price and volatility spillovers across the international steam coal market we examine the degree of integration of the global steam coal market using a variety of measures we show that the australian market remains the dominant force in setting world coal prices followed by mozambique and south africa we find little evidence of asymmetric price and volatility transmission in fact most markets react to both positive and negative shocks in a symmetric manner the coal market displays a significant degree of integration although this effect varies over time while china provides a major source of volatility to the global coal market it is relatively insignificant in terms of price transmission

market frictions a unified model of search costs and switching costs it is well known that search costs and switching costs can create market power by constraining the ability of consumers to change suppliers while previous research has examined each cost in isolation this paper demonstrates the benefits of examining the two types of friction in unison the paper shows how subtle distinctions between the two costs can provide important differences in their effects upon consumer behaviour competition and welfare in addition the paper also illustrates a simple empirical methodology for estimating separate measures of both costs while demonstrating a potential bias that can arise if only one cost is considered

compound risk aversion ambiguity and the willingness to pay for microinsurance abstract index insurance in which payments are based on an index correlated with but not identical to individual losses has been faced with an unexpectedly low uptake despite its promise as a tool for poverty alleviation this paper offers new insights into the behavioral impediments to the uptake of index insurance we start from the observation that an index insurance contract appears to the farmer as a compound lottery with uncertainty about individual production outcomes as well as about the validity of the index as a reflection of individual losses adopting the smooth model of ambiguity aversion to this insurance problem we show that in theory this compound lottery structure per se will dampen the demand for index insurance using framed field experiments with cotton farmers in southern mali we elicited the coefficients of risk aversion and compound risk aversion the experimental results find that almost 60 of farmers are compound risk averse and that the distribution of compound risk aversion is such that it would nearly cut in half the potential demand for the standard index insurance contracts our results highlight the importance of designing contracts with minimal basis risk under compound risk aversion such a reduction in basis risk would not only enhance the value and productivity impacts of index insurance but would also assure that the contracts are purchased and have their anticipated impacts

managing basis risk with multiscale index insurance agricultural index insurance indemnifies a farmer against losses based on an index that is correlated with but not identical to her or his individual outcomes in practice the level of correlation may be modest exposing insured farmers to residual basis risk in this article we study the impact of basis risk on the demand for index insurance under risk and compound risk aversion we simulate the impact of basis risk on the demand for index insurance by malian cotton farmers using data from field experiments that reveal the distributions of risk and compound risk aversion the analysis shows that compound risk aversion depresses demand for a conventional index insurance contract some 13 percentage points below what would be predicted based on risk aversion alone we then analyze an innovative multiscale index insurance contract that reduces basis risk relative to conventional single scale index insurance contract simulations indicate that demand for this multiscale contract would be some 40 higher than the demand for an equivalently priced conventional contract in the population of malian cotton farmers finally we report and discuss the actual uptake of a multiscale contract introduced in mali

where and how index insurance can boost the adoption of improved agricultural technologies abstract remote sensing and other advances have led to an outpouring of programs that offer index insurance to small scale farmers with the expectation that this insurance will enable adoption of improved technologies and boost living standards despite these expectations the evidence to date on the uptake and impacts of insurance is mixed this paper steps back and considers theoretically where index insurance might be most effective and whether it should be offered as a standalone contract or explicitly interlinked with credit contracts emerging from this analysis is a set of nuanced recommendations based on the structure of risk and the property rights collateral environment

customer markets credit market imperfections and real price rigidity according to standard theory an increase in demand should raise prices of goods given factor prices empirically however prices appear to be unaffected by short run variations in demand this paper suggests an explanation of this observation if customers react slowly to price changes and credit markets are imperfect prices may be unchanged or even fall when demand increases the reason is that when demand is high profits are high and firms can compete more intensely for customers without increasing their borrowing copyright 1991 by the london school of economics and political science

the uncertainty effect when a risky prospect is valued less than its worst possible outcome expected utility theory prospect theory and most other models of risky choice are based on the fundamental premise that individuals choose among risky prospects by balancing the value of the possible consequences these models therefore require that the value of a risky prospect lie between the value of that prospect s highest and lowest outcome although this requirement seems essential for any theory of risky decision making we document a violation of this condition in which individuals value a risky prospect less than its worst possible realization this demonstration which we term the uncertainty effect draws from more than 1000 experimental participants and includes hypothetical and real pricing and choice tasks as well as field experiments in real markets with financial incentives our results suggest that there are choice situations in which decision makers discount lotteries for uncertainty in a manner that cannot be accommodated by standard models of risky choice from the time of bernoulli on it has been common to argue that a individuals tend to display aversion to the taking of risks and b that risk aversion in turn is an explanation for many observed phenomena in the economic world arrow 1971 p 90

cash transfers and index insurance a comparative impact analysis from northern kenya abstract cash transfers and index insurance have become popular interventions by development agencies worldwide yet surprisingly little is known about these programs comparative impacts on participant behavior or well being this paper exploits exogenous variation in program participation and panel data from kenya to compare the causal impacts of a cash transfer program hsnp and an index based insurance product ibli which were implemented contemporaneously among the same population we find that both programs benefit clients hsnp improves child health as measured by mid upper arm circumference muac and helps households maintain their mobility dependent livestock production strategies households with ibli coverage make productivity increasing investments reduce distress sales of livestock during droughts and see a marked increase in income per adult equivalent estimating the impacts per total program costs reveals that the two programs perform comparably on average while ibli s impacts per unit marginal cost are considerably larger than hsnp s

convergence or divergence in latin america a time series analysis this article investigates the occurrence of per capita income convergence in 19 latin american countries we apply a time series approach to test for stochastic convergence and convergence based on structural breaks unit root tests where the dates of breaks are unknown and determined endogenously this approach is essential since it does not impose common break dates and parameter homogeneity among countries in fact the econometric methodology employed attempts to provide what was lacking in previous works as a consequence unlike prior studies the results indicate that there is substantial evidence in favor of conditional convergence in latin america we show that this evidence is even greater when analyzing south and central america separately

behavioral heterogeneity and the income effect inspired by the recent literature on aggregation theory this paper introduces hits a semiparametric model of consumer demand that allows for diversity in tastes the strong variation of budget shares observed across income groups has two possible origins the individual income effect and taste differences between poor and rich households consumer surveys reporting repeated cross sections do not permit the direct measurement of these two effects in hits linear heterogeneity allows the gmm estimation of structural coefficients on an aggregate series the joint density of spending and tastes is then recovered from cross sections by a nonparametric procedure involving a deconvolution we estimate the model on british data 1968 1998 and report that taste heterogeneity explains a large fraction of the variation of budget shares with income

the inadequacy of linear autoregressive model for real exchange rates empirical evidence from asian economies utilizing the formal linearity test of luukkonen saikkonen and terasvirta biometrika 75 491 499 1998 as diagnostic tool the empirical finding suggests that the linear autoregressive ar model is inadequate in describing the real exchange rates behaviour of 11 asian economies it is noted that the conventional battery of diagnostic tests is capable of identifying the inadequacy of the linear model in only three of these series moreover the linearity nature of this behaviour has been formally rejected in favour of the non linear smooth transition autoregressive star model the finding of non linearity in the data generating process of these real exchange rates warrants that the use of linear framework in empirical modelling and statistical testing procedures in the field of exchange rates may lead to an inappropriate policy conclusions

equilibrium with product differentiation tive consumer formulations is used to examine the properties of single and multiple price equilibria conditions under which decreases in the intensity of consumer preferences reduce price are given it is shown that with certain types of demand curves entry can eliminate price cost markups even given product differentiation if competition is localized it is demonstrated that entry does not affect the markup finally the effect of spurious product differentiation on price is examined

number of sellers average prices and price dispersion abstract a variety of models provide differing predictions regarding the effect of an increase in the number of competitors in a market seller density on prices and price dispersion we review different approaches to generating equilibrium price dispersion and then empirically estimate the relationship between seller density average product price and price dispersion in the retail gasoline industry using four unique gasoline price data sets controlling for station level characteristics we find that an increase in station density consistently decreases both price levels and price dispersion across four geographical areas

policy reform and growth in post soviet russia in pursuit of its transition from a command to a market economy russia has witnessed enormous regional differences in economic growth rates moreover the implementation of economic reforms has also differed markedly across regions we analyze whether regional differences in reform policies can account for regional differences in growth rates and conclude that to a considerable degree they can most notably we find that regional differences in price liberalization policies exhibit a positive direct correspondence with growth we also find that regional differences in large scale privatization exhibit a positive correspondence with the regional formation of new legal enterprises which in turn exhibits a strong positive correspondence with growth

technological extinctions of industrial firms an inquiry into their nature and causes after a buildup in the number of firms new industries commonly experience a shakeout in which the number of firms declines sharply three theoretical perspectives on how technological change contributes to industry shakeouts are analyzed the theories are used to synthesize predictions concerning technological change and industry evolution the predictions inform an analysis of four us industries that experienced sharp shakeouts automobiles tires televisions and penicillin using data on firm participation and innovation from the commercial inception of the four products through their formative eras we uncover regularities in how the products evolved the regularities suggest that shakeouts are not triggered by particular technological innovations nor by dominant designs but by an evolutionary process in which technological innovation contributes to a mounting dominance by some early entering firms copyright 1997 by oxford university press

monopolistic competition and preference diversity approach our model is especially attractive because it starts from economic primitives a specification of the set of possible individual preference patterns it shows how specific properties of the distribution of preferences translate into properties of aggregate demand this allows us to understand the relationship between the distribution of preferences and the degree to which the market introduces biases in product selection this paper presents a general model of the demand for differentiated products which has as special cases two of the most popular approaches used to analyse welfare and competition in monopolistically competitive markets the model of spatial competition on the circle and the model of symmetric aggregate demand the circle model is attractive because both demand and costs have a definite and easy to visualize physical foundation and because it is tractable salop 1979 provides an exemplary modem analysis with this model one can analyze the relationship between the optimal amount of product variety and the amount which a monopolistically competitive market will support in many plausible cases competition produces too much variety such a strong conclusion raises questions of robustness almost simultaneously spence 1976 and dixit and stiglitz 1977 developed an alternative approach to monopolistic competition based upon the chamberlinian assumption of symmetry see also shubik 1959 rather than specifying a distribution of preferences and deriving demand through aggregation as did salop and his predecessors these authors started by specifying a symmetric aggregate benefit function indicating how social welfare depends on the amounts of the various products supplied both spence and dixit stiglitz were able to show that the welfare conclusions from the circle model were not robust depending on the functional form of the benefit function equilibrium may entail either excessive or insufficient product variety 1 the assumption of symmetric demand has proven fruitful in the analysis of many economic problems it is therefore natural to ask what distribution of tastes would give

new product introduction with costly search abstract in the usual model of product market search a low search cost can turn out to have detrimental incentives on new product introduction as the low search cost erodes firms market power attenuating the profit from innovation this paper studies a model of monopolistic competition with costly search where the point of departure is that of a fixed cost of initiating search in this environment a low search cost could turn out to be favorable to innovation at a low search cost more consumers may decide to start searching possibly resulting in higher profits for firms in the larger market despite the erosion of market power

relationship between spatial agglomeration and hotel prices evidence from business and tourism consumers abstract in this paper we examine the relationship between number of local competitors and both the average and the dispersion of retail prices in urban hotels using a dataset from the metropolitan area of madrid spain by controlling for hotel characteristics and spatial factors we obtained results for each of the days in one week in line with predictions derived from the traditional monopolistic approach empirical results consistently indicate that a greater density of competitors implies a lower average and less dispersion of local prices moreover we found evidence which supports the idea that the effect of local agglomeration on average prices is particularly weaker at weekends this in turn indirectly suggests that within the metropolitan area there is a greater degree of substitution in hotel locations for tourism consumers than for business consumers

the effect of microinsurance on economic activities evidence from a randomized field experiment we report results from a large randomized field to study how access to formal microinsurance affects production and economic develop ment we induce exogenous variation in insurance coverage at the village level by randomly assigning performance incentives to the village animal husbandry worker who is responsible for signing farmers up for the insur ance we find that promoting greater adoption of insurance significantly increases farmers sow production and this effect seems to persist in the longer run moreover the increase in sow production in response to the sow insurance does not seem to be the result of the substitution of other livestock

insurance credit and technology adoption field experimental evidence from malawi this brief summarizes the insurance credit and technology adoption field experimental evidence from malawi the farmers were offered loans for the november 2006 planting season does production risk suppress the demand for credit the author implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology the study sample was composed of roughly 800 maize and groundnut farmers in malawi where by far the dominant source of production risk is the level of rainfall the author randomly selected half of the farmers to be offered credit to purchase high yielding hybrid maize and groundnut seeds for planting in the november 2006 crop season the other half of farmers were offered a similar credit package but were also required to purchase at actuarially fair rates a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall surprisingly take up was lower by 13 percentage points among farmers offered insurance with the loan take up was 33 0 percent for farmers who were offered the uninsured loan there is suggestive evidence that reduced take up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract insured loan take up was positively correlated with farmer education income and wealth which may proxy for the individual s default costs by contrast take up of the uninsured loan was uncorrelated with these farmer characteristics

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

insurance contracts when individuals greatly value certainty results from a field experiment in burkina faso abstract in discussing the paradoxical violation of expected utility theory that bears his name maurice allais noted that people tend to greatly value certainty allais observation implies that people will undervalue insurance relative to the predictions of expected utility theory because as conventionally constructed insurance offers an uncertain benefit in exchange for a certain cost pursuing this logic we implemented insurance games with cotton farmers in burkina faso on average farmer willingness to pay for insurance increases significantly when a premium rebate framing is used to render both costs and benefits of insurance uncertain we show that the impact of the rebate frame on the willingness to pay for insurance is driven by those farmers who exhibit a well defined discontinuous preference for certainty a concept that we adapt from the u v model of utility and measure with a novel behavioral experiment given that the potential impacts of insurance for small scale farmers are high and yet demand for conventionally framed contracts is often low the insights from this paper suggest welfare enhancing ways of designing insurance for low income farmers

informal risk sharing index insurance and risk taking in developing countries this paper presents preliminary findings from a research project that examines the interaction between informal risk sharing index insurance and risk taking we have randomized rainfall insurance contracts offered to cultivating and landless households in a set of indian villages where pre existing census data on caste networks allows us to characterize the nature and extent of informal risk sharing in a series of papers we study a how informal risk sharing mediates the demand for index insurance b whether index insurance or informal indemnification allows farmers to invest in risky technologies and c the general equilibrium effects of offering insurance contracts to cultivators or to agricultural laborers

new evidence of regional income divergence in post reform russia this article investigates regional income convergence in russia during 2000 2008 we test the hypothesis in which income divergence across regions of the country should give place to income convergence as the country moves toward free market economy with strong market institutions the study contributes to the existing literature by using the exponential smooth autoregressive augmented dickey fuller adf unit root test in a panel setup a novel econometric technique which encompasses cross sectional dependence results show strong evidence of on going regional income divergence in post reform period

depressed demand for crop insurance contracts and a rationale based on third generation prospect theory when actuarially fair insurance for a major risk is available then standard economic theory posits that those subject to the risk should insure in agriculture it is common for producers to decline contract offers where presubsidy premiums just cover average losses and subsidies are substantial this paper seeks to shed light on why demand is curtailed in a mail survey of u s corn and soybean producers we solicited willingness to pay wtp for actuarially fair insurance at different coverage levels we find demand to be so low that median wtp is no larger than fair premium when adjusted down by current subsidy rates which pay for one half or more of most premium charges wtp as a share of the fair rate is especially low when risk of loss is high there is limited evidence that respondents appreciate the convex relationship between coverage level and expected indemnity payoff third generation prospect theory is shown to be consistent with observed findings in particular a strong distaste for paying premium can be rationalized by loss aversion furthermore when high revenue outcomes are more likely than not that is negative skewness then higher loss aversion greater decision weight distortions and greater risk aversion will decrease wtp

the economics of product variety a survey demand for variety may arise from a taste for diversity in individual consumption and or from diversity in tastes even when each consumer chooses a single variant the full degree of variety potentially demanded will not in general be supplied because scale economies even to a small degree mean that the potential welfare or revenue gain from greater variety must be balanced against the lower unit production costs with fewer variants the economics of product variety consists essentially in analysing the effect of this balance in different situations and comparing the degree of product variety for different market structures with each other and with the optimum the survey commences with the work on market structures with single product firms generalized monopolistic competition tracing modern developments in both the chamberlinian and hotelling traditions the latter has been particularly fruitful due to the expansion of the original locational ideas into virtual spaces in product characteristics the emphasis in recent work on product variety has been on multiproduct firms in both monopolistic and oligopolistic structures including strategic market preemption although most work has been in a full information context there have been advances in product variety under imperfect information either by consumers to properties of the firms products or firms as to consumers demands

the dynamics of smithian growth this paper analyzes the evolution of an economy where growth is driven by increased specialization caused by the geographical expansion of markets it proves that such smithian growth exhibits generic threshold behavior below a critical density of transport linkages the economy is split into isolated local markets with limited specialization above the critical density these markets begin to fuse into a large economywide market causing growth to accelerate this allows an explicit test of the consensus among historians of sung dynasty china that the economic revolution during that period was a result of commercialization caused by the creation of a national waterway network

value of an additional firm in monopolistic competition the paper develops a model of monopolistic competition in which the satisfaction levels consumers get from products are independently and identically distributed potential substitution among products then generates demand curves through the mechanism of order statistics the value of extra variety can be calculated directly pareto lognormal and beta distributions are investigated using numerical integration some but not all cases support the argument that the optimal number of firms exceeds the equilibrium number

convergence in brazil recent trends and long run prospects this paper applies to the analysis of the interstate income distribution in brazil a set of techniques that have been widely used in the current empirical literature on growth and convergence usual measures of dispersion in the interstate income distribution the coefficient of variation and theil s index suggest that sigma convergence was an unequivocal feature of the regional growth experience in brazil between 1970 and 1986 after 1986 the process of convergence seems however to have slowed down almost to a halt a standard growth model is shown to fit the regional data well and to explain a substantial amount of the variation in growth rates providing estimates of the speed of conditional beta convergence of approximately 3 p a different estimates of the long run distribution implied by the recent growth trends point towards further reductions in the interstate income inequality but also suggest that the relative per capita incomes of a significant number of states and the number of very

ambiguity aversion decreases the impact of partial insurance evidence from african farmers indemnifying smallholder farmers against crop loss is thought to play an important role in encouraging the adoption of new technologies and facilitating productivity growth but to be infeasible due to information problems consequently there is interest in developing alternative partial insurance products examples include rainfall insurance and the limited liability inherent in credit contracts i argue that although these products may reduce information asymmetry ambiguity averse farmers struggle to assess whether the contracts reduce risk this problem is most pronounced when the production technology is ambiguous as is likely the case for new technologies i formalize this argument and test the theory using data from two rcts conducted in malawi and kenya comparative statics from the theory are consistent with both sets of data and i argue that income losses from ambiguity aversion may be substantial

regional inequality and regional polarization in russia 1990 99 abstract this paper contributes to the growing debate on regional inequality and polarization in russia using a consistent data series and applying a number of recently developed measures it documents trends over the transition decade of 1990 99 it shows that while inequality and polarization increased rapidly during 1991 96 the increases leveled off and even reversed in the late 1990s using a polarization index based on inequality decomposition it is shown that the main dimensions of increasing polarization are not so much the west east or the ethnic russian national republics divides but factors such as export shares of regions or the relative sizes of their capitals this provides a different perspective on the causes of regional inequality and polarization and suggests a research and policy agenda somewhat different from that which is prominent in the current debate

technological innovations downside risk and the modernization of agriculture we use a randomized experiment in india to show that improved technology enhances agricultural productivity by crowding in modern inputs and cultivation practices specifically we show that a new rice variety that reduces downside risk by providing flood tolerance has positive effects on adoption of a more labor intensive planting method area cultivated fertilizer usage and credit utilization we find that a large share of the expected gains from the technology comes from crowding in of other investments therefore improved technologies that reduce risk by protecting production in bad years have the potential to increase agricultural productivity in normal years

from local to global competition abstract we introduce a framework that has known models of oligopolistic competition with differentiated products the circle the logit and the ces as limit cases this integrative approach incorporates both localized and global competition as well as price sensitive individual demands it is used to explain the impact of major changes over the last two centuries reductions in transport costs increased taste for variety population growth and use of technologies with greater returns to scale we work out the properties of an extended chamberlinian model with applications both in industrial organization and economic geography

demand for differentiated products discrete choice models and the characteristics approach we propose a specific characteristics framework in order to construct linkages between alternative conceptual approaches to modelling product differentiation first it is shown that a demand system which satisfies the gross substitutes property imposes specific requirements on the locations of products in particular the dimension of the characteristics space must be larger than or equal to the number of products minus one we then identify a method for casting a given demand system subject to certain restrictions into our characteristics framework this is illustrated for the logit probit and linear probability models of discrete choice theory finally we find a characteristics representation of the ces representative consumer

taste heterogeneity and the scale of production fragmentation unification and segmentation abstract we propose a simple framework within which taste heterogeneity is a determinant of the scale of production we show i when taste heterogeneity is small every firm chooses a mass production technology ii when taste heterogeneity is large every firm chooses a small scale production technology and iii when the degree of taste heterogeneity is intermediate these symmetric equilibria cease to exist and both technologies coexist in equilibrium we then extend the basic framework to a geographic framework and obtain a historical evolution of marketing that is characterized by three phases a geographically fragmented market with small scale production a geographically unified market with mass production and a geographically unified but characteristically segmented market

agricultural decisions after relaxing credit and risk constraints the investment decisions of small scale farmers in developing countries are conditioned by their financial environment binding credit market constraints and incomplete insurance can limit investment in activities with high expected profits we conducted several experiments in northern ghana in which farmers were randomly assigned to receive cash grants grants of or opportunities to purchase rainfall index insurance or a combination of the two demand for index insurance is strong and insurance leads to significantly larger agricultural investment and riskier production choices in agriculture the binding constraint to farmer investment is uninsured risk when provided with insurance against the primary catastrophic risk they face farmers are able to find resources to increase expenditure on their farms demand for insurance in subsequent years is strongly increasing with the farmer s own receipt of insurance payouts with the receipt of payouts by others in the farmer s social network and with recent poor rain in the village both investment patterns and the demand for index insurance are consistent with the presence of important basis risk associated with the index insurance imperfect trust that promised

joint pricing procurement control under fluctuating raw material costs abstract we consider a firm that periodically procures raw material units stores them and processes them into finished products upon order arrivals the raw material cost evolves in a markovian fashion whereas the demand process is influenced by both the raw material cost and sales prices charged by the firm the firm controls both the raw material procurement activity and sales price in each period we show the optimality of base stock list price type of policies with the additional raw cost dependence under conditions that are verifiable when the firm engages in price competition with other firms tapping into the same raw material market and when the raw material cost process has time continuity and mean reversion tendencies we identify two monotone patterns in which policy parameters should follow as the raw material cost fluctuates cost increases are also shown to translate into price increases at low inventory levels in other circumstances however there does not appear to be a clear pattern as to how the firm should pass cost increases on to end customers our numerical evidence unequivocally supports the adaptation of procurement and pricing controls to changing raw material costs

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

risk preferences are not time preferences risk and time are intertwined the present is known while the future is inherently risky this is problematic when studying time prefer ences since uncontrolled risk can generate apparently present biased behavior we systematically manipulate risk in an intertemporal choice experiment discounted expected utility performs well with risk but when certainty is added common ratio predictions fail sharply the data cannot be explained by prospect theory hyperbolic discounting or preferences for resolution of uncertainty but seem consistent with a direct preference for certainty the data suggest strongly a difference between risk and time preferences jel c91 d81 d91 understanding individual decision making under risk and over time are two foundations of economic analysis 1 in both areas there has been research to suggest that standard models of expected utility eu and exponential discounting are flawed or incomplete regarding time experimental research has uncovered evidence of a present bias or hyperbolic discounting frederick loewenstein and o donoghue 2002 regarding risk there are number of well documented departures from eu such as the allais 1953 common consequence and common ratio paradoxes an organizing principle behind expected utility violations is that they seem to arise as so called boundary effects where certainty and uncertainty are combined camerer 1992 harless and camerer 1994 and starmer 2000 indicate that violations of expected utility are notably less prevalent when all choices are uncertain this observation is especially interesting when considering decisions about risk taking over time in particular certainty and uncertainty are combined in intertemporal decisions the present is known and certain while the future is inherently risky this observation is problematic if one intends to study time preference in isolation from

bertrand equilibrium in a differentiated duopoly this paper studies the stability of price competition in a horizontally differentiated duopoly the firms demand is derived from a distribution of consumer preferences this description of the consumer sector is applicable to a large class of differentiated commodity markets including spatial competition models the author shows that there is a pure price setting equilibrium when consumer tastes are sufficiently dispersed further conditions on the dispersedness of preferences guarantee uniqueness of the equilibrium in addition the author examines the relation between consumer preferences and the competitiveness and efficiency of the equilibrium outcome copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association