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

some comments on free riding in leontief partnerships hans k hvide holmstrom bell journal of economics 13 1982 324 40 showed that freeriding is inevitable in partnerships where inputs are substitutes legros and matthews review of economic studies 68 1993 599 611 and vislie journal of economics behavior and organization 23 1994 83 91 showed that when inputs are strict complements leontief technology free riding can be avoided with a linear sharing rule this paper considers the robustness and some extensions of the positive result of these articles first i show that legros and matthews s and vislie s results are not robust to the introduction of participation constraints and limited liability however i construct a novel rule that mitigates that problem second i perturb the deterministic model of the other authors it turns out that free riding is avoidable with noise added to joint output and is inevitable when noise is added to individual productivity jel c72 d20 d29 d82 i introduction a long tradition in economics compares the performance of different ownership arrangements of firms capitalist firms are defined through separating ownership and production by having an outside owner and partnership firms split the value of production in full between the partners building on alchian and demsetz 1972 the seminal paper by holmstrom 1982 argues that partnership firms may suffer from free riding problems holmstrom 1982 shows that efficient provision of effort is not consistent with nash behavior in static partnership games where inputs are substitutes and actions are noncontractible capitalist firms on the other hand can mitigate the free rider problems by a principal breaking the budget i e keep some of the surplus for oneself whenever one observes a low joint output motivated by the many examples of partnerships in the real world considerable literature has questioned the generality of holmstrom s result 1 the present article considers a particular branch of that literature works that explore effort taking in leontief partnerships partnerships where joint output is determined by the partner with the least effort 2 legros and matthews 1993 section 3 1 and vislie 1994 hereafter abbreviated lmv find that if production is determined in such a manner there exists a linear sharing rule denoted beta sup that implements the efficient provision of effort and hence eliminates free riding the intuition for this result is that given that the other agents stick to the efficient action no agent can gain by providing more effort because output does not change and can be made to support the full decrease in output since his deviation is proportional to the change in output the present article discusses the robustness of the implementation result of lmv in two different directions by introducing participation constraints and limited liability on one hand and by introducing noise in the production on the other hand let me articulate why it is important to test for robustness along these two directions first the partnership literature has largely ignored whether a partnership can be expected to agree ex ante on efficient sharing rules when such rules exist the interesting problem is that a partner with a strong bargaining power may wish to settle on a non efficient rule if that gives him or herself a greater return hence it is of importance to have sharing rules that make provision of effort incentive compatible under any distribution of participation constraints to distribute a large share of surplus to agents with strong bargaining power proposition 1 see below constructs a simple sharing rule that solves the participation problem this sharing rule which is inspired by the groves s mechanism has the attractive property of implementing the efficient provision of effort under any conceivable distribution of participation constraints

variable probability of realignment in a target zone the target zone model presented here encompasses a realignment probability that increases as the fundamental deviates from the center of the zone the analysis is carried out for cases where the fundamental follows either a brownian motion or an ornstein uhlenbeck process the simplest version of the model yields tractable results which prove to be robust when its most restrictive assumption is relaxed the solution obtained is dubbed the steeper s in accordance with its most relevant feature copyright 1994 by the editors of the scandinavian journal of economics

efficiency and equilibria in complementary teams abstract this paper considers a team or partnership where the partners effort levels enter as strict complements in the production function the existence of a linear budget balancing sharing mechanism is demonstrated which implements the team s efficient outcome as a nash equilibrium this result is in contrast to a result derived in holmstrom 1982

norms and contracting we argue that contracts establish the norms of a relationship and that individuals incur disutility when deviating from these norms in a laboratory experiment we allow agents to make simple contracts before they play one of four games and the most effective contract always includes an unenforceable handshake agreement to take the first best action in three games a contract with only this handshake agreement is at least weakly optimal the handshake is particularly effective in games with strategic complements our results highlight an explanation for contractual incompleteness establishing a norm can effectively substitute for weak enforceable restrictions this paper was accepted by brad barber teck ho and terrance odean special issue editors

dynamic reform of public institutions a model of motivated agents and collective reputation abstract state capacity is optimized when public institutions are staffed by individuals with public service motivation however when motivated agents value the collective reputation of their place of employment steady state equilibria with both high and low aggregate motivation reputation in the mission oriented sector exist reforming a low motivation institution requires a non monotonic wage path since the effect of higher wages on motivation is negative for a high reputation institution but positive for a low reputation institution a transition to a high reputation steady state requires an initial wage increase to crowd motivated workers in followed by a wage decrease to crowd non motivated workers out

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

dynamics of a household norm in female labour supply abstract this paper develops a continuous variant of the theory of social custom of akerlof q j econom 94 1980 749 to model the impact of a traditional household norm on married women s labour supply the erosion of this norm is treated as the endogenous result of feedback of the labour supply behaviour on the norm beliefs these endogenous dynamics are shown to imply multiple long run equilibria on both the individual and collective levels exhibiting hysteresis and mutual transitions dependent on the wage rate it is suggested that these properties have played important roles in the long run increase in married women s labour supply in many oecd countries

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

social norms and moral hazard the probability of income loss depends on talent and effort effort has positive externalities and therefore individuals are awarded status in proportion to their perceived diligence the social no

social norms of work ethic and incentives in organizations abstract in this paper i model the relation between the dissemination of social norms of work effort work ethic in a given society and the choice of incentives by firms and i motivate it by presenting evidence from three different datasets that suggests that work ethic is correlated with the intensity of firms incentives when the effort choices of different agents in a firm are complementary having hard working coworkers makes an agent more productive therefore in equilibrium she will work harder foreseeing that a work ethic is more useful to hard working agents parents will be more willing to transmit it in societies in which the probability that their offspring will have coworkers with strong work ethic is higher i then expand the model to incorporate the firm technology choice allowing firms to decide between complementary and separable production processes in societies with wide dissemination of work ethic firms will want effort to be complementary as in modern production processes while the opposite is true when the dissemination of work ethic is narrow finally i investigate the comparative dynamics of the model

public service motivation as an argument for government provision a public service motivation psm inclines employees to provide effort out of concern for the impact of that effort on a valued social service though deemed to be important in the literature on public administration this motivation has not been formally considered by economists when a psm exists this paper establishes conditions under which government bureaucracy can better obtain psm motivated effort from employees than a standard profit maximizing firm the model also provides an efficiency rationale for low powered incentives in both bureaucracies and other organizations producing social services 2000 elsevier science s a all rights reserved

relative pay and its effects on firm efficiency in a transitional economy abstract in this study we examine the impact of relative pay manager pay divided by average worker pay on a firm s productivity using data from a major transitional economy china we find that relative pay is negatively associated with high productivity our results provide support for the view that workers are alienated when their incomes are far lower than that of top management and this leads to lower productivity this effect is most pronounced in labor intensive firms

efficient and nearly efficient partnerships this paper shows in two ways that the degree to which free riding diminishes the performance of deterministic partnerships may be less than has been generally thought first a necessary and sufficient condition is provided for a partnership to sustain full efficiency it implies that many non trivial partnerships sustain efficiency such as generic ones with finite action spaces and neoclassical ones with leontief technologies second approximate efficiency is shown to be achievable in a large class of partnerships including ones with smooth and monotonic production and disutility functions approximate efficiency is achieved by mixed strategy equilibria one partner takes with small probability an inefficient action the degree to which efficiency is approximated is restricted only by the amount of liability the partners can bear nonetheless their equilibrium payments are not arbitrarily large

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

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

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

uniqueness in symmetric first price auctions with affiliation abstract the first price auction has a unique monotone pure strategy equilibrium when there are n symmetric risk averse bidders having affiliated types and interdependent values

work environment and individual background explaining regional shirking differentials in a large italian firm the prevalence of shirking within a large italian bank appears to be characterized by significant regional differentials in particular absenteeism and misconduct episodes are substantially more prevalent in the south we consider a number of potential explanations for this fact different individual backgrounds group interaction effects sorting of workers across regions differences in local attributes different hiring policies and discrimination against southern workers our analysis suggests that individual backgrounds group interaction effects and sorting effects contribute to explaining the north south shirking differential none of the other explanations appears to be of first order importance i introduction whether individual behavior is determined by group interactions or by individual background is undoubtedly a fundamental question for the social sciences this question presented itself forcefully when we stumbled onto the following piece of evidence there appear to be significant regional differentials in the prevalence of shirking among the employees of a large italian bank in particular absenteeism and misconduct episodes are considerably more frequent in the southern branches of the bank in this paper we examine several potential explanations for this fact first individual preferences for shirking versus working may differ according to one s region of hirth we will refer to this hj othesis as one of different individual hackgrounds the second possibility is one of locational sorting low shirking types may tend to migrate to the north high shirking types may tend to migrate to the south or hoth third the northern and southern

equilibria in first price auctions with participation costs this paper characterizes the equilibria of first price auctions with participation costs in the independent private values environment bidders use cutoff strategies to decide whether they will participate in the auction it is shown that when bidders are homogeneous there always exists a unique symmetric equilibrium and further there is no other equilibrium when valuation distribution functions are inelastic when distribution functions are elastic at the symmetric equilibrium there exists an asymmetric equilibrium inelasticity elasticity includes concavity convexity of distribution functions as a special case we find similar results when bidders are heterogeneous

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

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

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

understanding welfare stigma taxpayer resentment and statistical discrimination abstract welfare stigma is widely regarded to be of central importance in understanding the impact of welfare programs in their goal of alleviating poverty it affects both the decision to take up benefits and the well being of those who actually do this paper develops alternative models of the determinants of welfare stigma we identify two views a statistical discrimination approach and a taxpayer resentment view we discuss how each may be formalized and derive their implications we then examine what they imply about the relationship between stigma and program design

limited dependent rational expectations models with stochastic thresholds abstract this paper extends the standard limited dependent rational expectations model to allow for stochastic variations in the bounds we show that the degree of non linearity relating expectations to fundamentals tends to decline as the band becomes less predictable monte carlo experiments indicate that the assumption that the band is perfectly predictable by the agents when inappropriate can seriously bias the estimates and the inferences based on them

executive compensation and principal agent theory the empirical literature on executive compensation generally fails to specify a model of executive pay on which to base and test hypotheses regarding its determinants in contrast this paper analy

auction choice for ambiguity averse sellers facing strategic uncertainty abstract the robustness of the bayes nash equilibrium prediction for seller revenue in auctions is investigated in a framework of interdependent valuations generated from independent signals seller expected revenue may fall well below the equilibrium prediction even though the individual payoff consequences of suboptimal bidding may be small for each individual bidder this possibility would be relevant to a seller who models strategic uncertainty as ambiguity and who is ambiguity averse in the sense of gilboa and schmeidler it is shown that the second price auction is more exposed than the first price auction to lost revenue from the introduction of bidder behavior with small payoff errors

an analysis of the determination of deutsche mark french franc exchange rate in a discrete time target zone model following krugman 1 99 i recent models of exchange rates within a target zone have paid particular attention to the effect of the band on exchange rate expectations see for example miller and weller i 989 and froot and obstfeld i 989 the basic idea is that the band as long as it is credible has a stabilising effect on the exchange rate not only because the authorities when necessary would control the fundamentals in order to contain the movements of the exchange rate but also because expectations are influenced by the band these studiesby employing the continuous time stochastic setting of regulated brownian motion familiar from option pricing theory cf merton 1973 have also made a significant contribution to the theoretical analysis of the exchange rate the advantage of the continuous time framework is that in a multiperiod setting it makes the analysis of bands algebraically more manageable than a discrete formulation to illustrate the approach consider the following simple model from the literature

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

desert and inequity aversion in teams teams are becoming increasingly important in work settings we develop a framework to study the strategic implications of a meritocratic notion of desert under which team members care about receiving what they feel they deserve team members nd it painful to receive less than their perceived entitlement while receiving more may induce pleasure or pain depending on whether preferences exhibit desert elation or desert guilt our notion of desert generalizes distributional concern models to situations in

clean evidence on peer effects we study subjects who were asked to fill letters into envelopes with a remuneration independent of output in the pair treatment two subjects worked at the same time in the same room and peer effects were possible in the single treatment subjects worked alone and peer effects were ruled out we find evidence of peer effects in the pair treatment because the standard deviations of output are smaller within pairs than between pairs moreover average output is higher in the pair treatment thus peer effects raise productivity finally low productivity workers are the most sensitive to the behavior of peers

target zones and realignments recent contributions emphasize that the presence of exchange rate target zones has important effects on the within band behavior of exchange rates when agents are forward looking the authors find that the implications of available models are inconsistent with european exchange rate data and they suggest that the frequent realignments occurring in the period they consider may be responsible for this they construct a model in which the likelihood of a realignment in the near future increases as the exchange rate approaches the limits of its fluctuation band and show that its implications are broadly consistent with the evidence copyright 1992 by american economic association

language meaning and games a model of communication coordination and evolution language is a powerful coordination device we generalize the cheap talk approach to pre play communication by way of introducing a meaning cor respondence between messages and actions and by postulating two axioms met by natural languages players have a lexicographic preference second to material payoffs against deviating from the meaning correspondence under two sided communication in generic and symmetric n 3 n coordination games a nash equilibrium component in such a lexicographic communication game is evolutionarily stable if and only if it results in the unique pareto efficient out come of the underlying game we extend the analysis to one sided communica tion in arbitrary finite two player games jel c72 c73 z 3

can contracts signal social norms experimental evidence we investigate whether incentive schemes signal social norms and thus affect behavior beyond their direct economic consequences a one shot principal agent experiment is studied where prior to contract choice principals are informed about the past actions of other agents and thus have more information about norms of behavior compared with a setting in which principals are uninformed agents exert substantially higher effort under a fixed wage contract when they are aware that an informed principal chose this contract the informed principal s choice apparently signals a norm not to exploit trust which leads to more trustworthy behavior this mechanism s robustness is explored in further experiments data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2336 this paper was accepted by uri gneezy behavioral economics

sterling s erm credibility abstract this paper examines the recent credibility of the currencies participating in the erm since 1987 focusing on sterling in 1992 it shows that there is little market evidence that sterling s credibility was in serious doubt until mid september 1992

efficiency in sequential partnerships abstract we consider sequential partnerships in which agents obtain non verifiable information about the actions taken by previous agents for such partnerships a budget balanced sharing rule exists that induces efficient production the sharing rule has many desirable features 1 it uniquely implements efficient production 2 it does not rely on message games 3 it does not rely on unlimited liability and 4 it is robust to renegotiation the rule is furthermore simple intuitive and robust to sabotage coalition formation and noise it also induces efficient production when agents obtain incomplete information about previous actions journal of economic literature classificationnumbers d82 l23

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

social norms and economic incentives in firms abstract this paper studies the interplay between economic incentives and social norms in firms we introduce a general framework to model social norms arguing that norms stem from agents desire for or peer pressure towards social efficiency in a simple model of team production we examine the interplay of three types of contracts with social norms we show that one and the same norm can be output increasing neutral or output decreasing depending on the contract multiplicity of equilibria and crowding out effects of steeper incentives can arise

auction choice for ambiguity averse sellers facing strategic uncertainty comment abstract this note demonstrates epsilon equilibria in the first price auction that achieve lower worst case expected revenues than the lower bound proposed by turocy 2008 auction choice for ambiguity averse sellers facing strategic uncertainty games econ behav 62 2008 155 179 additionally it stresses the importance of a careful specification of the action space to properly characterize expected revenues when bidders systematically deviate from equilibrium play

homo moralis preference evolution under incomplete information and assortative matching what preferences will prevail in a society of rational individuals when preference evolution is driven by the resulting payoffs we show that when individuals preferences are their private information a convex combination of selfishness and morality stands out as evolutionarily stable we call individuals with such preferences homo moralis a t one end of the spectrum is homo oeconomicus who acts so as to maximize his or her own payoff at the opposite end is homo kantiensis who does what would be the right thing to do in terms of payoffs if all others would do likewise we show that the stable degree of morality the weight placed on the moral goal is determined by the degree of assortativity in the process whereby individuals are matched to interact

were the peseta exchange rate crises forecastable during target zone period during the 1990s several fixed or quasi fixed exchange rate systems collapsed currency crises have happened in both developed and emerging countries so it is necessary to forecast and avoid them however financial market crises have been extremely difficult to forecast economic agents expectations are nonobservable variables that cannot be ignored in the models in addition if it is required to study the european case during the 1990s the censored disposition of the exchange rate cannot be ignored either a discrete time target zones model is proposed where these aspects are taken into account it will be tested in a peseta deutsche mark exchange rate framework from june 1989 to december 1998 the results indicate differences between before and after the shift in band widths in august 1993

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

analysis of exchange rate target zones using a limited dependent rational expectations model with jumps this article examines the exchange rate determination in a target zone regime when the bounds can be fixed for an extended period but are subject to occasional jumps in this case the behavior of the endogenous variable is affected by the agents expectations about both the occurrence and the size of the jump empirical results using data for the franc mark exchange rate provide support for the nonlinear model with time varying realignment probability and indicate that the agents correctly anticipated most of the observed changes in the central parity

efficient equilibrium selection in evolutionary games with random matching abstract this paper investigates the sensitivity of recent evolutionary models of learning to the specification of the matching mechanism we study a literally random matching mechanism combined with a process of strategy adjustment based on the realized average performance of each strategy in the key class of symmetric 2 2 coordination games the pareto efficient equilibrium per se is selected rather than the risk dominant equilibrium as the probability of experimentation or mutation goes to zero furthermore convergence to the equilibrium is relatively fast we extend these results for example to games of common interest journal of economic literature classification numbers c72 c73

social norms and welfare state dynamics the paper analyses the interaction between economic incentives and work norms in the context of social insurance if the work norm is endogenous in the sense that it is weaker when the population share of beneficiaries is higher then voters will choose less generous benefits than otherwise we also discuss welfare state dynamics when there is a time lag in the adjustment of the norm in response to changes in this population share and show how a temporary shift in the unemployment rate may cause persistence in the number of benefi

estimating the discount rate policy reaction function of the monetary authority this paper estimates a policy rule that explains the sign and the magnitude of the federal reserve s fed s discount rate changes it sets out a two sided type ii tobit model and develops a procedure for its estimation considering the discrete and censored nature of the changes the results suggest that the fed has conducted discount rate policy counter cyclically to influence output and to curb inflation and that the fed s response to policy indicators varies over monetary regimes furthermore consistency is found between the model prediction of the discount rate change and a classification based on whether the change is technical or non technical copyright 1999 john wiley sons ltd

optimal incentives for teams much of the existing theory of incentives describes a static relationship that lasts for just one transaction this static assumption is not only unrealistic but the resulting predictions appear to be at odds with many work organizations the current paper introduces possible long term interaction among agents and studies how the design of explicit incentives and work organizations can exploit and interact with the implicit incentives generated by the repeated interaction of the agents the optimal incentive scheme is shown to display observed features of the increasingly popular teams such as the use of low powered group incentives