inequality of opportunity in energy consumption in china abstract this paper proposes an empirical implementation of the concept of inequality of opportunity in energy consumption expenditure and applies this to data from chinese general social survey cgss we examine the role played by circumstances beyond the control of individuals for instance gender hukou status family background and region of birth in generating inequality in energy consumption expenditure in china this study shows that the relative share of inequality of opportunity ior in energy consumption expenditure in china is 10 02 for the entire sample ior turns out to be larger for the older cohort peaking at 14 40 for the 1955 64 cohort a shapley value decomposition presents that hukou status and region of birth are the two largest contributors to inequality of opportunity across birth cohorts a heterogeneity analysis further shows that more disadvantaged groups for instance female individuals born in the west of rural china with worse family backgrounds are facing more unequal opportunities in energy consumption in china these results suggest that energy policies focused on zero discrimination in opportunities should be encouraged

the distributional implications of asymmetric income dynamics abstract income dynamics differ between groups of households defined by whether the head has university education or not and have changed asymmetrically in great britain since 2008 using a heterogeneous agent incomplete markets model we examine the quantitative implications of these differences for wealth inequality and for the distribution of conditional welfare losses within group wealth inequality is higher for the non university group and has increased since 2008 for both groups while between group inequality has also increased welfare losses are significantly higher for the non university educated since 2008 and are driven by both a greater fall in mean income and a larger rise in income risk non university educated households which had initial wealth below the median and net labour income in the lower quintiles suffered bigger losses social insurance policies beyond those currently in place can mitigate such welfare losses via tax and benefit redistributive mechanisms for the broad majority of households social insurance is valued more when it insures against the big adverse income shocks

the one sector growth model with idiosyncratic shocks steady states and dynamics abstract this paper investigates the one sector growth model where agents receive idiosyncratic labor endowment shocks and face a borrowing constraint it is shown that any steady state capital stock lies strictly above the steady state in the model without idiosyncratic shocks in addition the capital stock increases monotonically when it is sufficiently far below a steady state however near a steady state there can be non monotonic economic dynamics

cyclical dynamics in idiosyncratic labor market risk is individual labor income more risky in recessions this is a difficult question to answer because existing panel data sets are so short to address this problem we develop a generalized method of moments estimator that conditions on the macroeconomic history that each member of the panel has experienced variation in the cross sectional variance between households with differing macroeconomic histories allows us to incorporate business cycle information dating back to 1930 even though our data do not begin until 1968 we implement this estimator using household level labor earnings data from the panel study of income dynamics we estimate that idiosyncratic risk is i highly persistent with an annual autocorrelation coefficient of 0 95 and ii strongly countercyclical with a conditional standard deviation that increases by 75 percent from 0 12 to 0 21 as the macroeconomy moves from peak to trough

sutton s sunk costs and market structure price competition advertising and the evolution of concentration sunk costs and market structure price competition advertising and the evolution of concentration the third area is critical for policy this has kept our attention focused on the other two areas not until we understand the causes and consequences of concentrated industry structure can we comment on the relevant welfare economics the positive economics of entry exit and the persistence of dominant firms and oligopolies are thus a core research topic the positive questions are very difficult like many posed by the world and not by logic traditional empirical efforts to distinguish among competing hypotheses have made little progress this is due in no small part to the complexity of the question the two main efficiency defenses of concentrated industry structure are scale economies and firm heterogeneity traditional methods use proxies for barriers to entry that could equally plausibly be proxies for the efficiencies recent theoretical work on entry and entry barriers has been very successful in teaching us about the importance of strategy irreversibility and information but it has not emphasized links to observables the observable differences between a theory predicting nearly efficient outcomes and a related theory predicting harmful barriers to entry can be very subtle to use theory in a direct way it seems we must draw dozens

analysis of rural residential energy consumption and corresponding carbon emissions in china the analysis of rural residential energy consumption in china from 2001 to 2008 and corresponding impacts on climate change is presented in the paper it is found that rural residential energy consumption has shown obvious transition from non commercial energy to commercial energy the percentage of biomass energy consumption dropped from 81 5 in 2001 to 70 9 in 2008 while the percentage of commercial energy increased from 17 1 to 25 1 besides other renewable energy increased very fast with annual growth rate of 19 8 correspondingly total co2 emissions from rural residential energy consumption had significant increase from 152 2 million tons in 2001 to 283 6 million tons in 2008 the annual growth rate of per capita co2 emissions was nearly 2 times faster than that of urban area the major driving force for the consumption of commercial energy was the income of rural farmers while strong rural energy policies supported the development of renewable energy to satisfy the goals of energy supply and co2 emissions reduction in rural areas it is advised to change the energy structure and improve the energy efficiency such as to generate electricity using renewable technologies and to replace coal with modern biomass energy for cooking and heating

reading cournot reading nash the creation and stabilisation of the nash equilibrium the concept of the cournot nash equilibrium is central to noncooperative game theory and the latter s use in macroeconomic theory this paper considers the creation of this theoretical construct examining the separate contributions of both cournot and nash and showing how the two were ultimately joined together in the eyes of contemporary economic theorists rather than simply showing how cournot served as a precursor to nash the author challenges the traditional approach and emphasizes the shifts in interpretation of their respective contributions in so doing he addresses some pertinent questions about the manner in which economic theorists view the evolution of their own discipline copyright 1994 by royal economic society

the demand for energy using assets among the world s rising middle classes we study household decisions to acquire energy using assets in the presence of rising incomes we develop a theoretical framework to characterize the effect of income growth on asset purchases when consumers face credit constraints we use large and plausibly exogenous shocks to household income generated by the conditional cash transfer program in mexico oportunidades to show that asset acquisition is nonlinear depends as predicted in the presence of credit constraints on the pace of income growth and both effects are economically large among beneficiaries our results may help explain important worldwide trends in the relationship between energy use and income growth

the welfare cost of business cycles revisited finite lives and cyclical variation in idiosyncratic risk abstract this paper investigates the welfare costs of business cycles in a heterogeneous agent overlapping generations economy which is distinguished by idiosyncratic labor market risk aggregate variation arises both in terms of aggregate productivity shocks and countercyclical variation in the volatility of idiosyncratic shocks based on both aggregate data and microeconomic data from the panel study on income dynamics we find the welfare benefits of eliminating aggregate variation to be large an order of magnitude larger than those originally documented by lucas 1987 the key difference is countercyclical variation in idiosycratic risk which both amplifies the welfare cost of aggregate productivity shocks and imposes a cost of its own the magnitude of these effects increases non linearly in risk aversion our results therefore are consistent with the increasingly popular notion that distributional effects are an important aspect of understanding the welfare cost of business cycles

the influence of economics on antitrust law economists today play prominent roles in formulating antitrust policy and litigating antitrust cases this paper explains why economics influences antitrust law and describes how economic theories enter and shape the antitrust system antitrust policy and doctrine change over time in response to developments in economic theory and the decentralization of the antitrust adjudication system and the wide latitude accorded judges in interpreting antitrust statutes ensure that legal rules will reflect advances in the economic literature concerning the appropriate content of standards governing business conduct i introduction twenty five years ago george stigler 1976 asked whether economists matter in the formulation of public policy a century of experience with the federal antitrust laws indicates that they do whereas assessments of their impact vary most observers regard economists as important participants in the antitrust system eisner 1991 emphasizes the modern imprint of chicago school economic perspectives upon antitrust enforcement and litigation rowe 1984 and hovenkamp 1989 show that economists and economic theory have influenced antitrust doctrine and policy throughout the period since the passage of the sherman act as a rough contemporary market test one can simply note the expanding number of economic consulting firms for whom antitrust counselling and litigation are staples of the practice 1 this allocation of society s resources is a reliable sign that economic analysis is significant in the prosecution and adjudication of antitrust cases this paper suggests why economists and economic learning matter to antitrust policy and describes how the work of economists affects antitrust litigation the discussion is divided into four parts the first identifies features of the antitrust system that permit or require economic ideas to be taken seriously the second part considers how antitrust relevant economic ideas are generated and absorbed into the antitrust system the third part examines factors that determine how deeply economic ideas influence antitrust adjudication the paper concludes by discussing how economics will influence the antitrust system in the sherman act s second century ii the openness of the antitrust system to economic ideas economic analysis influences antitrust litigation because the federal antitrust system is unusually permeable this permeability is the result of three important features of the antitrust system the first is the wide range of analytical criteria that courts are permitted to consider in resolving antitrust disputes federal judges play a central role in determining the content of the antitrust statutes outcomes under the sherman act depend crucially upon the construction of ambiguous terms such as conspiracy in restraint of trade and monopolize as salop and white 1988 37 point out the decision to cast the statutes in general terms has given judges substantial discretion to determine litigation outcomes by defining the content of the statutes operative terms in conferring this interpretive role upon the federal courts congress has allowed judges to devise standards of conduct at least in part by reference to the likely economic effects of various forms of business behavior despite sharp disagreement over the weight congress meant to accord productive and allocative efficiency as judicial decision making criteria 2 few scholars seriously argue that congress intended that courts treat such concerns as irrelevant economists would play a far less important part in antitrust adjudication if congress had precluded judicial consideration of efficiency in implementing statutory commands the open ended language and indeterminate goals of the antitrust statutes allow economists to affect adjudication and rule formulation to a degree unattainable under most other federal regulatory schemes

on the distributional effects of reducing capital taxes this article asks whether household heterogeneity and market incompleteness have quantitatively important implications for the welfare effects of tax changes we compare a representative agent economy to an economy in which households face idiosyncratic uninsurable income risk the income process is consistent with empirical estimates and implies a realistic wealth distribution we find that capital tax cuts imply large welfare gains in the representative agent economy however when households are heterogeneous substantial redistribution during transition means that only a minority will support capital tax cuts whereas most households can expect large welfare losses

robust comparative statics in large dynamic economies we consider infinite horizon economies populated by a continuum of agents subject to idiosyncratic shocks this framework contains models of saving and capital accumulation with incomplete markets in the spirit of works by bewley aiyagari and huggett models of entry exit and industry dynamics in the spirit of hopenhayn s work and dynamic models of occupational choice and search models as special cases robust and easy to apply comparative statics results are established with respect to exogenous parameters as well as various kinds of changes in the markov processes governing the law of motion of the idiosyncratic shocks

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

on the existence and uniqueness of stationary equilibrium in bewley economies with production abstract i prove existence of stationary recursive competitive equilibrium in bewley economies with production under specifications in which i the utility function is allowed to be unbounded and ii the underlying discrete idiosyncratic productivity process can take any form aside from mild restrictions some of the intermediate results provide theoretical basis for assumptions often made in the quantitative macroeconomics literature by providing an example i illustrate that the equilibrium is not necessarily unique even under typical specifications of the model and discuss the underlying reasons for multiplicity

on the misuse of the profits sales ratio to infer monopoly power the common use of the profits sales ratio as a measure of the lerner index of monopoly power is flawed even with the assumption of constant returns because of problems connected with the valuation of capital the size of the error is related to the cost of capital the growth rate of the firm the depreciation method used and most important the shape of the stream of benefits resulting from an investment examples show that the error can be quite large further the error is likely to be systematically related to the variables used in regression studies

insurance and opportunities a welfare analysis of labor market risk abstract using a model with constant relative risk aversion preferences endogenous labor supply and partial insurance against idiosyncratic wage risk this paper provides an analytical characterization of three welfare effects a the welfare effect of a rise in wage dispersion b the welfare gain from completing markets and c the welfare effect from eliminating risk the analysis reveals an important trade off for these welfare calculations on the one hand higher wage uncertainty increases the cost associated with missing insurance markets on the other hand greater wage dispersion presents opportunities to raise aggregate productivity by concentrating market work among more productive workers welfare effects can be expressed in terms of the underlying parameters defining preferences and wage risk or alternatively in terms of changes in observable second moments of the joint distribution over individual wages consumption and hours

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

identifying electricity saving potential in rural china empirical evidence from a household survey in recent years there has been a fast growing body of literature examining energy saving potential in relation to electricity however empirical studies focusing on non western nations are limited to fill this gap this study intends to examine the electricity saving potential of rural households in china using a unique data set from the china residential electricity consumption survey crecs in collaboration with the china general social survey cgss conducted nationwide at the household level in rural china we use a stochastic frontier model which allows us to decompose residential electricity consumption into the minimum necessary amount of consumption based on physical characteristics e g house size house age number of televisions or refrigerators and estimate the consumption slack i e the amount of electricity consumption that could be saved which depends on various factors we find that rural households in china are generally efficient in electricity saving and the saving potential is affected by fast information feedback and social demographic characteristics instead of by the averaged electricity price or energy efficiency labelling signals in addition we find no evidence of regional heterogeneity on electricity saving potential for rural households policy implications are derived

powering up china income distributions and residential electricity consumption current forecasts suggest that the vast majority of growth in energy demand will come from the developing world and that china will play a major part in that growth this paper presents evidence suggesting that the shape of the income distribution which is typically omitted from forecasting models plays a major role in driving household acquisition of energy using durable goods in rural china we use province level data for rural households to show that the share of the population living above the poverty line is an important determinant of household appliance holdings even controlling for average household income

global changes in residential energy consumption abstract the residential energy sector is crucial to achieving co2 emission reductions as it has an important energy saving potential and its environmental controls are difficult to displace to other countries using the latest available data this short paper provides a concise analysis of residential energy consumption trends for the period 1993 2013 in a double perspective by main world regions and by per capita gross national income levels in 2013 residential energy has been divided into three types non renewable direct renewable and indirect renewable annual rates of change energy intensity energy in per capita terms and some ratios have been analyzed notable regional differences and trends were observed in the studied variables therefore different energy policies are recommended for the regions eastern and southern asian countries the eu15 and other developed countries are the regions which should make the greatest effort to reduce residential energy consumption the promotion of direct and indirect renewable energies is recommended

residential energy consumption in urban china a decomposition analysis abstract residential energy consumption rec is the second largest energy use category 10 in china and urban residents account for 63 of the rec understanding the underlying drivers of variations of urban rec thus helps to identify challenges and opportunities and provide advices for future policy measures this paper applies the lmdi method to a decomposition of china s urban rec during the period of 1998 2007 at disaggregated product activity level using data collected from a wide range of sources our results have shown an extensive structure change towards a more energy intensive household consumption structure as well as an intensive structure change towards high quality and cleaner energy such as electricity oil and natural gas which reflects a changing lifestyle and consumption mode in pursuit of a higher level of comfort convenience and environmental protection we have also found that china s price reforms in the energy sector have contributed to a reduction of rec while scale factors including increased urban population and income levels have played a key role in the rapid growth of rec we suggest that further deregulation in energy prices and regulatory as well as voluntary energy efficiency and conservation policies in the residential sector should be promoted

strategy complexity and economic rent this paper discusses important friction forces that future theories of strategy must incorporate some of these are technological and environmental but the most important ones it is argued are psychological the view is developed that strategy at its core concerns the development and testing of heuristics for high stake decisions in environments too unstable and complex to be optimized the paper especially highlights the behavioral dimension in the belief that strategies should incorporate both the rational and suboptimal aspects of human behavior the rational approach is in many ways the easier as there may be only one way to be right yet the great variety in which people and companies can err gives strategy its creative and real world challenge the tension between the rational and behavioral components is what the field of strategy should seek to exploit

solving the incomplete markets model with aggregate uncertainty using the krusell smith algorithm abstract this paper studies the properties of the solution to the heterogeneous agents model in den haan et al 2009 computational suite of models with heterogeneous agents incomplete markets and aggregate uncertainty journal of economic dynamics and control this issue to solve for the individual policy rules we use an euler equation method iterating on a grid of pre specified points to compute the aggregate law of motion we use the stochastic simulation approach of krusell and smith 1998 income and wealth heterogeneity in the macroeconomy journal of political economy 106 868 896 we also compare the stochastic and non stochastic simulation versions of the krusell smith algorithm and we find that the two versions are similar in terms of their speed and accuracy

demographics and real interest rates inspecting the mechanism abstract the demographic transition can affect the equilibrium real interest rate through three channels an increase in longevity or expectations thereof puts downward pressure on the real interest rate as agents build up their savings in anticipation of a longer retirement period a reduction in the population growth rate has two counteracting effects on the one hand capital per worker rises thus inducing lower real interest rates through a reduction in the marginal product of capital on the other hand the decline in population growth eventually leads to a higher dependency ratio the fraction of retirees to workers because retirees save less than workers this compositional effect lowers the aggregate savings rate and pushes real rates up we calibrate a tractable life cycle model to capture salient features of the demographic transition in developed economies and find that its overall effect is a reduction of the equilibrium interest rate by at least one and a half percentage points between 1990 and 2014 demographic trends have important implications for the conduct of monetary policy especially in light of the zero lower bound on nominal interest rates other policies can offset the negative effects of the demographic transition on real rates with different degrees of success

the macroeconomic implications of rising wage inequality in the united states in recent decades american workers have faced a rising college premium a narrowing gender gap and increasing wage volatility this paper explores the quantitative and welfare implications of these changes the framework is an incomplete markets life cycle model in which individuals choose education intrafamily time allocation and savings given the observed history of the u s wage structure the model replicates key trends in cross sectional inequality in hours worked earnings and consumption recent cohorts enjoy welfare gains on average as higher relative wages for college graduates and for women translate into higher educational attainment and a more even division of labor within the household

china s foreign trade and climate change a case study of co2 emissions abstract the globalization of trade has numerous environmental implications trade creates a mechanism for consumers to shift environmental pollution associated with their consumption to other countries carbon leakage exerts great influences on international trade and economy applying an input output approach the paper estimates the amount of carbon dioxide co2 embodied in china s foreign trade during 1997 2007 it is found that 10 03 26 54 of china s annual co2 emissions are produced during the manufacture of export goods destined for foreign consumers while the co2 emissions embodied in china s imports accounted for only 4 40 1997 and 9 05 2007 of that we also estimate that the rest of world avoided emitting 150 18 mt co2 in 1997 increasing to 593 mt in 2007 as a result of importing goods from china rather than manufacturing the same type and quantity of goods domestically during 1997 2007 the net additional global co2 emissions resulting from china s exports were 4894 mt then the paper divides the trade embodied emissions into scale composition and technical effect it was found that scale and composition effect increased the co2 emissions embodied in trade while the technical effect offset a small part of them finally its mechanism and policy implications are presented

income elasticity of cooking fuel substitution in rural china evidence from population census data abstract solid fuels are still widely used as primary cooking fuel in rural china which brings severe health environmental and socio economic consequences a sound understanding of the energy transition pattern of rural households will provide valuable insights for policy makers aiming to facilitate transition towards cleaner fuels the most relevant questions include whether measure of improving income could help facilitate transition and how quickly the transition would happen as household income grows using national population census data 2000 2010 for over two thousand chinese counties we estimated the income elasticities of primary cooking fuel substitution between traditional biomass coal gaseous fuels electric power and others it is found that the income effect is positive for the cleaner fuels gases and electric power but negative for dirty solid fuels like coal and biomass however our estimated elasticities show that the adoption of cleaner fuels gases and electric power as primary cooking fuel is income elastic elasticity 1 for rural village households but income inelastic elasticity

food prices and market structure in sweden this paper examines retail grocery price levels across a large panel of stores in sweden we explain price variation across stores by market structure variables to capture differences in competition intensity and a number of store and region specific factors most of the explained variation in prices can be attributed to store specific factors such as size and chain affiliation overall the relation between market structure variables and food prices is weak and effects are small in percentage terms nevertheless higher local concentration of stores higher regional wholesaler concentration and a lower market share of large stores are all correlated with higher prices

a test of the household income process using consumption and wealth data the evolution of household income can be explained almost equally well by rival models however rival models have very different implications for other household behaviours such as consumption i therefore test between two prominent models in the uk using panel data on consumption and wealth as well as income over 1991 2006 to operate the test i show that long lived income shocks transmit far less than one for one through to consumption and particularly so for younger households i then compare these estimates of transmission with estimates of households ability to smooth shocks captured by the data on wealth conditional on the suitability of the consumption model my estimates provide evidence against the restricted income process rip and in favour of an alternative heterogeneous income process hip this finding also explains why cross sectional consumption inequality grew slowly over the period even though the variance of long lived shocks was high finally i conclude that it is important to consider mean reversion of shocks when constructing life cycle consumption models

current accounts in debtor and creditor countries the authors reexamine a classic question in international economics what is the current account response to a transitory income shock such as a temporary improvement in the terms of trade a transfer from abroad or unusually high production to answer this question they construct a world equilibrium model in which productivity varies across countries and international borrowing and lending take place to exploit good investment opportunities despite its conventional ingredients the model generates the novel prediction that favorable income shocks lead to current account deficits in debtor countries and current account surpluses in creditor countries evidence from thirteen oecd countries broadly supports this theoretical prediction

reputation and equilibrium selection in games with a patient player a single long run player plays a simultaneous move stage game against a sequence of opponents who play only once but observe all previous play let the stackelberg strategy be the pure strategy to which the long run player would most like to commit himself if there is positive prior probability that the long run player will always play the stackelberg strategy then his payoff in any nash equilibrium exceeds a bound that converges to the stackelberg payoff as his discount factor approaches one when the stage game is not simultaneous move this result must be modified to account for the possibility that distinct strategies of the long run player are observationally equivalent

cost of business cycles with indivisibilities and liquidity constraints it is almost universally agreed that individuals face incomplete insurance markets and cannot perfectly insure against the idiosyncratic risk in this paper simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles two versions of incomplete insurance markets are considered and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy

bidding behaviour in ocs drainage auctions theory and evidence empirical economists frequently criticize game theoretic models of markets on the grounds that they fail to generate empirically testable hypotheses the complaint is that prices and quantities or entry decisions are explained using factors that are not observable to the econometrician such as private valuations and beliefs of agents the corollary to this argument is that the only way to proceed empirically is through experiments however this approach suffers from the problem that the experience of the subjects may be too limited and the compensation too small for them to perform the requisite optimizing calculations the objective of this paper is to discuss the above criticism of gametheoretic models in the context of our work on markets of offshore oil and gas leases in this case study one group of buyers is better informed about the unknown value of the leaae being sold that another group and the two groups can be identified game theoretic models of markets with informational asymmetries generate restrictions on the relative behaviour and performance of the two groups of buyers and some of these restrictions are empirically testable we examine them using bid and profit data more generally the work serves to illustrate a basic point about testing models of

industry competition and firm human capital this paper argues that objective and subjective human capital may have substantial impact upon organizational performance in a competitive context objective human capital pertains to such features as education and experience whereas subjective human capital relates to personality characteristics the argument is illustrated by presenting the results of two empirical studies 1 a cross section 1990 1991 analysis of about 50 incumbents in the flemish furniture industry concentrating on the impact of subjective human capital particularly the chief executive officer s ceo s locus of control personality on financial performance and 2 a longitudinal 1970 1992 analysis of a cohort of 100 entrants into the dutch audit industry focusing on the influence of objective human capital particularly education and experience on exit by merger and acquisition m a or diaspora both studies support the claim that objective and subjective human capital matters for example flemish furniture firms headed by a ceo with an internal locus of control trait reach higher levels of financial performance and dutch audit firms with a high proportion of personnel with business experience are more likely to exit the industry over the years as a result of diaspora finally the data of the flemish furniture and dutch audit industries are re analyzed so as to compare the impact of human capital variables on small firm performance in both industries this re analysis reveals that in both industries the impact of human capital variables is more pronounced in large firms compared to small businesses

games economists play a noncooperative view for some thirty years following world war ii most bright young economists did not go into industrial organization it was not hard to see why this was so the quick big payoffs in economics tend to go to theorists and industrial organization was a subject in which theory was not only unsatisfactory but moribund the promise of the chamberlin robinson revolution of the early 1930s had not been fulfilled and while institutional and verbaltheoretic writings on the subject were sometimes illuminating there was no hard analytic theory formalizing the structure conduct performance paradigm oligopoly in particular showed no signs of analytic tractability today the atmosphere is altogether different the profession is full of young theorists whose principal occupation is industrial organization indeed industrial organization has become the hot topic for microtheorists journals meetings and seminars abound in research on oligopoly and judging by the market this is a booming industry of course the principal reason for the change is the rise of game theory and its applications in these areas von neumann and morgenstern s great work was published in 1944 and hailed immediately by theorists von neumann and morgenstern 1944 jacob marschak indeed stated in reviewing it marschak 1946 p 1 15 ten more such books and the progress of economics is assured nevertheless it was not until the last decade that game theory came to the ascendant as the premier fashionable tool of microtheorists that ascendancy appears fairly complete bright young theorists today tend to think of every problem in game theoretic terms including problems that are easier to deal with in other forms every department feels it needs at least one game theorist or at least one theorist who thinks in game theoretic terms oligopoly theory in particular is totally dominated by the game theoretic approach the field appears to be in an exciting stage of ferment to understand why i believe that such excitement is not warranted it is necessary to step back briefly review the history of oligopoly theory before the game theory revolution and consider what it is that one wants theory to deliver

income variance dynamics and heterogeneity recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance in this paper the assumption of i i d income innovations used in previous empirical studies is removed and the focus of the analysis is placed on models for the conditional variance of income shocks which is related to the measure of risk emphasized by the theory we first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components we allow for education and time specific differences in the stochastic process for earnings and for measurement error the conditional variance of the income shocks is modelled as a parsimonious arch process with both observable and unobserved heterogeneity the empirical analysis is conducted on data drawn from the 1967 1992 panel study of income dynamics we find strong evidence of sizeable arch effects as well as evidence of unobserved heterogeneity in the variances