corporate finance and monetary policy we develop a general equilibrium model where entrepreneurs finance random investment opportunities using trade credit bank issued assets or currency they search for bank funding in over the counter markets where loan sizes interest rates and down payments are negotiated bilaterally the theory generates pass through from nominal interest rates to real lending rates depending on market microstructure policy and firm characteristics higher banks bargaining power for example raises pass through but weakens transmission to investment interest rate spreads arise from liquidity regulatory and intermediation premia and depend on policy described as money growth or open market operations

exclusion and moral hazard the case of identical demand abstract this paper examines the problem of costly exclusion of individuals from a public good previous analyses of exclusion have treated it as solely a question of technologies in our analysis exclusion depends on technology and incentives in this paper providers of the good design a mechanism to provide an optimal level of deterrence to free riders if individuals are heterogeneous optimal deterrence may allow some free riders we examine the effect of costs of exclusion on the samuelson condition for optimal provision and see that the desire to deter free riding leads to underprovision of the good irrespective of the degree of rivalry of the good

zero expenditures and the estimation of engel curves over the brief interview periods typical of budget surveys such as the u k family expenditure survey households recorded expenditures are liable to be misleading indicators of their underlying consumption most starkly a household may not be observed to purchase commodities that it nevertheless consumes this paper considers the implications of such measurement errors for the estimation of demand systems and derives a consistent estimator for the special case of linear engel curves

turnover liquidity and the transmission of monetary policy we provide empirical evidence of a novel liquidity based transmission mechanism through which monetary policy influences asset markets develop a model of this mechanism and assess the ability of the quantitative theory to match the evidence

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

compositional data analysis and zeros in micro data the application of compositional data analysis methods in economics has some attraction the methodology relies upon the use of log ratios in the statistical analysis such an approach is not possible when the data to be analysed include observations where the observed budget share is zero we therefore consider and extend the methods of compositional data analysis in the situation where the data to be analysed include observations where the observed budget share is zero the modified compositional data methods are discussed both in statistical terms and through potential economic interpretations of the method further the modified methodology is applied to the 1988 89 australian household expenditure survey yielding estimates for a system of engel curves

demand systems estimation with microdata a censored regression approach demand systems estimation increasingly makes use of household level microdata mainly to measure the effects of demographic variables data based on these household expenditure surveys present a major estimation problem for any given household many of the goods have zero consumption implying a censored dependent variable techniques which do not take this censored dependent variable into account will yield biased results we utilize a censored regression approach that is computationally simple consistent and asymptotically efficient the results are then presented and compared with those obtained using an uncensored technique

effects of income distribution in an inverse demand system evidence from chinese household survey data this study provides an empirical analysis of the impact of changes in income distribution on food demand in china using data from china health and nutrition survey a new parametric form of an inve

exclusion and the theory of clubs this paper examines the competitive provision of club goods with costly exclusion we consider two exclusion regimes fine and coarse with fine exclusion a provider can charge both a membership fee and a per use price with coarse exclusion a provider can charge a membership fee only we show that competitive club good providers choose both the efficient exclusion regime which depends on the costs of exclusion and the associated efficient resource allocation thus with costly exclusion the competitive provision of club goods is constrained pareto efficient

a divisible search model of fiat money this paper extends the kiyotaki wright search model of fiat money to allow for divisible money and goods the extension allows me to examine the standard issues in monetary economics such as the neutrality and superneutrality of money by severing the artificial link in the kiyotaki wright model between the money supply and the number of money holders it is shown that money is neutral but not superneutral money growth generates a trading opportunity effect it changes the fraction of different agents in the economy and hence changes the probability with which agents have a successful match in addition money growth has a negative effect on the real money balance that is familiar in walrasian monetary models the balance of the two effects can imply a positive optimal money growth rate

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

a search model of unemployment and inflation in this paper i introduce money in the standard labor matching model mortensen and pissarides 1999 pissarides 2000 a double coincidence problemmakes fiat money necessary as a medium of exchange in the long run a rise inthe rate of money growth leads to higher inflation and higher unemployment sothe long run phillips curve is not vertical the optimal monetary growth ratedecreases with the workers bargaining power the level of unemploymentbenefits and the payroll tax rate

equilibrium in a market with sequential bargaining this paper considers a market where pairs of agents who are interested in carrying out a transaction are brought together by a stochastic process and upon meeting initiate a bargaining process over the terms of the transaction the basic bargaining problem is treated with the strategic approach the paper derives the steady state equilibrium agreements analyzes their dependence on market conditions such as the relative numbers of agents of different types and discusses their relations with the competitive equilibrium outcome and other results in the search equilibrium literature this paper considers a market that operates in the following way pairs of agents who have mutual interest in carrying out a transaction are brought together by a stochastic process when two agents meet they initiate a bargaining process over the terms of the transaction if two agents reach an agreement a transaction takes place and they leave the market of course the bargaining positions and hence the agreement reached in any particular meeting will be affected by the conditions prevailing in the market these will include the chances that each of the negotiating parties have of meeting other partners in the event that the agreement in the current negotiations is delayed also the expected length of time required to achieve an alternative transaction and the expected behavior of alternative partners the study of such a market mechanism is of interest for two reasons firstly it captures some realistic aspects of the trade in certain specific markets e g asset markets such as housing and some labor markets secondly it contributes to an understanding of the micro mechanisms of price formation and their role in shaping market outcomes in both cases the features studied are largely neglected in the traditional market equilibrium analyses the related literature includes the articles by diamond 4 5 diamond and maskin 6 mortensen 8 9 and zusman and bell 13 these articles consider markets of the type described above in which transactions are concluded at pairwise meetings of agents the major difference between our work and these articles is in the approach to the basic bargaining problem in the cited articles it is assumed that a meeting is concluded with an instantaneous agreement which divides the associated surplus in an arbitrary predetermined way when the surplus is assumed to be divided equally the division rule is in fact nash s axiomatic bargaining solution in contrast the present paper treats the basic bargaining problem with the strategic approach see rubinstein 19 which constitutes an attempt to look into the bargaining black box this approach explicitly models the time dimension of the bargaining process describes in detail the bargaining procedure and justifies the agreement as a perfect equilibrium in

bargaining with an agenda gradual bargaining is represented by an agenda a family of increasing sets of joint utilities parameterized by time a solution for gradual bargaining specifies an agreement at each time we axiomatize an ordinal solution i e one that is covariant with order preserving transformations of utility it can be viewed as the limit of step by step bargaining in which the agreement of the last negotiation becomes the disagreement point for the next the stepwise agreements may follow the nash solution the kalai smorodinsky solution or many others and still yield the ordinal solution in the limit

the importance of the agenda in bargaining abstract this paper discusses a multi issue bargaining game in which the players set up an agenda and negotiate on the issues sequentially according to this agenda we demonstrate that the agenda might play an important role in the bargaining and discuss the relationship between the agenda and the final outcome of the bargaining game assuming that players have conflicting evaluations regarding the importance of the issues under negotiation we identify the type of agenda each player prefers we also show that in such cases the outcome of the bargaining game need not to be efficient by demonstrating the strategic use of the agenda the paper explains the phenomenon of bargaining on the agenda

credit frictions and participation in over the counter markets abstract this paper formalizes a nash bargaining game between two players constrained by capacity decisions made prior to entering the negotiation in equilibrium strategic interactions drive capacity choices to zero and shut trade down despite the existence of gains from trade the game is embedded in a general equilibrium model of decentralized asset trade with credit frictions to investigate the interaction between availability of credit and investors participation modeled through their choices of inventory and payment capacity partial access to credit is sufficient to restore trade the strategic interactions between payment capacity and inventory generate endogenous heterogeneity in holdings trade sizes and prices and complementarity between money and credit

intra firm bargaining and shapley values we study two wage bargaining games between a firm and multiple workers we revisit the bargaining game proposed by stole and zwiebel we show that in the unique subgame perfect equilibrium the gains from trade captured by workers who bargain earlier with the firm are larger than those captured by workers who bargain later as well as larger than those captured by the firm the resulting equilibrium payoffs are different from those reported in stole and zwiebel as they are not the shapley values we propose a novel bargaining game the rolodex game which follows a simple and realistic protocol in the unique no delay subgame perfect equilibrium of this game the payoffs to the firm and to the workers are their shapley values

modelling zeroes in microdata although the literature contains a number of suggestions for dealing with problems caused by a preponderance of zero expenditure observations that frequently occur in micro level budget studies in general these suggestions seem to be either empirically intractable or theoretically unappealing in this paper it is argued that a natural theoretical specification can be motivated by duality theory and that the statistical technique of compositional data analysis provides a corresponding complementary stochastic specification the resulting model is a consistent theoretical and stochastic specification for handling the possibility of a zero demand over a range of expenditures and or prices the model is then applied to the 1988 89 australian household expenditure survey

hierarchic demand and the engel curve for variety ahstract the usual treatment of consumer demand theory assumes a solution to the demand equations with positive quantities of all commodities this paper characterises a class called hierarchic demand systems for which only a subset of commodities are in the purchased set the hierarchic linear expenditure svstem is used to illustrate interesting properties of such systems the empirical section shows how the number of commodities purchased expands with total expenditure both in aggregate and for commodity groups the data clearly establish the empirical importance of corner solutions and of the purchase decision in demand studies

clubs and the cost of agency the paper investigates the impact of agency costs on clubmembership using a simple principal agent model under standardassumptions the paper demonstrates that increased agency costsassociated with hidden action can lead to an expansionary bias

a system of demand equations satisfying effectively global regularity conditions a parametric specification of an indirect utility function in terms oaf expenditure and two unit cost functions is proposed specification of these unit cost functions in terms of regular functions leads to the notion of an effectively globally regular system of demand equations that is a system of demand equations that is regular over a cone in expenditure price space and for which the regular region includes all points in any given sample and all values of nominal expenditure and prices generating higher values of real expenditure than the sample minimum this general model nests a number of popular demand systems such as the linear expenditure system as special cases an empirical application illustrates some of these ideas copyright 1996 by mit press

transaction costs and equilibrium pricing of congested public goods with imperfect information abstract this paper examines the role of transaction costs in pricing a congested public facility which can be used with variable intensity when there exists information asymmetry between consumers and firms if a per visit price toll requires a large transaction cost of toll gates a lump sum price season ticket price may be used in equilibrium however under the lump sum price together with imperfect information high demanders in terms of visits to the facility have an incentive to patronize facilities designed for low demanders to exploit a price difference thus an adverse selection problem may arise and equilibrium is in general inefficient depending on the magnitude of the transaction cost

bargaining and the value of money abstract search models of monetary exchange have typically relied on nash 1950 the bargaining problem econometrica 18 155 162 bargaining or strategic games that yield an equivalent outcome to determine the terms of trade by considering alternative axiomatic bargaining solutions in a search model with divisible money we show that the properties of the bargaining solutions do matter both qualitatively and quantitatively for questions of first degree importance in monetary economics such as i the efficiency of monetary equilibrium ii the optimality of the friedman rule and iii the welfare cost of inflation

statistical models for zero expenditures in household budgets household budget surveys are an important source of data on consumer s expenditure not just for individual consumers but also for estimating national aggregates however it is a widespread finding that for certain commodities most notably tobacco and alcohol the estimate from the household survey falls short of the known consumption total calculated with some confidence from data on production imports exports and excise duties for example in the british family expenditure survey with which we shall largely be concerned total tobacco expenditure was underestimated in 1976 by 21 percent see kemsley redpath and holmes 1980 p 51 much of this understatement together with that on alcohol is thought to occur because of the design of the survey which excludes many persons amongst whom consumption of such items is thought to be atypically high e g prisoners hoteliers and their residents merchant seamen even so the possibility remains that some of the understatement is due to various types of misreporting by households included in the survey in this paper we consider a model in which the standard tobit specification tobin 1958 is supplemented by the operation of a simple binary censor the tobit model is essentially a linear regression model in which non positive observations of the dependent variable are replaced by zero we take this specification as our starting point but add a second censoring process that randomly replaces a fraction of the observations generated by the tobit model bv zeroes the combined model can serve as a representation of several types of

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

bargaining with revoking costs abstract a simple two stage bilateral bargaining game is analyzed the players simultaneously demand shares of a unit size pie if the demands add up to more than one the players simultaneously choose whether to stick to their demand or accept the other s offer while both parties sticking to their offers leads to an impasse accepting a lower share than the original demand is costly for each party the set of pure strategy subgame perfect equilibria of the game is characterized for continuously differentiable payoff and cost functions strictly increasing in the pie share and the amount conceded respectively higher cost functions are shown to improve bargaining power the limit equilibrium prediction of the model as the cost functions are made arbitrarily high selects a unique equilibrium in the nash demand game that corresponds to a proportional bargaining solution of kalai 1977

how well are women doing female non employment across uk regions discussions of the uk s recent labour market performance commonly mention the contrasting trends in the unemployment rate down the employment rate up and the inactivity rate flat these same commentaries also notice that the flatness of the overall inactivity rate masks contrasting trends by sex with male rates slowly rising and female rates slowly falling and then proceed to discuss male inactivity in some detail before concluding bypassing the composition of female inactivity these commentaries fail to notice that the male and the female proportions of the population not working by reason of sickness or disability are quite similar equally they have rarely noticed that male and female non employment rates display a very similar regional hierarchy with female rates in the north as much as 50 higher than those in the south and that there is an even steeper north south gradient in some of the components of non employment for example sickness and disability rates for females in the

bargaining under liquidity constraints unified strategic foundations of the nash and kalai solutions abstract we provide unified strategic foundations for the nash 1950 and kalai 1977 solutions in the context of negotiations under liquidity constraints we propose an n round game where in each round a seller and a buyer with limited payment capacity negotiate a bundle of divisible goods where bundle sizes can vary across rounds according to rubinstein s 1982 alternating offer game the game implements the nash solution if n 1 and the kalai solution if n and bundle sizes are infinitesimal if n is set by one player ex ante the buyer chooses n 1 while the seller chooses n we endogenize liquidity constraints and show they bind for all n even when there is no cost in holding liquidity

money and prices a model of search and bargaining abstract this paper makes commodities divisible and incorporates bargaining into the search theoretic model of money to determine the purchasing power of money or price it is shown that two monetary equilibria always coexist where fiat money is universally accepted the two equilibria differ in price output welfare and the velocity of money sunspot monetary equilibria exist in which money is universally accepted in all states of the economy multiplicity has novel implications on the effectiveness of currency substitution and exchange market intervention journal of economic literature classification numbers c78 e40

an empirically oriented demand system with improved regularity properties while the almost ideal demand system has received increasing attention in empirical studies of consumer demand the fact that the underlying piglog cost function is not globally regular has often led to violation of negative semidefiniteness in the estimated slutsky matrix this paper suggests a modification to the piglog class of preferences termed mpiglog which preserves regularity in a wider region of expenditure price space in an empirical section the almost ideal demand system special case of piglog is compared with the analogous special case of mpiglog which the authors term maids the comparison demonstrates the improved regularity features of maids

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem