bounded price variation and rational expectations in endogenous switching model of the u s corn market a model that includes bounded price variation and rational expectations by producers is estimated for the u s corn market the resulting model specification is highly nonlinear though since the probability of market equilibrium must be determined endogenously unlike previous research the cross equation restrictions implied by the rational expectations hypothesis are incorporated in the bounded prices model by using fair and taylor s 1983 procedure for obtaining maximum likelihood estimates of nonlinear rational expectations models the resulting model is compared against a standard equilibrium model with naive expectations the results show the bounded prices model is a superior specification copyright 1989 by mit press

inflationary bias of the federal reserve system the creation of the federal reserve system coincides with a turning point in the inflationary history of the united states before 1914 there was no overall trend in the price level generally during war time periods the consumer price index increased significantly but during the intervening periods prices gradually declined to approximately their former levels however since the creation of the fed there has been an unmistakable and almost continuous upward trend in prices l

bureaucratic theory and the choice of central bank goals economists have frequently asserted that central bank priorities among economic goals have not been appropriate to the public s desires for example one interpretation of the results of reuber s pioneering study of central bank preferences was that the bank of canada s reactions reflect the placing of a very heavy implicit weight on price stability compared with higher employment presumably based on a judgement about the relative economic costs of more unemployment and more price inflation the evidence examined on the relative economic costs of price inflation and unemployment suggests that the economic costs of inflation are not as high relative to the costs of unemployment as the reactions and statements of the authorities have implied reuber p 132 1

screening ethics when honest agents care about fairness we analyze a principal s ability to discriminate between honest and dishonest agents who have private information about the circumstances of the exchange honest agents reveal circumstances truthfully as long as the mechanism is suciently fair the probability that an equilibrium allocation is chosen by an agent who is lying should not be too large without intolerance for lying the agent is given proper incentives if dishonest and zero rent if honest with even a small intolerance for lying the optimal mechanism is discontinuously altered it may still involve ethics screening whereby some allocation chosen by a dishonest agent is never chosen by an honest agent it happens either when the dishonest is overstating circumstances or when the principal is forced to allow for some suboptimal announcements due to an excessive intolerance for lying with limited intolerance for lying ethics screening allows for doing better than in the standard setup where the agent is dishonest with certainty even if honesty is unlikely however if intolerance for lying is too strong the principal cannot improve upon the standard setup

econometric developments in agricultural and resource economics the first 100 years this article reviews the major contributions of agricultural and resource economists in the area of econometrics over the past 100 years early on a number of agricultural economists were in on the ground floor in terms of developing new econometric methods over time as the economics profession became more empirically oriented agricultural and resource economists increasingly assumed the role of early adopters of new econometric methods even so agricultural and resource economists continue to make useful modifications to econometric techniques in order to adapt the methods to the unique nature of the problems and applications that we study

the effect of cognitive moral development on honesty in managerial reporting this study examines whether truth telling in the form of honest reporting is associated with cognitive moral development conventional agency theory assumes that people are self interested and willing to tell a lie to increase their personal payoffs while recent empirical evidence shows that some people give up monetary rewards to tell the truth e g evans et al account rev 76 537 559 2001 the social psychology literature suggests that cognitive moral development influences individuals ethical decisions we carried out an experiment whereby participants submitted managerial reports in which truth telling decreased their monetary payoff despite the fact that their decisions were not subject to monitoring auditing or reputation effects some participants reported honestly or partially honestly we find the relationship between honest reporting and cognitive moral development to be both positive and linear compared with those at lower stages of cognitive moral development participants at higher stages of cognitive moral development were more likely to submit an honest report and give up potential monetary gains from lying we further examine the economic impact of honest reporting on the firm s profit with the assumption of self interest and profit maximization antle and eppen manag sci 31 163 174 1985 suggest that a contract with a hurdle rate feature reduces managers information rent we find that in comparison with the expected outcome of a hurdle contract the firm can yield higher profits with a trust contract by hiring managers with a p score higher than 16 67

imports and the supply of winter tomatoes an application of rational expectations a model of the florida tomato industry is formulated under the hypothesis that growers make production decisions as rational economic agents this assumption implies that anticipated mexican tomato imports as well as other economic variables are taken into account when the planting decision is made maximum likelihood estimation methods are used to solve the simultaneous equations model and the implications of the model s reduced form are analyzed the empirical findings are consistent with the rational expectations hypothesis that producers respond to market information in its entirety when making acreage decisions key vwords expectations imports mexico rational expectations supply response tomatoes florida produces about 90 of u s tomatoes harvested for fresh use during the november to mid june season since the cuban trade embargo of february 1962 mexico has become the major foreign supplier of fresh winter tomatoes the total fresh winter tomato market in the united states has been almost equally shared by florida and mexico in recent years the rivalry for this market reached the point in 1978 that florida growers charged that mexican producers were dumping their product on the u s market schmitz firch hillman many florida growers suggest that unless mexican tomato imports are limited the florida tomato industry will effectively disappear primary attention in this paper is focused on domestic tomato acreage allocations in light of the mexican influence on the winter tomato market the paper does not attempt to evaluate the welfare effects of mexican imports on the florida tomato industry in addition to the emphasis on acreage response the domestic quantity and price effects are also considered most efforts to explain acreage devoted to agricultural crops have utilized some variant of a cobweb model because the ultimate price of the crop cannot be ascertained until the completion of the production cycle nevertheless if the supply and demand framework is truly representative of the way the market works an alternative to lagged price for representing the anticipated price for the crop is the price prediction of the supply and demand model itself thus acreage would be dependent on the expected price of the crop and expected price would result from the solution of the supply and demand model for price on the basis of information available at planting time the underlying hypothesis is that producers are acting in accordance with the information available to them at planting time and in a way represented by the interaction in the supply and demand model viewed in this way planted acreage decisions would be based on such factors as anticipated mexican imports and their attendant effect on the price of tomatoes one distinction between this and the traditional cobweb framework is that in the latter case lagged imports may influence planted acreage via their effect on lagged prices but any impact expected imports might have on current price is ignored in the acreage

acreage decisions under risk the case of corn and soybeans an acreage supply response model is developed under expected utility maximization the resulting framework is used to specify and estimate a system of risk responsive acreage equations for corn and soybeans in the united states particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices also a wealth variable is included in the acreage equations the empirical results indicate that risk and wealth variables play an important role in cornsoybean acreage decisions the analysis also shows that cross commodity risk reduction is important in acreage allocation decisions

inflationary bias of the federal reserve system a bureaucratic perspective abstract the federal reserve system does not receive a budget from congress but instead finances its operation from interest payments on its government security portfolio this peculiar financing arrangement provides the foundation for a bureaucratic model of federal reserve official behavior the empirical section tests the bureaucratic model by analysing the fed s expenditure record since 1947 and its policy actions during periods of constitutional revision

micro economic applications of marginal changes in risk abstract extending a recent definition we propose a theorem on the impact of marginal changes in risk on the optimal decision of a risk averse individual several micro economic applications are then provided

a century of research on agricultural markets this article provides a perspective on major innovations in research on agricultural markets over the past century we review research on market structure and performance vertical coordination arrangements and institutions for producer collective action contributions to empirical modeling of agricultural price determination and marketing margins are also evaluated as are innovations in research on spatial market relationships and the role of storage finally we discuss contributions to understanding market information systems and the functioning of market based mechanisms for agri

fed behavior in periods of price and wage controls there is a literature which addresses the bureaucratic behavior and incentives of the federal reserve system some of the papers along these lines include acheson and chant 1973 kane 1980 levy 1981 toma 1981 friedman 1982 shughart and tollison 1983 and allen 1986 this paper brings to bear some additional evidence on the behavior and the incentives of the fed in particular we examine the behavior of the fed during periods of price and wage controls the public interest approach to fed behavior suggests that the fed should pursue a monetary policy that is consistent with price and wage controls in order to control inflationary forces the private interest approach suggests that price and wage controls make seigniorage operations more profitable for the fed and make it more difficult for fed overseers to monitor fed performance in both cases leading the fed to pursue monetary expansion in its own self interest during a period of price and wage controls the setting of price and wage controls therefore provides a test of public versus private interest hypotheses about fed behavior the paper proceeds as follows section 2 develops the competing explanations of federal reserve behavior section 3 presents the estimates of a structural money supply reaction function and an arima transfer function model of fed behavior in each case controlling for ceteris paribus conditions and periods of wage and price controls the results of both models indicate a falsification of the public interest explanation of fed policy section 4 offers some concluding remarks

income money ethic pay satisfaction commitment and unethical behavior is the love of money the root of evil for hong kong employees this study examines a model involving income the love of money pay satisfaction organizational commitment job changes and unethical behavior among 211 full time employees in hong kong china direct paths suggested that the love of money was related to unethical behavior but income money was not indirect paths showed that income was negatively related to the love of money that in turn was negatively related to pay satisfaction that in turn was negatively associated with unethical behavior pay satisfaction was positively related to organizational commitment thus the love of money is the root of evil but money is not

a theoretical and empirical approach to the value of information in risky markets a reply the theory of the competitive firm under price uncertainty is used to develop a money metric of a producer s willingness to pay for additional information this concept is extended to the market by formulating ex ante and ex post measures of the value of a rational expectations forecast the empirical feasibility of these measures are demonstrated by application to a simple two equation model of an agricultural market this abstract was borrowed from another version of this item

price stabilization and the risk averse firm an analytically simple and tractable approach to firm level welfare analysis of complete and partial mean preserving price stabilization for producers with general risk averse preferences facing a stochastic technology is developed necessary and sufficient conditions for price stabilization to be welfare enhancing are derived under different assumptions of the producer s preferences and the producer s technology existing stabilization results for the risk averse firm are shown to be corollaries of these more general results

risk behavior and rational expectations in the u s broiler market this study examines the empirical implications of extending the rational expectations hypothesis reh to include price uncertainty a general estimation framework that incorporates both the restrictions on structural parameters and the variance covariance terms is developed garch time series processes are used to generate time varying expectations of both the means and the variances of exogenous variables the empirical application is with a quarterly model of the u s broiler industry the results indicate that the rational expectation of price variance is an important determinant of broiler supply a formal test indicates that the restrictions implied by the reh cannot be rejected

european banking distress and emu institutional and macroeconomic risks financial stability in europe has received renewed attention with the advent of emu this paper examines whether eu country banking systems are particularly vulnerable to systemic risk our approach is to explore episodes of banking sector distress for a large sample of countries highlighting the experience of the eu we estimate multivariate probit models linking the likelihood of banking problems to a set of macroeconomic variables and institutional characteristics such as aspects of bank supervision and regulation restrictions on bank portfolios and development of the banking system given these characteristics the model predicts a low probability of banking sector distress in emu countries

bounded price variation models with rational expectations and price risk abstract the bounded price variation model under rational expectations is extended to include higher moments of price in the supply equation the resulting framework is then used to estimate a disequilibrium model of the u s corn market that includes price risk

optimal contracting with endogenous social norms research in sociology and ethics suggests that individuals adhere to social norms of behavior established by their peers within an agency framework we model endogenous social norms by assuming that each agent s cost of implementing an action depends on the social norm for that action defined to be the average level of that action chosen by the agent s peer group we show how endogenous social norms alter the effectiveness of monetary incentives determine whether it is optimal to group agents in a single or two separate organizations and may give rise to a costly adverse selection problem when agents sensitivities to social norms are unobservable

rational expectations in limited dependent variable models abstract the appropriate characterizations of rational expectations solutions in one limit and two limit models are derived we prove the existence and uniqueness of the rational expectations solution for each model our analysis is general without imposing serial independence and the parametric distributional assumption

modeling expectations of bounded prices an application to the market for corn the presence of farm programs should directly affect the expectations of producers this paper analyzes the formation of price expectations when price supports constitute an effective lower bound on the distribution of the expectations we first investigate what the expected price would be if the usual rational expectations formula is used this leads to a relationship that is not estimable we suggest two alternatives one based on a tobit approximation and the other based on a perfect prediction of when the support is going to be effective using a simplified model of the u s corn market the methodology is demonstrated and compared to an alternative method of using futures prices as the expectation of harvest price the analysis of supply response for the major u s field crops is made difficult due to government intervention in these markets this intervention has been characterized by the use of price supports acreage diversion storage incentives etc during the last thirty years many studies have analyzed producer behavior in the presence of governmental involvement such studies have typically been concerned with modeling the effect of supports and diversions in an ex post sense rather than with how producers used the knowledge of farm programs to form their expectations if producers are rational economic agents their expectations of harvest prices should be conditioned both by free market forces and the type and degree of governmental intervention in the market of course farm programs have varied in nature and extent during the past thirty years and it is doubtful that any structural model could capture their complexities in this paper we attempt to introduce rational expectations in a simplified model of the u s corn market in essence we focus on the formation of price expectations when price supports constitute an effective lower bound on the distribution of the expectations we proceed by developing a theoretical model that connects the rational expectations model with a model of bounded price variation it is shown that one representation that may characterize the corn market is a triangular structural system with endogenous switching a full information maximum likelihood estimator is proposed for the system next an empirical model is specified and estimated the model is evaluated in comparison to an augmented model that contains a futures price so that some inferences may be made concerning the rational expectations model s success in summarizing relevant market information expectations under bounded prices consider a market that may be represented by a simple supply and demand system q a pt a2w el supply function pt b qt b2xt e2t demand function 1 where p and q represent market price and quantity w and x represent supply and demand shifters and p represents the rational expectation of product price at the time production decisions are made note that this system has a familiar recursive structure when the expected price variable is specified in terms of one or more lagged prices when the restricted reduced form of the structural system is solved for in terms of the expected price and this expression is used to replace pj wallis 1980 then models similar to those of goodwin and sheifrin 1982 and shonkwiler and emerson 1982

price volatility and rational expectations in a sectoral framework commodity model a multivariate garch approach this article explores supply response models in a rational expectations framework with endogenous risk by using a multivariate generalized autoregressive conditional heteroskedasticity model with cholesky decomposition this approach allows the incorporation of price volatility as a risk factor into the supply response of a primary commodity sector that is composed of several markets of homogenous products the model is applied to the greek meat sector which is composed of four major meat categories that is beef lamb pork and broiler and thus the model for the entire market includes supply and demand equations for all the four meat markets which are estimated simultaneously the empirical results confirm that price volatility is a significant risk factor in greek meat production and also provide useful implications about the cost factors of production furthermore the empirical findings show that the last reform of the common agricultural policy seems to have had a negative effect on beef and lamb production in greece

the expectations hypothesis of the term structure when interest rates are close to zero abstract in an economy where cash can be stored costlessly in nominal terms the nominal interest rate is bounded below by zero this paper derives the implications of this non negativity constraint for the term structure and shows that it induces a nonlinear and convex relation between short and long term interest rates the long term rate responds asymmetrically to changes in the short term rate and by less than that is predicted by the benchmark linear model in particular a decrease in the short term rate produces a smaller response in the long term rate than an increase of the same magnitude the empirical predictions of the model are examined using data from japan

the econometrics of markets with quantity controls this paper presents econometric methods for single markets with quantity controls or quotas a theory of quotas based on disequilibrium bargaining nations is outlined maximum likelihood methods are described for these theories the methods are applied to the australian tobacco leaf market it is argued that cigarette manufacturers gain slightly more from bargaining proces than tobacco growers

monitoring motivation and management the determinants of opportunistic behavior in a field experiment economic models of incentives in employment relationships are based on a specific theory of motivation employees are rational cheaters who anticipate the consequences of their actions and shirk when the marginal benefits exceed costs we investigate the rational cheater model by observing how experimentally induced variation in monitoring of telephone call center employees influences opportunism a significant fraction of employees behave as the rational cheater model predicts a substantial proportion of employees however do not respond to manipulations in the monitoring rate this heterogeneity is related to variation in employee assessments of their general treatment by the employer jel d2 j2 l2 l8 m12

methods of estimation for models of markets with bounded price variation introduction there has been a considerable amount of literature on the estimation of models which are in disequilibrium see fair and jaffe 1972 fair and kelejian 1974 amemiya 1974 maddala and nelson 1974 goldfeld and quandt 1975 laffont and garcia 1977 bowden 1978 etc the main feature of these models is that there is a demand function a supply function a min condition and in some models a price adjustment equation the cornerstone equation in these models is q1 min d1 s where d t quantity demanded at time t s t quantity supplied at time t q t quantity transacted at time t this equation which says that the short side of the market always prevails separates the sample points into those belonging to demand and those belonging to supply one can classify the models into two categories those with sample separation known and those with sample separation unknown but the important point is that the min condition implies under the usual assumptions that the probability of equilibrium is zero for any t however there are many practical cases where some of the observations refer to equilibrium points and some to disequilibrium points this is because trading in many markets is confined to some limits on price and the disequilibrium occurs only when these limits are violated there are minimum wage laws in labor markets usury laws in credit markets and trading limits in commodity markets in all such cases the markets are sometimes in equilibrium and sometimes in disequilibrium the present paper discusses methods of estimation for models of such markets

econometric tests of firm decision making under uncertainty optimal output and hedging decisions comparative statics of the competitive firm under price uncertainty were first developed by sandmo 23 and batra and ullah 3 more recently pope 21 and chavas and pope 7 extended these results by deriving the corresponding symmetry and homogeneity properties these latter two papers have particular importance in econometric modeling because symmetry or reciprocity results are equality restrictions which can be easily imposed in empirical research and hence increase the degrees of freedom and allow the theory to be tested however while theoretical work on various related models has become quite common in the literature few studies have actually empirically tested these models notable exceptions include brown and snow 4 chavas and holt 6 and antonovitz and roe 1 which empirically test various models of firm optimization under uncertainty holthausen 13 and feder just and schmitz 12 introduced hedging into the model of the firm under price uncertainty paroush and wolf 20 applied the expected utility model to include basis risk and the comparative statics were derived this paper presents the first empirical test of the expected utility model based on firm level production and hedging decisions a prime motivation for this paper is the gap in the literature between the assumptions underlying theoretical models of decision making and econometric tests of risk averse behavior chari jagannathan and jones 5 demonstrated that when a futures market is present producers may benefit even as the variance of spot prices increases the key role played by the assumption of constant absolute risk aversion is highlighted and noted as an extension of the more restrictive mean variance model yet econometric results presented by chavas and holt for aggregate corn and soybean production decisions suggested that risk preferences were not consistent with constant absolute risk aversion

the comparative statics of cumulative distribution function changes for the class of risk averse agents abstract the primary question addressed is when does a particular change in the cumulative distribution function cdf describing a random variable always cause all risk averse decision makers to adjust the choice variable in the same direction a necessary and sufficient condition involving both the decision model and the cdf change is derived this condition allows the researcher to determine the tradeoff between assumptions on the economic model and the cdf changes which are necessary and or sufficient to yield determinate comparative static results several applications are included

economic effects of non binding price constraints for decades the conventional wisdom among economists has been that a non binding price floor or price ceiling has no effect whatsoever on the market equilibrium and quantity 1 this hypothesis rests on the shaky theoretical assumption that the competitive firm s perception of future market conditions is not altered when the government imposes a price control recent experiments by isaac and plott 6 and smith and williams 18 cast doubt on this conventional wisdom but they offer no theory to explain their findings similarly working 19 benedict 1 and johnson 8 alluded that price supports set below the market equilibrium price would distort the supply response offarmers without explaining why only lee 10 and eeckhoudt and hansen 4 have developed theories to explain why firms react this way lee used an intertemporal decision making model to show that a price ceiling implemented above the current price would affect both price and output in the current period however lee discussed only those cases where resources have a finite inventory non renewable resources which once depleted cannot be produced again following sandmo 15 ishii 7 and coes 3 eeckhoudt and hansen analyzed the restraining effects of minimum and maximum prices on a competitive firm using a static equilibrium model they explained the short run response of a utility maximizing firm to the imposition of price constraints however eeckhoudt and hansen were unable to sign the effect that a price ceiling has on the volume of industrial output furthermore they ignored all long run adjustments our model differs from the previous studies in that we assume firms maximize the market value of the firm in so doing we are able to determine both the short run and the long run effects that currently non binding price restrictions have on a competitive industry consider the conventional competitive market in which the long run equilibrium is achieved when all the firms in the industry have an expected net worth comparable to their next best alternative for simplicity assume a price floor pf is inacted that is lower than the current market price and will remain constant for the forseeable future furthermore assume the government agrees

the economics of sequential choice applied to quasi option value abstract this paper develops a general model that can be used to determine the value of sequential forecasts the model is used 1 to examine the interacting effects of strategies for coping with environmental uncertainty and 2 to explore the relationship between the theories of sequential choice and quasi option value the framework presented bridges these two schools of thought and provides a tool for evaluating one time e g climate change or repetitive e g pollution forecasts of environmental damage

a heteroskedastic multivariate tobit analysis of price dynamics in the presence of price floors this article presents an econometric analysis of the effects of price floors on price dynamics and price volatility in a multimarket context we investigate the implications of a government price support program providing a censoring mechanism to the price determination process the analysis uses a dynamic multivariate tobit model under time varying volatility the model is applied to the u s dairy markets with a special focus on the effects of government price support programs in a period of market liberalization the econometric analysis provides useful information on the multimarket effects of price supports on price dynamics and price volatility

interactions between agricultural and resource policy the importance of attitudes toward risk using a method proposed by meyer for deriving comparative statics results in the presence of risk this paper analyzes the effects of various agricultural and environmental policy alternatives on the choices of a risk averse producer with a just and pope production function many commonly held beliefs about policy effects are not supported unambiguously by economic theory for example a tax on pesticides will not necessarily reduce pesticide use or average output and a reduction in price of agricultural output will not necessarily lead to a reduction in use of water or agricultural chemicals

testing the rational expectations hypothesis in an agricultural market a recent survey on models of agricultural supply equations listed over 500 studies in which variants of nerlove s adaptive expectations model were employed one might naively assume that the scientific evidence overwhelmingly favored the adaptive expectations hypothesis but this inference would not be warranted in particular there have been very few studies which have even attempted to estimate a rational expectations version of the traditional agricultural supply models and none that have explicitly tested the rational expectations hypothesis 2 in this paper we estimate a model of agricultural supply and demand for the chicken broiler industry under the maintained assumption of rational expectations in the sense of muth 1961 and provide a series of tests of the model specification we find that in this case the hypothesis of muth rationality receives strong support in recent years there has been increasing interest in models in which economic actors are assumed to form expectations of variables rationally for the most part empirical applications of the rational expectations hypothesis have employed single equation econometric methods these methods have permitted consistent estimation of equations under the assumption of the rational expectations hypothesis but do not allow for any explicit testing of the maintained hypothesis of rationality this paper presents estimates of a simultaneous equation model of the chicken broiler industry using maximum likelihood methods and provides a joint test of the rational expectations hypothesis and the model specification our econometric procedure is related to the recent theoretical work of wallis 1980 and combines time series analysis with traditional econometric estimation techniques under the assumption of rational expectations the model can be solved for the expected price as a function of the expected values of the exogenous variables this function can then be substituted into the model leading to a specification which contains the original endogenous and exogenous variables plus the expected values of the exogenous variables in general following this substitution the model will contain overidentifying restrictions time series analysis is utilized to generate the necessary forecasts of the exogenous variables the complete system of equations is estimated by full information maximum likelihood and the constraints are tested by a log likelihood ratio test the overidentifying constraints arise in the model because the suppliers are assumed to act as if they know both the underlying structure of the model and the stochastic processes governing the exogenous variables the two requirements of rational expectations while the expected price enters only the supply equation of our model it is necessary in the econometric formulation to specify the demand equation the instrumental variable procedures of mccallum 1976 and nelson 1975b are single equation methods and do not permit a test of the rational expectations hypothesis by specifying the complete model the additional structure imposed on the problem allows us to estimate the coefficients and test the implied restrictions there has not been universal agreement that the rational expectations hypothesis is the best theoretical device to model rational behavior according to muth s original formulation economic actors forecast endogenous variables according to the true reduced form equations of the model decanio 1979 and friedman 1979 have argued that the economic actors actually received for publication august 24 1981 revision accepted for publication march 2 1982 university of new mexico and university of california davis respectively we wish to thank g king r l huntzinger r pope and l wegge for advice on this project a nelson and e shaw contributed useful research assistance i the paper by askari and cummings 1977 provides references for these studies 2 huntzinger s 1979 paper is one of the first attempts at estimatitng a rational expectations model of agricultural supply

an examination on the cost efficiency of the banking industry under multiple output prices uncertainty this article formulates a behavioural model of profit maximization which explicitly incorporates both multiple output prices risk and safety first practice this theoretical model is specifically suitable for investigating financial institutions whose output prices frequently encounter a variety of risks such as loan defaults arrears the sample banks are empirically found to be highly risk averse furthermore risk preferences exert little effect on the technical efficiency estimates whereas the same estimates obtained by the standard fixed effect model under certainty tend to be overestimated evidence is found that a specialized bank offering a single product with a larger scale of production will be preferable in an uncertain atmosphere

household behavior under income uncertainty in a monocentric urban area abstract for a household living outside of but commuting to and from the cbd of an urban area and experiencing income uncertainty housing consumption and location distance from the cbd are inversely related to the probability of unemployment and directly related to the level of unemployment compensation under fairly unrestrictive assumptions under more restrictive assumptions it is found that these variables are inversely related to housing price and transportation costs finally income compensation causes housing consumption and location to be directly related to the probability of unemployment and the level of unemployment compensation

mean variance preferences and investor behaviour we study the comparative statics implications of mean variance preferences for optimal portfolios specifically we show that all risk averse mean variance investors raise their investment in a risky asset in response to a change in that asset s return distribution if and only if the change lowers both the mean and standard deviation of the return by the same percentage besides being of interest in its own right our results allow us to compare some comparative statics implications and the expected utility and mean variance models systematically

stochastically dominating shifts and the competitive firm abstract the production responses of the competitive firm to stochastically dominating shifts in the distribution of output price have been the object of much research in a recent paper simpson and sproule metroeconomica 51 2 2000 168 181 present five sets of sufficient conditions any one of which may be used to jointly sign the production responses of the competitive firm to first second and third order stochastically dominating shifts this paper demonstrates that one of the conditions outlined in the above mentioned reference is unnecessarily restrictive in the case of the logarithmic and the positive power utility functions

effects of exchange rate changes on u s agriculture a dynamic analysis an econometric model of the wheat corn and soybean markets is used to examine the dynamic effects of exchange rate fluctuation on u s commodity markets exports and agricultural prices are found to be sensitive to movements in the exchange rate while domestic factors such as disappearance and inventories are less sensitive but still responsive dramatic short run adjustments in prices and exports are followed by less dramatic but significant longer run adjustments thus the hypothesis of elastic response to the exchange rate seems particularly relevant for the short run

methods of estimation for models of markets with bounded price variation under rational expectations abstract the present paper extends the analysis in an earlier paper by maddala on estimation of disequilibrium market models with controlled prices to the case where the supply function depends on expected prices and expectations are formed rationally as suggested by muth

uniform and non uniform second best input taxes we investigate second best input based taxes foragricultural nonpoint pollution control when marketprices are endogenous and production isheterogeneous theoretically we derive the optimalforms of taxes which take account of heterogeneity non uniform taxes and a tax which does not auniform tax empirically we use a multi factor market equilibrium simulation model to determineoptimal tax rates and associated equity effects particularly differences in landowner gains lossesacross a heterogeneous region when market prices areendogenous second best tax policies result inpecuniary externalities that affect existingenvironmental externalities in particular thepecuniary externalities amplify the effect of producerheterogeneity on determination of sub regionaldifferences in tax rates and returns to land particularly for the uniform policy with endogenousprices the uniform tax rate is considerably higherthan any of the non uniform rates and ironically thenon uniform taxes result in less dispersion oflandowner gains across sub regions than the uniformtax

a note on the estimation of limited dependent variable models under rational expectations abstract in this paper we derive the expressions for the expected price in a disequilibrium model with upper and lower limits on prices under rational expectation relaxing the assumption of perfect foresight made in earlier studies we prove the uniqueness of the solution to the rational expectations model and outline the estimation method and iterative procedure

price and quantity controlled agricultural markets and disequilibrium econometrics a survey abstract this survey reviews the literature on estimating single markets in disequilibrium in the presence of regulated price and or quantity controls e g minimum price regimes and or marketing quotas most of the literature is found to describe pure econometric technique with only a few applications having emerged to date various reasons for the broad non acceptance of this literature are offered including a perceived lack of realism proposals to close this econometric theory application gap are put forward including the use of effective demand concepts in specifying demand and supply functions synthesizing some closely related literature on agricultural price quantity controls with disequilibrium econometrics i e endogenous government policy and the effects controls have on yield uncertainty and price risk and outlining more applicable econometric technique extensions

capital rationing and organizational slack in capital budgeting this paper reconciles three stylized facts about capital budgeting in firms and shows that they are tied to the presence of asymmetric information among the several members of the firm each with his or her own objectives and decisions the facts of interest are 1 the existence of organizational slack 2 the rationing of resources within organizations 3 the stated cut off rate for accepting capital projects in firms is often greater than the market rate of interest organizational slack is defined as the excess of resources allocated over the minimum necessary to accomplish the tasks assigned resource rationing is defined as the under allocation of resources i e an increase in the amount allocated would generate revenues in excess of its costs rationing and slack are both manifestations of ex post inefficiencies an lp model is used to show that these inefficiencies can occur in ex ante efficient organizational designs when asymmetric information is present the optimal allocation policy involves a hurdle rate criterion in which the hurdle rate is strictly in excess of the cost of capital thus inducing rationing in some states of the world typically resources are optimally allocated such that slack exists in other states the optimal allocation policy trades off these two inefficiencies