learning and strategic pricing we consider the situation where a single consumer buys a stream of goods from different sellers over time the true value of each seller s product to the buyer is initially unknown additional information can be gained only by experimentation for exogeneously given prices the buyer s problem is a multi armed bandit problem the innovation in this paper is to endogenize the cost of experimentation to the consumer by allowing for price competition between the sellers the role of prices is then to allocate intertemporally the costs and benefits of learning between buyers and sellers we examine how strategic aspects of the oligopoly model interact with the learning process all markov perfect equilibria mpe are efficient we identify an equilibrium which besides its unique robustness properties has a strikingly simple seemingly myopic pricing rule prices below marginal cost emerge naturally to sustain experimentation intertemporal exchange of the gains of learning is necessary to support efficient experimentation we analyze the asymptotic behavior of the equilibria

international policy coordination in interdependent monetary economies abstract an optimising equilibrium model of two interdependent monetary economies with no other assets except cash perfect foresight flexible exchange rates and imperfect substitution between home and foreign goods is analysed both non cooperative and cooperative market oriented outcomes are time inconsistent since each government has an incentive to renege and levy a surprise inflation tax international policy coordination without pre commitment can be counterproductive even though there are no tax distortions and the provision of public goods is optimal since it exacerbates the credibility problems perceived by the private sectors and therefore leads to a too low level of real money balances and excessive inflation

pollution control and the ramsey problem pollution is an inevitable by product of production and is only gradually dissolved by the environment it can be reduced by producing less and by cleaning up the environment but neither occur when they are left to the market cleaning activities and the optimal emission charges increase with the stock of pollutants when one allows for pollution of the environment in the classical ramsey problem the capital stock is less than in the market outcome and a fortiori less than under the golden rule the analysis distinguishes between stock and flow externalities arising from pollution an increase in impatience can lead to more capital accumulation even though this leaves less room for current consumption

habit formation interdependent preferences and demographic effects in the almost ideal demand system the authors model myopic habit formation interdependence of preferences among consumers and demographic effects as taste shifters in a micro consumer demand model of the almost ideal demand variety the model is estimated for dutch micro data the authors investigate the dynamic properties of the model and find that it behaves very differently from models without interdependence of preferences the implications for micro macro modeling are discussed copyright 1991 by royal economic society

payoff assessments without probabilities a simple dynamic model of choice abstract we develop a model which reflects the tendency of people to simplify the decision problems they face the decision maker chooses among alternate strategies only on the basis of the payoff she assesses she would obtain from them and these assessments do not explicitly take into account her subjective judgements regarding the likelihood of alternate states of the world at each stage the decision maker chooses the strategy that she assesses to give the highest payoff she updates her assessments adaptively we show that such behavior leads to maxmin choices we also consider the decision maker who experiences shocks journal of economic literature classification numbers c7 d8

was hayek an ace in order to address the question whether hayek might have been an agent based computational economist ace avant la lettre we consider an ace model concerning the phenomenon of information contagion alongside increasing returns network externalities and information cascades information contagion has been presented in the literature as an explanation for particular patterns of macrobehavior that may seem at odds with the underlying micromotives but whereas these other explanations have been shown to have a proper microfoundation information contagion has remained a phenomenon that seemed to occur only when certain ad hoc rules of thumb for individual behavior are assumed we show how information contagious behavior can emerge in a coevolutionary process of interacting adaptive agents how this is related to various hayekian themes and how ace research in general is an application of hayek s methodological insights

bertrand competition for inputs and walrasian outcomes market making by merchants who obtain stock from suppliers and resell it to con sumers is modeled as a two stage pricing game with winner take all c ompetition for the inputs in contrast to fixed capacity models the re is a unique subgame perfect nash equilibrium spne which is walr asian for elastic demand and non walrasian for inelastic demand alte rnatively when merchants first sell forward contracts to consumers a nd then compete for supplies the unique spne is always walrasian th us the author has an equilibrium model in which walrasian price aris es not from the benevolent actions of a fictitious auctioneer but fr om optimal price setting behavior of merchants copyright 1988 by american economic association

selling costs and switching costs explaining retail gasoline margins recent theoretical work has shown that price discrimination can take place in imperfectly competitive as well as monopoly markets the persistence of higher retail margins on unleaded than on leaded gasoline during the 1980s suggests that discrimination may occur even in very competitive markets this article studies a number of cost based explanations for such gasoline pricing as well as the possibility of price discrimination the analysis indicates that gas stations discriminate against groups of customers who are less likely to switch to another station the conclusions highlight the influence of shopping or search costs on pricing decisions even in markets thought to be quite competitive

nonresponse in panel data the impact on estimates of a life cycle consumption function if missing observations in a panel data set are not missing at random many widely applied estimators may be inconsistent in this paper we examine empirically several ways to reveal the nature and severity of the selectivity problem due to nonresponse as well as a number of methods to estimate the resulting models using a life cycle consumption function and data from the expenditure index panel from the netherlands we discuss simple procedures that can be used to assess whether observations are missing at random and we consider more complicated estimation procedures that can be used to obtain consistent or efficient estimates in case of selectivity of attrition bias finally some attention is paid to the differences in identification consistency and efficiency between inferences from a single wave of the panel a balanced sub panel and an unbalanced panel

testing for imperfect competition at the fulton fish market in this article i report the results of a study of the prices paid by individual buyers at the fulton fish market in new york city in principle this is a highly competitive market in which there should be no predictable price differences across customers who are equally costly to service the results indicate that different buyers pay different prices for fish of identical quality for example asian buyers pay 7 less for whiting than do white buyers a result which is inconsistent with the model of perfect competition

price formation of fish an application of an inverse demand system inverse demand systems explain price variations as functions of quantity variations they have properties analogous to those of regular demand systems there are very few examples of their empirical application in part this is due to lack of data for which price is the decision variable and the quantity given the case of fish landed at belgian sea ports appears to suit an inverse demand system well a rotterdam variant of such a system in estimated allais interaction intensities have been derived and show a reasonable pattern

evolving market structure an ace model of price dispersion and loyalty we present an agent based computational economics ace model of the wholesale sh market in marseille two of the stylized facts of that market are high loyalty of buyers to sellers and persistent price dispersion although it is every day the same population of sellers and buyers that meets in the same market hall in our ace model sellers decide on quantities to supply prices to ask and how to treat loyal customers while buyers decide which sellers to visit and which prices to accept learning takes place through reinforcement the model explains both stylized facts price dispersion and high loyalty in a coevolutionary process buyers learn to become loyal as sellers learn to o er higher utility to loyal buyers while these sellers in turn learn to o er higher utility to loyal buyers as they happen to realize higher gross revenues from loyal buyers the model also explains the e ect of heterogeneity of the buyers we analyze how this leads to subtle di erences in the shopping patterns of the di erent types of buyers and how this is

the persistence of taiwan s output fluctuations an empirical study using innovation regime switching model in this article we examine the persistence nature of taiwan s aggregate output fluctuations by using the innovation regime switching irs model in which the effect of an innovation may be permanent or transitory depending on an unobservable state variable that follows a first order markov chain by applying the irs model to taiwan s real gdp data we find that during the 1961 to 2000 period 61 39 of the real output shocks are likely to have permanent transitory effects moreover the innovations in the officially identified expansion contraction are more likely to have a permanent transitory effect these results are similar to those found in many studies of us real output fluctuations e g beaudry and koop 1993 kim and nelson 1999 and kuan et al 2005 however we also find that taiwan s output dynamics have changed drastically ever since year 2000 in particular the shocks to real gdp have become more likely to have only transitory effect even during the period of post 2001 iv ex

rational behavior and economic theory abstract nowadays it seems almost universally presumed that the fundamental characteristic of homo oeconomicus is his rationality we analyze the role played by the concept of rationality in economic theory and demonstrate that it is necessarily constrained to be an essentially contentless notion we show that the main body of economic theory is firmly grounded and that some contrasting approaches to rationality although leading to heated debates and vivid confusion have no fundamental significance for economics with a refereshed view on the essence of economics we argue that the principles of economic theory form an essential methodological guide for the emergent line of research based on the use of so called evolutive models

a precursor to muth tinbergen s 1932 model of rational expectations this paper describes a model published in 1932 in which explicitly rational expectations are used to study a dynamic problem of intertemporal inventory allocation the model is very similar to muth 1961 except that the stochastic process in the latter is serially correlated whereas in tinbergen s model the disturbances are serially uncorrelated hence tinbergen was able to solve a rational expectations model thirty years before muth s much more well known contribution copyright 1991 by royal economic society

renegotiation proof equilibria in repeated prisoners dilemma abstract in this note it is shown that the requirement of weak renegatiation proofness does not eliminate any subgame perfect equilibrium outcome of the repeated prisoner s dilemma specifically it is demonstrated that when players are sufficiently patient any feasible and individually rational outcome can be sustained by means of an equilibrium in which the punishing player always profits by carrying out the punishment

keynesian and new classical models of unemployment revisited several keynesian and new classical models of unemployment for the united states are reevaluated the models are examined for adequacy by testing the cross equation restrictions where appropriate and using diagnostic and nonnested tests that explicitly recognize the problem introduced by generated regressors the best new classical model for the 1946 73 period is found to be adequate when it is estimated over the 1946 85 period whereas the keynesian model is not existing results of tests obtained at the single equation level ignoring generated regressors are not always supported when the test statistics are calculated using the correct covariance matrix or maximum likelihood copyright 1991 by royal economic society

market organisation and trading relationships in this paper we give a theoretical model of buyers behaviour on a market for a perishable good where no prices are posted we show that if buyers learn from their own previous experience there is a sharp division between those who learn to be loyal to certain sellers and those who continue to shop around this feature remains in more general models which are simulated and is consistent with empirical data from the marseille fish market