toward a reconstruction of keynesian economics expectations and constrained equilibria a two period model of temporary equilibrium with rationing is presented paying particular attention to agents expectations of future constraints it is shown that with arbitrary constraint expectations many different types of current equilibrium may be consistent with the same set of current and expected future wages and prices and that constraint expectations exhibit bootstraps properties e g a higher expectation of keynesian unemployment tomorrow increases the probability that it will prevail today in addition the concept of rational constraint expectations i e perfect foresight of future constraints is introduced and shown to enhance rather than reduce the effectiveness of government policy

competition and the number of firms in a market are duopolies more competitive than atomistic markets this paper uses a variant of the standard search model to examine market equilibrium and the consequences for market equilibrium of an increase in the number of firms if marginal search costs increase with the number of searches then the demand curve facing any firm will be kinked with the elasticity of demand with respect to price decreases being less than with respect to price increases prices may not change in response to changes in marginal costs as the number of firms increases the maximum price that is consistent with equilibrium increases to the monopoly price but the minimum price decreases on the other hand if marginal search costs decrease with the number of searches equilibrium if it exists is characterized by a

rockets and feathers understanding asymmetric pricing prices rise like rockets but fall like feathers this stylized fact of most markets is con rmed by many empirical studies in this paper i develop a model with competitive rms and rational partially informed consumers where such asymmetric response to costs by rms emerges naturally in contrast to public opinion and past work collusion is not necessary to explain such result using a rich dataset of retail gasoline prices i nd the observed price dispersion pattern to be consistent with the model s prediction

we the rich inequality identity and cooperation abstract inequality not only generates status differentials between rich and poor individuals it also generates status differentials between groups of different composition and income level we organise the social structure within which groups are embedded to manipulate their composition and relative status thus inducing weaker or stronger group identities in their members via the processes of social categorization identification and comparison we therefore manipulate the fundamental components of group identity rather than resorting to ad hoc identity reinforcement tasks how strongly individuals identify with each group will ultimately determine the degree of cooperativeness within the group and the whole society we find that the impact of inequality on social cooperativeness is not trivial cooperation varies with the strength of the group s identity as predicted by social identity theory in particular high endowment homogeneous groups cooperate most and increasingly over time low endowment homogeneous groups display intermediate levels of cooperation heterogeneous groups cooperate least a result driven by lack of cooperation on behalf of the rich as endowment sizes and groups are exogenously allocated we argue that our findings are a lower bound for the effects generated where endowments and groups are endogenously determined in or outside of the laboratory

oligopolistic markets with sequential search and production cost uncertainty this article analyzes a sequential search model where firms face identical but stochastic production costs the realizations of which are unknown to consumers we characterize a perfect bayesian equilibrium satisfying a reservation price property and provide a sufficient condition for such an equilibrium to exist we show that i firms set on average higher prices and make larger profits compared to the scenario where consumers observe production costs ii expected prices and consumer welfare can be non monotonic in the number of firms and iii the impact of production cost uncertainty vanishes as the number of firms becomes very large

on supply constrained equilibria abstract the paper gives sufficient conditions for the existence of an equilibrium with price rigidities and quantity rationing where i demand is never rationed ii net trades of an a priori chosen numeraire are never rationed and iii supply is rationed only when relative prices are downward rigid

optimal investment under ambiguous technology shocks abstract this paper analyzes the behavior of a firm facing an ambiguous technology shock and the effects of the attitude toward ambiguity on optimal capital investment using the smooth ambiguity model of klibanoff et al 2005 although it seems intuitive that an increase in ambiguity aversion always reduces the optimal capital investment this is not necessarily true because the shape of the production function plays a key role in determining the effect under some conditions we show that the optimal amount of capital investment increases decreases in ambiguity aversion if the production function is substitute complement and that this result is counterintuitive when the production function is substitute furthermore our main results hold if we assume the maxmin preferences in ghirardato et al 2004

learning in an equilibrium search model this paper explores the role of learning in an equilibrium search model with asymmetric information firms with identical but privately observed marginal cost sell a homogeneous good to heterogeneously informed consumers a reservation price equilibrium exists if the uninformed consumers search cost is sufficiently large in this equilibrium the amount of price dispersion is inversely related to the realization of marginal cost also the average price level is less responsive to cost changes than when cost is observable finally uncertainty about firms marginal cost increases the expected price level copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

non reservation price equilibria and consumer search abstract reservation price equilibria rpe do not accurately assess market power in consumer search markets in most search markets consumers do not know important elements of the environment in which they search such as for example firms cost we argue that when consumers learn when searching rpe suffer from theoretical issues such as non existence and critical dependence on specific out of equilibrium beliefs we characterize equilibria where consumers rationally choose search strategies that are not characterized by a reservation price non rpe always exist and do not depend on specific out of equilibrium beliefs non rpe have active consumer search and are consistent with recent empirical findings

temporary pareto optimum theory abstract the purpose of this paper is to introduce bounded rationality in the framework of pareto optimality this is done by altering the usual definition of the attainable set to take account of the fact that agents are represented by expectation functions induced by their learning processes two polar cases are examined first we show that a temporary pareto optimum is a temporary competitive equilibrium when expectations are strongly roy consistent second in the general case of weak roy consistency the temporary version of the second welfare theorem cannot always be true moreover the characterizations of a temporary pareto optimum bear some resemblance to those of optimal taxation in an atemporal second best framework

precautionary principle and the optimal timing of environmental policy under ambiguity i consider a problem in environmental policy design in which i focus on stock pollutants in particular i consider stock pollutants that cause severe damage on the environment and do not depreciate at all once they are released into the atmosphere and the ocean the purposes of this paper are 1 to provide an economic foundation for environmental policies based on the precautionary principle and the 1992 rio declaration on environment and development and 2 to show that this optimal timing rule has a reservation property furthermore i analyze the effect of an increase in ambiguity on the optimal timing of adopting some environmental policy and show that an increase in ambiguity decreases the optimal timing of adopting the environmental policy

testing models of consumer search using data on web browsing and purchasing behavior using a large data set on web browsing and purchasing behavior we test to what extent consumers are searching in accordance to various classical search models we nd that the benchmark model of sequential search with a known distributions of prices can be rejected based on the recall patterns we observe in the data moreover we show that even if consumers are initially unaware of the price distribution and have to learn the price distribution observed search behavior for given consumers over time is more consistent with non sequential search than sequential search with learning our

marginal tax reform externalities and income distribution the paper examines welfare improving and revenue neutral directions marginal policy reforms for an economy with nonidentical individuals and an externality that has a feedback effect on the consumption of taxed goods it considers three types of policy instruments the indirect taxes the uniform poll transfer and public abatement this extends the framework set up by ahmad and stern 1984 bovenberg and de mooij 1994 and schob 1996 the theoretical model is illustrated for a specific externality namely congestion caused by peak car transport

the economic environment and public enterprise behaviour belgian railroads 1950 86 the purpose of this paper is to estimate the impact of variations in the economic environment on allocatively inefficient behaviour by public enterprises and to measure the implications of both allocative and technical inefficiency for the firm s costs and factor use empirical results for the belgian railroad company suggest the importance of unemployment and the pressure experienced by managers to reduce the deficit as explanatory variables of allocative inefficiency the implications of inefficiencies for factor use are found to be substantial although the associated costs are quite small

identity and the economics of organizations on plebes first day at west point called r day they strip down to their underwear their hair is cut off they are put in uniform they then must address an older cadet with the proper salute and with the statement sir new cadet doe reports to the cadet in the red sash for the first time as ordered plebes must stand and salute and repeat and stand and salute and repeat until they get it exactly right all the while being reprimanded for every tiny mistake in the summary of david lipsky 2003 pp 145 154 who spent four years tracking a company of cadets at west point on r day you surrender your old self in stages but r day is just the beginning of the training and personal re engineering that is to come so that west point graduates emerge four years later as loyal officers in the u s army lipsky shows that despite some failure this tough program is remarkably successful in creating officers with the will to lead in battle economists current picture of organizations and work incentives has no place for the west point program and the motivations it seeks to inculcate in recruits in a standard economic model an individual s preferences are fixed and utility depends only on pecuniary variables the army s aim at west point is to change cadets preferences they wish to inculcate non economic motives in the cadets so that they have the same goals as the u s army alternatively stated the goal of west point is to change the identity of the cadets so they will think of themselves above all else as officers in the u s army they will feel bad about themselves they will lose utility if they fall short of the ideals of such an officer this change in identity

a model of tax reform for belgium abstract the paper deals with determining second best optima and existence conditions of pareto improving directions of tax reform for an economy experiencing keynesian unemployment i e characterised by excess supply of labour and commodities it is then tested whether these existence conditions were fulfilled in belgium in 1982 the model considers the taxation of seven consumption goods plus labour in a ten consumer economy empirical evidence suggests that welfare improving price directions can be found the whole set of these directions is then constructed

cost benefit rules in general disequilibrium abstract the consequences of imbalances in markets for goods and factors are the prime issues in many project evaluations this is so in evaluations of measures like migration manpower training programmes and plant locations in the present paper a general disequilibrium model of a small open economy is used to generate evaluation rules to be used when markets do not clear through price adjustments

second best analysis with markets in disequilibrium public sector pricing in a keynesian regime the paper develops pricing rules for a public sector subject to a budget constraint in an economy where the private sector experiences keynesian unemployment excess supply of labour and of commodities both second best and welfare improving pricing rules are studied it is found that such rules can be defined in operational terms in general they are quite complex involve quantities which are not directly observable reservation wages and prices and require evaluation of income and employment multipliers the general equilibrium approach to second best theory thus involves standard macroeconomic concepts and techniques some discussion of methodological issues and of policy objectives inflation versus unemployment is offered in order to facilitate interpretation the corresponding results for an economy with a competitive private sector are first restated

the quiet revolution that transformed women s employment education and family the modern economic role of women emerged in four phases the first three were evolutionary the last was revolutionary phase i occurred from the late nineteenth century to the 1920s phase ii was from 1930 to 1950 phase iii extended from 1950 to the late 1970s and phase iv the quiet revolution began in the late 1970s and is still ongoing three aspects of women s choices distinguish the evolutionary from the revolutionary phases horizon identity and decision making the evolutionary phases are apparent in time series data on labor force participation the revolutionary phase is discernible using time series evidence on women s more predictable attachment to the workplace greater identity with career and better ability to make joint decisions with their spouses each of these series has a sharp break or inflection point signifying social and economic change these changes moreover coincide by birth cohort or period the relationship between the development of modern labor economics and the reality of women s changing economic role is explored the paper concludes by assessing whether the revolution has stalled or is being reversed women who graduated college in the early 1980s did not opt out but recent cohorts are too young to evaluate this abstract was borrowed from another version of this item

risk ambiguity and the exercise of employee stock options abstract we investigate the importance of ambiguity or knightian uncertainty in executives stock option exercise decisions we develop an empirical estimate of ambiguity and include it in regression models alongside the traditional measure of risk equity volatility we show that each variable has a significant effect on the timing of option exercises with volatility causing executives to hold options longer to preserve option value and ambiguity increasing the tendency for executives to exercise early

optimal pricing and quality choice of a monopolist under knightian uncertainty abstract this paper analyzes a simple vertical product differentiation model with demand uncertainty and derives a risk neutral monopolist s optimal market entry timing her optimal pricing and optimal quality choice by incorporating knightian uncertainty irreversibility and flexibility in quality enhancing investment into a continuous time stochastic model it is shown that an increase in knightian uncertainty induces decreases in the optimal price the optimal quality and the value of undertaking the quality enhancing investment by the monopolist the social optimal entry timing pricing and quality are also analyzed

oligopolistic pricing with heterogeneous consumer search abstract a finite number of identical stores sell a homogeneous good to consumers with heterogeneous search costs who search sequentially with perfect recall and without replacement consumers search rules are optimal with respect to the stores pricing strategies and consumers must visit a store to obtain information about its actual price a symmetric nash equilibrium sne always exists the model exhibits a variety of equilibrium behaviors between monopoly pricing and marginal cost pricing the competitiveness of a market depends crucially on the shape of the search cost distribution moreso than on the number of competing firms

unemployment equilibrium in an economy with linked prices wage inflexibility has been widely regarded in modern writing as a cause of unemployment almost any keynesian or non walrasian equilibrium which involves equilibrium excess supplies also contain some form of wage or price inflexibility yet the micro mechanism of wage inflexibility its causes and form remains somewhat a mystery in this paper we study the allocation of resources in an economy in which prices of some goods or services are linked to other goods or services this is not wage rigidity in the traditional sense but it is a form of rigidity which is widely observed following the recent literature on non walrasian equilibrium see for example dreze 1975 barro and grossman 197 l grandmont and laroque 1976 malinvaud 1977 and many others one would expect the allocation to be attained via a set of quantity constraints on net trades we show in this paper however that the allocation mechanism in the economy will not require a general set of limitations on excess supplies and excess demands but rather will tend to have the following two properties

oligopolistic pricing with sequential consumer search n identical stores compete by choosing prices for a homogeneous good with constant marginal costs consumers search sequentially with perfect recall for the lowest price one class of consumers called shoppers have zero search costs while all other consumers have a positive search cost c there is a unique symmetric nash equilibrium price distribution with the property that it changes smoothly from marginal cost pricing when all consumers are shoppers and or c 0 and monopoly pricing when no consumers are shoppers remarkably as the number of stores increases the nash equilibrium becomes more monopolistic copyright 1989 by american economic association

risk uncertainty and option exercise many economic decisions can be described as an option exercise or optimal stopping problem under uncertainty motivated by experimental evidence such as the ellsberg paradox we follow knight 1921 and distinguish risk from uncertainty to capture this distinction we adopt the multiple priors utility model we show that the impact of ambiguity on the option exercise decision depends on the relative degrees of ambiguity about continuation payoffs and termination payoffs consequently ambiguity may accelerate or delay option exercise we apply our results to investment and exit problems and show that the myopic npv rule can be optimal for an agent having an extremely high degree of ambiguity aversion

public production and shadow pricing in a model of disequilibrium in labor and capital markets abstract this paper develops second best rules for public investment and employment in various regimes of disequilibrium on the capital and the labour markets the model used is very simple so as to imply rules which can easily be interpreted and contrasted with the current literature on the subject another issue considered is that of possible changes of regimes within a process of welfare improvement involving adjustments in the public production plan it is dealt with through a numerical example which points out that such changes can indeed occur

robust monopoly pricing we consider a robust version of the classic problem of optimal monopoly pricing with incomplete information in the robust version the seller faces model uncertainty and only knows that the true demand distribution is in the neighborhood of a given model distribution we characterize the pricing policies under two distinct decision criteria with multiple priors i maximin utility and ii minimax regret the equilibrium price under either criterion is lower then in the absence of uncertainty the concern for robustness leads the seller to concede a larger information rent to all buyers with values below the optimal price without uncertainty

non reservation price equilibrium and search without priors we analyse a model of oligopolistic competition in which consumers search without priors consumers do not have prior beliefs about the distribution of prices charged by firms and thus try to use a robust search procedure we show that the optimal stopping rule is stochastic and that for any distribution of search costs there is a unique market equilibrium which is characterised by price dispersion although listed prices approach the monopoly price as the number of firms increases the effective price paid by consumers does not depend on the number of firms

on the origins of gender roles women and the plough the study examines the historical origins of existing cross cultural differences in beliefs and values regarding the appropriate role of women in society we test the hypothesis that traditional agricultural practices influenced the historical gender division of labor and the evolution of gender norms we find that consistent with existing hypotheses the descendants of societies that traditionally practiced plough agriculture today have less equal gender norms measured using reported gender role attitudes and female participation in the workplace politics and entrepreneurial activities our results hold looking across countries across districts within countries and across ethnicities within districts to test for the importance of cultural persistence we examine the children of immigrants living in europe and the united states we find that even among these individuals all born and raised in the same country those with a heritage of traditional plough use exhibit less equal beliefs about gender roles today jel codes d03 j16 n30 copyright 2013 oxford university press

search and knightian uncertainty suppose that uncertainty about labor market conditions has increased does this change induce an unemployed worker to search longer or shorter this paper shows that the answer is drastically different depending on whether an increase in uncertainty is an increase in risk or that in true uncertainty in the sense of frank knight we show in a general framework that while an increase in risk the mean preserving spread of the wage distribution that the worker thinks she faces increases the reservation wage an increase in knightian uncertainty a decrease in her confidence about the wage distribution reduces it

tax reform from the gradient projection viewpoint abstract this paper examines the problems of gradual tax reform desirable small moves of the tax system are determined using the principles of the well known gradient projection algorithm three classical models of public finance are considered for each of them a continuous time dynamic process is exhibited along which the social welfare function increases until convergence to local second best extrema although the selection of trajectories according to the gradient projection method has some arbitrariness it leads to intuitively and economically appealing rules such as a tax reform analog of the classical optimal taxation result on production efficiency

shadow prices for public production in an open economy with disequilibrium abstract this paper derives shadow prices for public production employment and imports in a one period one individual small open economy where there is both unemployment and excess supply of some tradeable goods and where there exists a ceiling on the foreign trade balance the model used is made purposely simple so as to yield shadow prices which can be interpreted and contrasted with intuitive understanding and the current literature on the subject

the efficiency basis for regional employment policy is there a theoretical basis for subsidizing employment in low income regions a two region model is analyzed where there is migration of labour between regions costs of migration and unemployment in the low income region workers migrate according to the expected wage net of the cost of migration when there are no transfers an unambiguous case can be made for encouraging employment in the poor region however when transfers to residents of the low income region exist the case becomes ambiguous this abstract was borrowed from another version of this item

uncertainty risk neutral measures and security price booms and crashes abstract this paper provides a general analysis of intertemporal utility based on the multiple priors model of aversion to knightian uncertainty then the existence of equilibrium is proven for a representative agent security market model it is shown that uncertainty aversion can invalidate the existence of a risk neutral measure representation for prices in addition an example suggests an intriguing link between uncertainty aversion and the possibility of abrupt changes in security prices the analysis relies heavily on a fubini type theorem for analytic functions due to dellacherie and meyer probabilities and potential c north holland new york 1988 journal of economic literature classification numbers g12 d81 d90

group learning wage dispersion and non stationary offers can differences in equilibrium beliefs among otherwise identical individuals account for a substantial degree of wage inequality this paper shows that this is possible if two conditions are met first people learn about the distribution of wage offers from the experience of their peers and second people believe that wage offers are stationary even though offers that arrive later tend to have higher wages than offers that arrive earlier peer groups can then end up with different stable beliefs that lead to intergroup wage differences the non stationarity of offers is rationalized in a model where firms can either advertise their job openings or not and where advertised ones have more influence on more inexperienced job searchers a statistic is proposed whose application to existing studies suggests that the non stationarity considered here is present in data

cost benefit rules in a regionalized disequilibrium model in 1982 83 a mining company in northern sweden laid off 1 800 employees the parliament allotted sek 309 million for a program of job creating measures evaluation of these measures requires a welfare theoretic foundation this analysis focuses on the welfare implications of public production of private goods these effects depend on which market output is sold and the type of taxes used to balance the public budget the rules include partial and indirect spill over effects that can be interpreted in terms of multipliers and marginal propensities to consume

privatization internal control and internal regulation abstract this paper develops a theory of the privatization of public enterprises the relevant decisions are modelled as a three stage process internal control internal regulation and privatization privatization is a move from an overcontrolled public firm to an overcontrolled private firm the firm never achieves the optimal extent of control because the necessary replacement of public by private managers leads not only to the desired reduction of bureaucracy but also to an undesired increase in profits moreover the reduction of overbureacratization is matched by a reduction in the quality of the supplied goods

shadow pricing of labor and capital in an economy with unemployed labor abstract this paper derives the shadow prices of labour and capital to be used in the public sector in a situation of unemployment the setting considered is that of a three good two period general equilibrium model then shadow prices are compared to their corresponding market prices and shown to closely depend on own and cross elasticities of supply and demand for labour and investment in the first part a rigid wage rate is the sole source of distortion then a tax on capital income is introduced so that our formula for the social rate of discount can be contrasted with that of harberger sandmo and dreze

the causes and consequences of distinctively black names in the 1960s blacks and whites chose relatively similar first names for their children over a short period of time in the early 1970s that pattern changed dramatically with most blacks particularly those living in racially isolated neighborhoods adopting increasingly distinctive names but a subset of blacks actually moving toward more assimilating names the patterns in the data appear most consistent with a model in which the rise of the black power movement influenced how blacks perceived their identities among blacks born in the last two decades names provide a strong signal of socioeconomic status which was not previously the case we find however no negative relationship between having a distinctively black name and later life outcomes after controlling for a child s circumstances at birth

disequilibrium and the welfare maximising levels of government spending taxation and debt a disequilibrium framework which extends that of r j barro and h i grossman 1971 and e malinvaud 1977 to include overlapping generations and dynamics due to perfect foresight and t he accumulation of bonds and capital is used to determine when a welfare maximizing fiscal policy requires a higher level of government spending than in walras ian equilibrium when deficits are permitted optimum spending either equals the walrasian optimum or differs in a way depending arbitrarily on preferences when a balanced budget is imposed two situations which may justify spending clearly above the walrasian optimum are 1 when capital accumulation is included 2 when spending provides utility to consumers copyright 1987 by royal economic society

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

a political economy theory of fiscal policy and unemployment this paper presents a political economy theory of fiscal policy and unemployment the underlying economic model is one in which unemployment can arise but can be mitigated by tax cuts and public spending increases such policies are fiscally costly but can be financed by issuing government debt policy decisions are made by a legislature consisting of representatives from different political districts the theory provides a positive account of the simultaneous determination of fiscal policy and unemployment the most important implication of the theory is that debt and unemployment levels should be positively correlated some evidence in support of this prediction is provided using data from a panel of developed countries

privatization of public enterprises in this paper the following results of a transition from public to private ownership are obtained the manager of a public firm engages in less effort than is efficient in a privatized firm the manager s effort is chosen efficiently the reward to the manager of a public firm is more differentiated than efficient in the case of an unfavourable economic environment the reward is higher than efficient on the other hand the manager in a privatized firm is always rewarded efficiently it is irrelevant whether the public manager is incompletely informed about the particular mix of government s multiple objectives as long as the government chooses the incentive compatible reward for the manager

optimal fiscal policy in open economies with labour market distortions abstract we set up a general equilibrium model with unemployment owing to distortions in the labour market it is shown that a public expansion financed by a distortionary income tax may give rise to a decrease in unemployment even if public goods are pure waste such an expansion may give rise to an increase in welfare if it is associated with a decrease in unemployment since part of the gain from a fiscal expansion is achieved at the expense of welfare in other countries non cooperative policies tend to be too expansionary

pricing product diversity and search costs a bertrand chamberlin diamond model we study price competition in the presence of search costs and product differentiation the limit cases of the model are the bertrand paradox the diamond paradox and chamberlinian monopolistic competition market prices rise with search costs and decrease with the number of firms prices may initially fall with the degree of product differentiation because more diversity leads to more search and more competition equilibrium diversity rises with search costs while the optimum level falls so entry is excessive the market failure is most pronounced for low preference for variety and high search costs

price matching guarantees and consumer search abstract this paper examines the effect of price matching guarantees pmgs on market outcomes in a sequential search model pmgs are simultaneously chosen with prices and some consumers shoppers know the firms decisions before buying while others non shoppers enter a shop before observing the price and whether or not the firm has a pmg in such an environment pmgs increase the value of buying the good and therefore increase consumers reservation prices this increase is so large that even after accounting for the possible execution of pmgs firms profits are larger in an equilibrium where pmgs are offered than in an equilibrium without pmgs we also consider the incentives of firms to choose pmgs and show that an equilibrium where all firms offer pmgs does not exist because of a free riding problem

truly costly sequential search and oligopolistic pricing we modify the paper of stahl 1989 stahl d o 1989 oligopolistic pricing with sequential consumer search american economic review 79 700 12 by relaxing the assumption that consumers obtain the first price quotation for free when all price quotations are costly to obtain the unique symmetric equilibrium need not involve full consumer participation the region of parameters for which non shoppers do not fully participate in the market becomes larger as the number of shoppers decreases and or the number of firms increases the comparative statics properties of this new type of equilibrium are interesting in particular expected price increases as search cost decreases and is constant in the number of shoppers and in the number of firms welfare falls as firms enter the market we show that monopoly pricing never obtains with truly costly search d 2005 elsevier b v all rights reserved

identity economics 2016 where do social distinctions and norms come from abstract identity economics provides a framework to analyze economic outcomes by establishing people s identities not just pecuniary incentives as primary motivations for choice the heart of the framework is social difference and norms this paper engages the emerging economic research into sources of divisions and norms individuals families schools governments and social movements the task at hand is to further to develop the micro foundations of identity in order to build a socially framed understandings of human motivation that will yield more robust accounts of behavior and institutions and yet better predictions of the implications of policy

regret aversion and opportunity dependence this paper provides an axiomatic model of decision making under uncertainty in which the decision maker is driven by anticipated ex post regrets our model allows both regret aversion and likelihood judgement over states to coexist also we characterize two special cases minimax regret with multiple priors that generalizes savage s minimax regret and a smooth model of regret aversion

pricing without priors we consider the problem of pricing a single object when the seller has only minimal information about the true valuation of the buyer specifically the seller only knows the support of the possible valuations and has no further distributional information the seller is solving this choice problem under uncertainty by minimizing her regret the pricing policy hedges against uncertainty by randomizing over a range of prices the support of the pricing policy is bounded away from zero buyers with low valuations cannot generate substantial regret and are priced out of the market we generalize the pricing policy without priors to encompass many buyers and many qualities

mothers and sons preference formation and female labor force dynamics this paper argues that the growing presence of a new type of man one brought up in a family in which the mother worked has been a significant factor in the increase in female labor force participation over time we present cross sectional evidence showing that the wives of men whose mothers worked are themselves significantly more likely to work we use variation in the importance of world war ii as a shock to women s labor force participation as proxied by variation in the male draft rate across u s states to provide evidence in support of the intergenerational consequences of our propagation mechanism

general equilibrium when some firms follow special pricing rules in this paper we study the existence of a general equilibrium in an economy in which some of the firms behave competitively whereas others follow special pricing rules an even casual observation of economic reality confirms the need for the inclusion of price setting firms in the study of general equilibrium models and in fact this has been emphasized in the economic literature for some time we consider this a sufficient justification to present a general equilibrium model which allows for both types of behavior price setting as well as price taking behavior the model to be presented will account for a wide range of price setting rules we however find it appropriate to point out at the start that not all economically relevant price setting rules are covered although our model permits the drawing of useful conclusions for the general equilibrium theory of oligopolistic competition through prices it is not especially designed for that purpose in particular our results are not applicable to the general equilibrium analysis with price making monopolistic firms a subject on which there exists some literature 2 our motivation as well as our modelling options and assumptions are directed to two fields where an increased interest in the theoretical foundations recently could be noticed

optimal administered pricing under capacity constraints abstract this paper addresses the question of how pricing policies can improve the utilization of existing production capacities an optimizing input output model for the indian economy is developed for this purpose where the government s objective is to maximize growth subject to capacity constraints it is found that the optimal prices are related to the keynesian income multipliers associated with increases in the consumption of goods

shadow prices and public policies in a disequilibrium model of an open economy the paper focuses on the interaction between the goals of optimal stabilization and of allocative efficiency in project evaluation in an economy that is small as an exporter which must maintain trade balance and where some disequilibrium may prevail on goods and labour markets the criteria that are developed reflect an aggregation of profitability and reduction of unemployment additional foreign demand foreign currency savings should be evaluated in welfare terms after weighting by the gap between the relevant market and shadow prices the shadow prices also lead to the definition of an optimal taxation system

the social cost of labor and project evaluation a general approach abstract this paper presents a general framework for analyzing shadow wages in ldcs we focus on i the differences between the domestic and international prices ii the equilibrating mechanisms in the economy iii the endogeneity of earnings in industry and agriculture iv the consequences of industrial employment creation on agriculture and v the nature of migration and unemployment we identify those reduced form relationships which are central in determining the shadow wage and use them to obtain general formulae for the shadow wage these formulae can be specialized to alternative technological behavioral and institutional settings this yields many new results concerning the relationship between the shadow wage and the market wage also earlier results on shadow wages are derived as special cases of our formulae

identity and schooling some lessons for the economics of education abstract this review culls noneconomic literature on education by sociologists anthropologists and practitioners to present a new economic theory of students and schools this theory elaborates two themes that have eluded economic analysis first is the student as decision maker whose primary motivation is her identity second is a conception of the school as a social institution this framework suggests a new perspective on questions such as resource allocation and school reform it explains why some educational policies succeed and others fail we show how sociological variables may affect outcomes and suggest ways economists can incorporate them into theoretical and empirical research

cognitive dissonance status and growth of the underclass we present a model of cognitive adaptation to examine the growth and behaviours of the underclass in the model individuals experiencing cognitive dissonance between status seeking and social recognition adapt their attitudes regarding what is deemed status worthy this yields the endogenous formation of an underclass in which non pecuniary social returns counteract the effect of traditional incentives i e wages in motivating behaviour by gaining insight into the process of psychological adaptation of those living in poverty the paper sheds light on economic policies that mitigate the disenfranchisement and hence the growth of the underclass

ambiguity made precise a comparative foundation the theory of subjective expected utility has been recently extended to allow ambiguity to matter for choice we propose a notion of absolute ambiguity aversion by building on a notion of comparative ambiguity aversion we characterize it for a preference model which encompasses some of the most popular models in the literature we next build on these ideas to provide a definition of unambiguous act and event and show the characterization of the latter as an illustration we consider the classical ellsberg 3 color urn problem and find that the notions developed in the paper provide intuitive answers journal of economic literature classification number d81

the melting pot and school choice abstract in the united states parents are offered free public education in the mainstream culture but must pay the full cost of tuition if they educate their children privately this creates strong economic incentives for remaining within the public system which promotes the assimilation of minorities a pareto improvement can be achieved by subsidizing private education in exchange for modifying its social content so as to reduce polarization popular opposition to voucher programs that facilitate school choice without regulating cultural content may partly reflect voters concerns that such programs threaten to erode the common ground created by public education

optimal policy rules and regime switching in disequilibrium models this paper emphasizes the need to search for globally optimal policy levels for public production say in fix price disequilibrium analysis regime specific rules are inadequate they ignore the fact that moving a policy towards its optimal level may move the economy from its initial disequilibrium regime to a different regime where the rule no longer applies

true monopolistic competition as a result of imperfect information the paper restates hart s 1985a 1985b definition of large group monopolistic competition distinguishes it from oligopolistic competition and raises the question of whether there are reasonable circumstances that give rise to true monopolistic competition as defined the purpose is to show that consumers imperfect information may create conditions that will turn an otherwise oligopolistic market into a truly monopolistically competitive one