stabilization adjustment and the poor abstract this paper attempts to survey the recent literature on the impact of stabilization and adjustment programs upon the poor and to consider some of the key issues in the context of a particular equity oriented low income country tanzania after looking at some of the approaches of earlier studies this paper analyzes the effects of restructuring policies macroeconomic restraint and strategic policy change the author then reviews available evidence on the recent experience of tanzania with external shock efforts at stabilization and relations with the imf in conclusion the author argues that in order to better understand their impact on poverty we need more detailed analyses of specific countries experience with different kinds of macroeconomic imbalance and different short to medium term policy responses however he does indicate with some certainty that when equivalent external blows impact upon very low income countries there must be a presumption that other things being equal including the distribution of income the proportion of households and people pushed over the line into absolute poverty will be greater than in middle income countries the international community should provide external finance to aid these low income countries in limiting the negative impact on the poorest

nash implementation a complete characterization the authors extend e maskin s results on nash implementation first they establish a condition that is both necessary and sufficient for nash implementability if there are three or more agents the case covered by maskin s sufficiency result second and more important they examine the two agent case for which there existed no general sufficiency results the two agent model is the leading case for applications to contracting and bargaining for this case too they establish a condition that is both necessary and sufficient the authors use their theorems to derive simpler sufficiency conditions that are applicable in a wide variety of economic environments copyright 1990 by the econometric society

boundedly rational nash equilibrium a probabilistic choice approach we propose an equilibrium for n person finite games based on bounded rationality using the legit model of discrete choice theory at equilibrium each player uses appropriate choice probabilities given those used by the others rationality is parameterized on a continuum from complete rationality to uniform random choice results on the existence of equilibrium and on convergence to nash as rationality becomes perfect are similar to results due to mckelvey and palfrey we identify conditions such that for a given rationality parameter range the path of choices over time when the players use fictitious play converges to equilibrium c 1997 academic press

on constant maskin monotonic social choice functions abstract a social choice function satisfying a dual dominance condition is maskin monotonic if and only if it is constant hence any non constant social choice function satisfying dual dominance is not nash implementable among the important examples are all social choice functions on unrestricted domains on the other hand non constant social choice functions such as a walrasian performance function in economic environments need not satisfy dual dominance

coase theorem complexity and transaction costs this paper by introducing complexity considerations provides a dynamic foundation for the coase theorem and highlights the role of transaction costs in generating inefficient bargaining negotiation outcomes we show when the players have a preference for less complex strategies the coase theorem holds in negotiation models with repeated surplus and endogenous disagreement payoffs if and only if there are no transaction costs specifically complexity considerations select only efficient equilibria in these models without transaction costs while every equilibrium induces perpetual disagreement and inefficiency with transaction costs we also show the latter is true in the rubinstein bargaining model with transaction costs

the principle of minimum differentiation holds under sufficient heterogeneity the so called principle of minimum differentiation stated by hotelling has been challenged by many authors this paper restores the principle by showing that n firms locate at the center of the market and charge prices higher than the marginal cost of production when heterogeneity in consumers tastes is large enough

bargaining and markets complexity and the competitive outcome abstract rubinstein and wolinsky rev econ stud 57 1990 63 78 consider a simple decentralised market game in which agents meet randomly or voluntarily and bargain over the terms of trade they show that any individually rational price can be sustained as a sequential equilibrium even though the model has a unique competitive outcome here i consider rubinstein and wolinsky s model and show that if complexity costs of implementing strategies enter players preferences together with the standard payoff in the game then every equilibrium is stationary markov and induces the unique competitive price thus i demonstrate that aversion to complexity may provide a justification for the competitive outcome

mechanism design with interdependent valuations efficiency ggagents valuations are interdependent if they depend on the signals or types of all agents under the implicit assumption that agents cannot observe their outcome decision payoffs previous literature has shown that with interdependent valuations and independent signals efficient design is impossible this paper shows that an efficient mechanism exists in an environment where first the final outcome e g allocation of the goods is determined then the agents observe their own outcome decision payoffs and then final transfers are made

undominated nash implementation in bounded mechanisms we study implementation in undominated nash equilibrium by bounded mechanisms an undominated nash equilibrium is a nash equilibrium in which no agent uses a weakly dominated strategy a mechanism is bounded if every dominated strategy is dominated by some undominated strategy we identify necessary conditions and sufficient conditions for such implementation these conditions are satisfied in virtually all economic environments and are also satisfied by interesting correspondences from the social choice literature for economic settings we provide a particularly simple implementing mechanism for which the undominated equilibrium outcomes coincide with those obtained from the iterative elimination of weakly dominated strategies

robust implementation in direct mechanisms a social choice function is robustly implementable if there is a mechanism under which the process of iteratively eliminating strictly dominated messages lead to outcomes that agree with the social choice function for all beliefs at every type profile in an interdependent value environment with single crossing preferences we identify a contraction property on the preferences which together with strict ex post incentive compatibility is sufficient to guarantee robust implementation in the direct mechanism strict ex post incentive compatibility and the contraction property are also necessary for robust implementation in any mechanism including indirect ones the contraction property requires that the interdependence is not too high in a linear signal model the contraction property is equivalent to an interdependence matrix having all eigenvalues smaller than one

implementation in undominated nash equilibria without integer games a mechanism which uses neither integer games nor modulo games is shown to implement any social choice function in a production economy with private and excludable public goods more precisely th

on the dispensability of public randomization in discounted repeated games abstract we show that any feasible individually rational payoffs of an infinitely repeated game can arise as subgame perfect equilibrium payoffs if the discount factor is close enough to one even if mixed strategies are not observable and public randomizations are not available

choosing how to choose self stable majority rules and constitutions constitutional arrangements affect the decisions made by a society we study how this effect leads to preferences of citizens over constitutions and ultimately how this has a feedback that determines which constitutions can survive in a given society constitutions are stylized here to consist of a voting rule for ordinary business and possibly a different voting rule for making changes to the constitution we define an equilibrium notion for constitutions called self stability whereby under the rules of a self stable constitution the society would not vote to change the constitution we argue that only self stable constitutions will endure we prove that self stable constitutions always exist but that most constitutions even very prominent ones may not be self stable for some societies we show that constitutions where the voting rule used to amend the constitution is the same as the voting rule used for ordinary business are dangerously simplistic and there are many societies for which no such constitution is self stable we conclude with a characterization of the set of self stable constitutions that use majority rule for ordinary business

economic stabilization and structural transformation lessons from the chilean experience 1973 87 abstract this paper evaluates the experience of economic reforms and stabilization efforts in chile during 1973 87 the paper presents a brief historical background and then reviews the main goals policy tools and results of the economic program implemented since the military government came to power in september 1973 the paper discusses in detail the stabilization and structural transformation aspects of the economic program including the privatization of the economy and the trade and financial liberalization the main conclusion is that despite a healthy improvement in the economic situation during 1985 87 the future of the chilean economy remains uncertain and vulnerable to external shocks the paper concludes by summarizing the main policy lessons of the chilean experience

discrete choice and variable returns to scale in previous studies of the probabilistic theory of qualitative choice e g marschak 1960 and mcfadden 1974 it has been assumed that an individual chooses among various alternatives with their utility levels independent of the number of individuals who choose each alternative there are however many examples in which the utility of a choice depends on the number of individuals who make the same choice for instance the utility of a given spatial choice may depend upon the number of others who choose neighboring locations neighborhood utility may decrease crowding or it may increase agglomerative economies with population size a second example is the automobile traveler s choice of routes the benefit of one route choice over another due to congestion depends on the number of drivers who choose the same route both of the examples suggested above deal with spatial choices of a particular kind but there are even examples from the more traditional macroeconomic theory one such example is of a product produced under variable returns to scale by a number of different sellers the price that each seller charges will depend upon the number of his customers if a buyer must choose to purchase from only one seller the price paid and thus utility will depend upon the total number of buyers choosing the same seller in all of the examples cited a reasonable model of choice is one that postulates uncertainty about the actual utility of each alternative the point of view is that a chooser s notional utility about each choice is a random variable in this case it is not certain which alternative will be chosen but the chosen alternative is the one with the greatest perceived utility it follows therefore that the probability that a given alternative is chosen is the probability that the utility perceived to be associated with it is larger than the utility perceived to be associated with any other alternative

complexity and competition extensive form market games typically have a large number of noncompetitive equilibria in this paper we argue that the complexity of noncompetitive behavior provides a justification for competitive equilibrium in the sense that if rational agents have an aversion to complexity at the margin then maximizing behavior will result in simple behavioral rules and hence in a competitive outcome for this purpose we use a class of extensive form dynamic matching and bargaining games with a finite number of agents in particular we consider markets with heterogeneous buyers and sellers and deterministic exogenous sequential matching rules although the results can be extended to other matching processes if the complexity costs of implementing strategies enter players preferences lexicographically with the standard payoff then every equilibrium strategy profile induces a competitive outcome

equilibrium analysis of disaggregate facility choice systems subject to congestion elastic demand this paper considers the impact of congestion on the spatial distribution of customer utilization of service facilities in a stochastic dynamic environment previous research has assumed that the rate of demand for service is independent of the attributes of the facilities we consider the more general case in which facility utilization is determined both by individual facility choice based on the stochastic disaggregate choice mechanism and by the rate of demand for service we develop generalized results for proving that equilibria exist and describe sufficient conditions for the uniqueness and global stability of these equilibria these conditions depend upon the elasticity of demand with respect to the level of congestion at the facilities and on whether customers are congestion averse or are congestion loving finally we examine special cases when these conditions are satisfied

overcoming incentive constraints by linking decisions consider a bayesian collective decision problem in which the preferences of agents are private information we provide a general demonstration that the utility costs associated with incentive constraints become negligible when the decision problem is linked with a large number of independent copies of itself this is established by defining a mechanism in which agents must budget their representations of preferences so that the frequency of preferences across problems mirrors the underlying distribution of preferences and then arguing that agents incentives are to satisfy their budget by being as truthful as possible we also show that all equilibria of the linking mechanisms converge to the target utility levels the mechanisms do not require transferable utility or interpersonal comparisons of utility and are immune to manipulations by coalitions

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

external shocks and growth prospects the case of brazil 1973 1989 this is a study of the factors underlying the current account deficits experienced by brazil since the mid 1970s it also explores the country s economic prospects through 1989 with the help of a simple macro simulations model the current account deficit is identically equal to the excess of domestic spending over national income provided that net external financing is available this excess may increase for a number of reasons prominent among them is an expansion of real domestic spending associated with increases either of real consumption expenditures or of real domestic capital formation even if domestic absorption is invariant the external deficit may worsen because of inadequate domestic pricing policies these may make it impossible for local firms to compete with cheaper foreign products thus forcing a contraction of national income and employment a temporary reduction of gnp below its potential value may also be caused by domestic supply shocks of a climatic or other nature however other factors can also cause a deterioration of the current account in this context this study investigates the factors underlying the evolution of the external accounts of brazil since the mid 1970s following an approach suggested in the dell report and elaborated by balassa the reasons for a deterioration of the current account are divided into three groups external shocks burden of accumulated debt and domestic policy actions the first group comprises terms of trade international interest rates and world recession the second includes the accumulated effect of past shocks and domestic policy actions finally the third group encompasses the variables supposedly under the control of local policy makers domestic absorption and the economy s tradability

efficient repeated implementation this paper examines repeated implementation of a social choice function scf with innitely lived agents whose preferences are determined randomly in each period an scf is repeated implementable in nash equilibrium if there exists a sequence of possibly history dependent mechanisms such that i its nash equilibrium set is non empty and ii every nash equilibrium outcome corresponds to the desired social choice at every possible history of past play and realizations of uncertainty we show with minor qualications that in the complete information environment an scf is repeated implementable in nash equilibrium if and only if it is ecient we also discuss several extensions of our analysis including constructions employing only nite mechanisms

implementation in undominated strategies a look at bounded mechanisms this paper examines the impact of placing natural restrictions on the mechanisms considered for implementation problems it is shown that if all mechanisms are considered and preferences satisfy a basic condition then any social choice correspondence can be implemented in undominated strategies an example points out that the strength of this result derives from the use of mechanisms with questionable features in part of the message space the agent who announces the highest integer is rewarded this sort of tail chasing construction common in the constructive proofs of the literature is used to assure that undesired strategy combinations do not form an equilibrium if such mechanisms are ruled out then the social choice correspondences which can be implemented in undominated strategies satisfy an incentive compatibility type condition called strategy resistence for social choice functions this is equivalent to strategy proofness this contrast suggests that this issue should be examined as it applies to other solution concepts used in implementation theory the last portion of the paper begins to explore the issue as it relates to nash implementation and undominated nash implementation

complexity and repeated implementation this paper examines the problem of repeatedly implementing an ecient social choice function when the agents preferences evolve randomly we show that the freedom to set dierent mechanisms at dierent histories can give the planner an additional leverage to deter undesirable behavior even if the mechanisms are restricted to be simple and nite specically we construct a history dependent sequence of simple mechanisms such that with minor qualications every pure subgame perfect equilibrium delivers the correct social choice at every history while every mixed equilibrium is strictly pareto dominated more importantly when faced with agents with a preference for less complex strategies at the margin the ecient social choice function can be repeatedly implemented in subgame perfect equilibrium in pure or mixed strategies our results demonstrate a positive role for complexity considerations in mechanism design

foreign debt balance of payments and growth prospects the case of the republic of korea 1965 1988 the rapid buildup in the external debt of the developing countries since 1973 has created serious economic and political difficulties that could frustrate the development efforts of these countries and threaten the international financial system in terms of outstanding debt the republic of korea ranks fourth among third world borrowers and has experienced a noticeable deterioration in its debt servicing capacity yet at the same time it is widely recognized that the country has successfully adjusted to a series of adverse external developments since 1973 and in the process has maintained growth momentum while avoiding the financial difficulties other countries now face the exceptional performance of its economy in recent years supports this assessment the purpose of this study is twofoid the first is to analyze korea s experience with debt accumulation and management over the past two decades with a view to identifying some of the factors that may explain its successful debt management the second objective is to examine the prospects of the national economy for the 1984 88 period section 2 discusses profiles of the country s external obligations and analyzes several aspects of the outstanding debt pertinent to the discussion section 3 is devoted to a discussion of the evolution and causes of the country s foreign debt accumulation this discussion is followed by a review of its response to external and internal shocks in sections 4 and 5 section 6 examines questions related to the efficiency and optimality of foreign borrowing section 7 investigates the prospects of the national economy for the next five years for this purpose this section highlights some of the target revisions made in 1983 for the remainder of the fifth five year economic and social deveiopment plan 1982 86 and the government s macroeconomic projections through 1988 comparisons are made with simulation exercises under a number of scenarios that generate projections for the economy until 1990 a summary and concluding remarks constitute the final section

nash equilibrium and welfare optimality if is a set of social alternatives a social choice rule scr assigns a subset of a to each potential profile of individuals preferences over a where the subset is interpreted as the set of welfare optima a game form or mechanism implements the social choice rule if for any potential profile of preferences 1 any welfare optimum can arise as a nash equilibrium of the game form implying in particular that a nash equilibrium exists and 2 all nash equilibria are welfare optimal the main result of this paper establishes that any scr that satisfies two properties monotonicity and no veto power can be implemented by a game form if there are three or more individuals the proof is constructive

the development trinity how regional integration impacts growth inequality and poverty developing countries today have become more active participants in regional trade agreements this raises questions about how the benefits of integration are distributed and the extent to which lower income countries are able to capture development gains historically such impacts have been difficult to identify with precision this paper seeks to address this gap by empirically analysing the impact of regional integration on development particularly the effects on growth and welfare using both bilateral and regional integration measures we show that the ability to capture gains from integration varies across developing country regional groups with developing asia benefiting on par with developed countries the findings in the paper indicate that trade and trade policy play an important role in reducing inequality and poverty in developing countries it also shows that regionalism can function as a channel to make multilateralism a more adept way of addressing national challenges