[This paper develops a general, competitive model of commodity differentiation. The structure analyzed is sufficiently rich to admit the basic structures of many of the common models of commodity differentiation as special cases. Thus, the model provides a unifying framework within which alternative formulations of strategic product choice can be compared. It is shown that competitive equilibria exist under only mild restrictions on the underlying economic structure and vary continuously with endowments. Finally, some results relevant to all models of commodity differentiation featuring price taking consumers are presented. The results are shown to point to some potentially important methodological restrictions.]

Affirmative action remains controversial. The controversy extends from the original antidiscrimination legislation and its interpretation to estimates of affirmative action's effect on the labor market. This paper provides a progress report on our recent efforts at detecting the effects of affirmative action on minority wages and employment. Although we find a substantial increase in wages for black men and black women over our sample period, the timing of these wage changes is surprising. Most of the wage gains came prior to 1974, before the establishment of an effective monitoring structure for affirmative action. Indeed, when the powers of the EEOC and OFCC are greatest, the wage effects for young blacks are somewhat perverse. Using EEO-1 reports we find a major shift in black employment toward firms most vulnerable to the monitoring and potential sanctions of the affirmative action programs. As with wages, the shift in minority employment came prior to the expansion of the powers and budgets of the EEOC and OFCC. We are surprised by the timing of these changes and are concerned about the quality of the EEO-1 reports.

The preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk. Yet it is an important factor in decisions to hold liquid assets or delay irreversible investment. This paper formalizes the notion of flexibility in a sequential decision context, and relates its value to the amount of information an agent expects to receive. A rudimentary money demand model is developed embodying these ideas, and the history of flexibility as an economic concept is traced.

Arbitrage pricing theorems are derived for options on stocks with jumps as a well as local movements. The resulting valuation formulas depend on observable variables only. Closed-form valuation expressions are obtained in the case of large positive and negative jumps. These results translate into a simple algebra for characterizing the risk of arbitrage and investment portfolios. A continuous-time formulation of the infinite variance hypothesis leads to isomorphic pricing expressions.

Abstrac-t-This paper gathers evidence on the contribution of various techniques of exchange rate management to the output stability of twelve industrial countries. We estimate the distribution of unanticipated disturbances in outputs and the payments balances under pegged exchange rates from the 1955-1971 experience. We use this distribution to characterize the foreign exchange market intervention procedures which simultaneously minimize the output variances of the sample countries. The efficient procedures and the alternatives of managed floats, basket pegs, and the European currency area are compared according to structure and efficacy; and several implications for I.M.F. surveillance of exchange rates are drawn.

The article presents information on the Quasi-Bayesian audit risk model for dollar unit sampling. The auditor's objective is to limit, to a reasonably low level, the risk that a material error will remain undetected in financial statements that he has examined. DH&S has a formalized approach to combining subjective and objective probabilities that, we believe, accomplishes that objective. A personal correspondence to the chairman of the statistical sampling, J.H. McCray is proposing a different approach to combining these probabilities, which also may accomplish the auditor's objective. However, McCray's article provides no basis for his assertion of serious deficiencies in the DH&S method of combining subjective and objective probabilities. Furthermore, it offers no evidence to demonstrate that the described McCray method is better than any other approach to assessing or combining probabilities. The value of audit risk modeling is recognized and have been an innovator and a primary user of such techniques since the early 1960's. Its believed that the model is among the most advanced currently used by auditing practitioners and we welcome academic research that may provide enhancements.

This paper presents a formal theoretic framework to analyze credit union interest rates on loans and savings deposits. The unique motivational and institutional features of a credit union, in particular its structure as a financial service cooperative, are used to develop the objective function. This is based on a comparison of the credit union's rates to alternatively available market rates and includes parameters to recognize the possibility of borrower-saver conflict. The principal result is that the optimal rates and reactions to exogenous changes depend critically on the preference of the organization toward financial gain to the borrowing and saving members.

This paper presents a formal theoretic framework to analyze credit union interest rates on loans and savings deposits. The unique motivational and institutional features of a credit union, in particular its structure as a financial service cooperative, are used to develop the objective function. This is based on a comparison of the credit union's rates to alternatively available market rates and includes parameters to recognize the possibility of borrower‐saver conflict. The principal result is that the optimal rates and reactions to exogenous changes depend critically on the preference of the organization toward financial gain to the borrowing and saving members.

The study investigates the information content of the foreign sensitive payment disclosures made during the Securities and Exchange Commission's ‘voluntary’ disclosure program. The results of the information content tests and the tests of the relationship between payment size and abnormal security returns imply that investors may have been reacting to the expectation of the loss of future business or to the possibility of future government sanctions.