and the deadweight cost of taxes and subsidies. An increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers. This analysis unifies the view that governments correct market failures with the view that they favor the politically powerful: both are produced by the competition for political favors.

The optimal timing of real investment is studied under the assumptions that investment is irreversible and that new information about returns is arriving over time. Investment should be undertaken in this case only when the costs of deferring the project exceed the expected value of inforrnation gained by waiting. Uncertainty, because it increases the value of waiting for new information, retards the current rate of investment. The nature of investor's optimal reactions to events whose implications are resolved over time is a possible explanation of the instability of aggregate investment over the business cycle.

Economic theorists have interpreted the "efficient markets hypothesis" to assert that equilibrium asset prices reveal all decision-relevant information in the market. This paper establishes conditions on investors' utility functions of future wealth which are necessary for the efficient markets hypothesis to be satisfied and be robust to slight perturbations of endowments and the joint distribution of current information and future asset values. The main result states that over the relevant range of future wealth values, there are three possible cases: (i) all investors are risk-neutral; (ii) modulo a change in the wealth origin, each investor has constant relative risk aversion with the same constant for all investors; or (iii) all investors have constant absolute risk aversion.

Institutional and Behavioral Economics, Labor and Human Capital

Because it concentrates on the co-movements of jointly determined endogenous variables, the traditional analysts of labor productivity does not directly address the question of the causes of productivity change.This problem is solved by a modelling approach in which productivity and other choice variables are assumed to respond optimally to five broad classes of exogenous (causal) shocks.Although these shocks are unobservable to the econometrician, maximum likelihood estimates of their relative importance in the determination of productivity change are obtained.

Thomas S. Y. Ho, Anthony Saunders, Fixed Rate Loan Commitments, Take-Down Risk, and the Dynamics of Hedging with Futures, The Journal of Financial and Quantitative Analysis, Vol. 18, No. 4 (Dec., 1983), pp. 499-516