existence of equilibrium and comparative statics in differentiated goods cournot oligopolies abstract we show that under horizontal differentiation pure symmetric cournot equilibria exist if firms react to a rise in competitors output in such a way that their market price does not rise this condition is related to strategic complementarity but not to convexity or differentiability we rule out multiple equilibria under some additional conditions and discuss stability and regularity of equilibria with ordinal methods following entry equilibrium price decreases only if competitors outputs enter inverse demand aggregated into a single number otherwise it may increase even in stable equilibria the comparative statics of quantities and profits for all equilibria are given

the 9 11 conservative shift this study analyzes the causal impact of the 9 11 terror attacks on individual political orientation and political support intensity using the german socio economic panel 1999 2003 exploiting survey interview timing in 2001 for identification and controlling for unobserved individual heterogeneity i find 9 11 to have increased overall political mobilization while there is no indication of a considerable switch in support between political blocks the attacks significantly weakened support intensity among left wing voters and increased the strength of political support among right wing voters indicating a shift in conservative direction

targeted transfers and the fiscal response to the great recession abstract between 2007 and 2009 government expenditures increased rapidly across the oecd countries while economic research on the impact of government purchases has flourished in the data most of the increase in expenditures was in government transfers after documenting this fact we argue that future research should focus on the positive impact of transfers towards this we present a model in which there is no representative agent and ricardian equivalence does not hold because of uncertainty imperfect credit markets and nominal rigidities targeted lump sum transfers are expansionary both because of a neoclassical wealth effect and because of a keynesian aggregate demand effect

cournot oligopoly and the theory of supermodular games abstract we reconsider the cournot oligopoly problem in light of the theory of supermodular games invoking the recent ordinal version of this theory proposed by milgrom and shannon we generalize novshek s existence result derive the associated uniqueness result give an extension of a classical existence result under symmetry and provide conditions making a cournot oligopoly into a log supermodular game with the natural order on the action sets we also provide extensive and precise insight as to why decreasing best responses are widely regarded as being typical for the cournot model with production costs several illustrative examples are provided journal of economic literatureclassification numbers c72 l10 l13

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

what does an oligopoly maximize a monopolist maximizes a well defined objective function monetary profit in a competitive industry although each individual pursues selfish objectives the market behaves as if an agent was maximizing an objective function social welfare can we say the same for an oligopoly do firms pursuing selfish objectives and behaving strategically act as if an agent was maximizing a fictitious objective function necessary and sufficient conditions for nash equilibria of static and state space games to be observationally equivalent to single optimization problems are derived nash equilibria of the game that are not maxima of the function are shown to be generically unstable copyright 1994 by blackwell publishing ltd

the power of forward guidance revisited in recent years central banks have increasingly turned to forward guidance as a central tool of monetary policy especially as interest rates around the world have hit the zero lower bound standard monetary models imply that far future forward guidance is extremely powerful promises about far future interest rates have huge effects on current economic outcomes and these effects grow with the horizon of the forward guidance we show that the power of forward guidance is highly sensitive to the assumption of complete markets if agents face uninsurable income risk and borrowing constraints a precautionary savings effect tempers their responses to changes in future interest rates as a consequence forward guidance has substantially less power to stimulate the economy in addition we show that the business cycle dynamics of our incomplete markets model differ substantially from its complete market counterpart this contrasts with the well known results of krusell and smith 1998 we present approximate representations that can easily be incorporated into standard business cycle models

occbin a toolkit for solving dynamic models with occasionally binding constraints easily abstract the toolkit adapts a first order perturbation approach and applies it in a piecewise fashion to solve dynamic models with occasionally binding constraints our examples include a real business cycle model with a constraint on the level of investment and a new keynesian model subject to the zero lower bound on nominal interest rates compared with a high quality numerical solution the piecewise linear perturbation method can adequately capture key properties of the models we consider a key advantage of the piecewise linear perturbation method is its applicability to models with a large number of state variables

a new keynesian perspective on the great recession with an estimated new keynesian model this paper compares the great recession of 2007 09 to its two immediate predecessors in 1990 91 and 2001 the model attributes all three downturns to a similar mix of aggregate demand and supply disturbances the most recent series of adverse shocks lasted longer and became more severe however prolonging and deepening the great recession in addition the zero lower bound on the nominal interest rate prevented monetary policy from stabilizing the us economy as it had previously counterfactual simulations suggest that without this constraint output would have recovered sooner and more quickly in 2009 jel e32 e52

the protestant fiscal ethic religious confession and euro skepticism in germany during the european sovereign debt crisis most countries that ran into fiscal trouble had catholic majorities whereas countries with protestant majorities were able to avoid fiscal problems we find that christian conservative members of the german parliament from constituencies with higher shares of protestants were more likely to vote against a third bailout for greece survey data show that views on the euro differ between german protestants and non protestants at the individual level too among protestants concerns about the euro have compared to non protestants increased during the crisis we show that this increase in concern is linked to a reduction of protestants subjective well being we use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns emphasis on moral hazard concerns in protestant theology may thus still shape economic preferences jel d72 e00 i31 z12

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

money does granger cause output in the bivariate money output relation abstract a bivariate granger causality test on money and output finds statistically significant causality when data are measured in log levels but not when they are measured in first differences of the logs bootstrap simulation experiments indicate that most probably the first difference results reflect lack of power whereas the level results reflect granger causality that is actually in the data the reason for the lack of power in the first difference f statistic is that first differencing the data appears to entail a specification error by showing that money does granger cause output in the bivariate relation we remove a potential embarrassment for models that assign an important role to money in business fluctuations

regime switching debt and taxation the effects of changes to the tax rate are studied within a framework where an estimated regime switching process for the debt output ratio is embedded in a standard growth model the regime is a hidden state variable so agents face a signal extraction problem consequently agents incorporate the possibility of switching to different fiscal regimes when forming expectations over future taxes decision rules have additional nonlinearity relative to fixed regime models income allocation and the tax elasticity of investment depend on agents inference regarding the regime specifically the tax elasticity can be either positive or negative depending on whether agents perceive a tax reform as an intra regime shock or change in regime

do dropouts drop out too soon wealth health and happiness from compulsory schooling abstract this paper uses compulsory schooling laws to evaluate high school dropout decisions the main empirical result is that lifetime wealth increases by about 15 with an extra year of compulsory schooling students compelled to stay in school are also less likely to report being in poor health unemployed and unhappy the main conclusion is that high school aversion alone is unlikely to explain why dropouts forgo substantial gains to lifetime wealth the results are more consistent with the possibility that adolescents ignore or heavily discount future consequences when deciding to drop out of school if teenagers are myopic making school compulsory or offering incentives to stay in school may help improve lifetime outcomes

solving the incomplete markets model with aggregate uncertainty using the krusell smith algorithm and non stochastic simulations abstract this article describes the approach to computing the version of the stochastic growth model with idiosyncratic and aggregate risk that relies on collapsing the aggregate state space down to a small number of moments used to forecast future prices one innovation relative to most of the literature is the use of a non stochastic simulation routine

evaluating the long run impacts of the 9 11 terrorist attacks on us domestic airline travel although the us airline industry began 2001 with 24 consecutive profitable quarters including net profits in 2000 totaling 7 9 billion the impact of the 9 11 event on the industry was substantial whereas the recession that began in early 2001 signaled the end of profitability the 9 11 terrorist attacks pushed the industry into financial crisis after air travel dropped 20 over the september december 2001 period compared to the same period in 2000 given the decline in domestic air travel an important question is whether the detrimental impact of the attacks was temporary or permanent that is did airline travel return to the trend that existed prior to the terrorist attacks there are theoretical reasons to the believe that it would not economists have long viewed travel mode choices as the outcome of a comparison of opportunity costs and benefits thus anything that permanently raises the opportunity cost of travel holding benefits constant should reduce the level of travel volume to determin

universal health insurance in the clinton plan coverage as a tax financed public good the financing arrangements embodied in the clinton health reform plan involve some important differences in the way in which public goods are usually financed the subsidies to small low wage firms mandated to provide benefits distort markets in both labor and products and offer incentives for the creation of small firms in addition the financing scheme implicitly envisions a head tax on families at modest income levels but offers a possible rationale for it nevertheless the main reason for many of the financing features appears to be an attempt to hold down the apparent budgetary cost of universal coverage

estimating the frequency of price re optimization in calvo style models abstract this paper assesses the empirical performance calvo style models of price re optimization we first show that versions of these models in which firms update non re optimized prices to lagged inflation account well for the statistical behavior of post war u s inflation rates we then investigate whether these models imply plausible degrees of inertia in price setting behavior by firms they do but only if we depart from two standard auxiliary assumptions monopolistically competitive firms face a constant elasticity of demand and capital is homogeneous and can be instantaneously reallocated after a shock we develop a version of the model in which these assumptions are relaxed and show that it is consistent with the view that firms re optimize prices on average once every two quarters

the dynamic effects of forward guidance shocks we examine the macroeconomic effects of forward guidance shocks at the zero lower bound empirically we identify forward guidance shocks using unexpected changes in futures contracts around moneta

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

real balance effects and monetary policy i introduction modern literature on monetary policy rules employs new keynesian optimizing models that do not explicitly include monetary aggregates see e g rotemberg and woodford 1997 clarida et al 1999 taylor 1999 in these models the demand for output derives from the log linearization of the standard euler equation characterizing household s saving decisions the real money stock does not enter the is relation and therefore monetary policy affects output and inflation only through its effect on the real interest rate when the nominal interest rate is the policy instrument it is not necessary to specify a money market equilibrium condition see romer 2000 the practice of neglecting monetary aggregates in monetary policy analysis has recently been questioned by meltzer 1999 mccallum 2001 and nelson 2002 2003 in particular mccallum 2001 points out that although no explicit term involving money appears in the standard new keynesian setup long run inflation can still be pinned down by the economy steady state nominal money growth rate moreover mccallum 2000 2001 andres et al 2001 kremer et al 2003 woodford 2003 ireland 2004a and collard and dellas 2005 analyze the case in which the resources used by consumers in conducting transactions are modeled by a nonseparable function of consumption and real money balances meltzer 1999 2001 argues that changes in real monetary base generate effects on real aggregate demand not summarized by the real interest rate on short term securities nelson 2003 emphasizes the role of money in the transmission mechanism both as a proxy for a whole spectrum of rates of return and as an indicator variable which contains information about the state of the economy the main aim of the present article is to provide additional microfoundations for an explicit role for money in the current macroeconomic debate in particular i derive a real balance effect that explicitly enters the is relation within an optimizing general equilibrium framework of the new keynesian type according to de scitovszky 1941 haberler 1946 pigou 1943 and patinkin 1965 a change in real money balances has an impact on the real financial wealth of consumers and therefore affects consumption and output notably this effect is not considered in traditional models there is in fact empirical evidence showing that real monetary base growth is a significant determinant of consumption and output gap in both the united states and in the united kingdom see chari et al 1995 meltzer 1999 nelson 2002 the present article extends the dynamic stochastic new keynesian setup with money in the utility function by introducing overlapping generations as modeled by yaari 1965 and blanchard 1985 there are good reasons to base the demand side of the economy on a discrete time stochastic monetary version of the yaari blanchard model first this kind of extension allows one to maintain the main characteristics of the so called new neoclassical synthesis that is forward looking behavior of optimizing agents and incomplete nominal adjustment of prices featured in new keynesian theories goodfriend and king 1997 second the derivation of the real balance effect does not require nonseparability in the utility function thus the implications are analytically more tractable 1 third my framework is more general because it includes the immortal representative agent setup as a particular case my analysis attempts to examine whether the presence of an explicit real balance effect in the is relation helps evaluate the role for money in designing monetary policy rules i focus on basic issues concerning the design of monetary policy rules specifically i investigate whether it is necessary for monetary policy to overreact to inflation by raising the nominal interest rate by more than the observed increase in inflation to rule out equilibrium multiplicity

high frequency identification of monetary non neutrality the information effect we present estimates of monetary non neutrality based on evidence from high frequency responses of real interest rates expected inflation and expected output growth our identifying assumption is that unexpected changes in interest rates in a 30 minute window surrounding scheduled federal reserve announcements arise from news about monetary policy in response to an interest rate hike nominal and real interest rates increase roughly one for one several years out into the term structure while the response of expected inflation is small at the same time forecasts about output growth also increase the opposite of what standard models imply about a monetary tightening to explain these facts we build a model in which fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output

extreme us stock market fluctuations in the wake of 9 11 we apply extreme value analysis to us sectoral stock indices in order to assess whether tail risk measures like value at risk and extremal linkages were significantly altered by 9 11 we test whether semi parametric quantile estimates of downside risk and upward potential have increased after 9 11 the same methodology allows one to estimate probabilities of joint booms and busts for pairs of sectoral indices or for a sectoral index and a market portfolio the latter probabilities measure the sectoral response to macro shocks during periods of financial stress so called tail s taking 9 11 as the sample midpoint we find that tail s often increase in a statistically and economically significant way this might be due to perceived risk of new terrorist attacks copyright 2008 john wiley sons ltd

health income and relative deprivation evidence from the bhps it is believed that income affects health directly but it is argued that indirect income effects due to relative deprivation may be equally important this paper investigates these relationships using parametric and semiparametric panel data models which ameliorate problems of misspecification and unobservable heterogeneity by allowing for a flexible functional form of income we ensure that coefficients on relative deprivation variables are not an artefact of a highly non linear relationship between health and income the results provide strong evidence for the impact of income on self reported measures of health for men and women these results are robust across a range of techniques and are resilient to the inclusion of measures of relative deprivation the parametric results for relative deprivation largely reject its influence on health although there is some evidence of an effect in the semiparametric models

the impact of the london bombings on the well being of adolescent muslims we exploit the timing of the london bombings coinciding with a large scale national survey of adolescents to identify the impact of extremist islamic terror attacks on the well being of adolescent muslims our analysis reveals interesting gender differences we find evidence of a decline in the happiness of muslim teenage girls after the bombings which is also accompanied by a rise in expectations of facing discrimination in the labour market these findings are robust to several falsification tests on the other hand we fail to uncover compelling evidence of any impact of the bombings on muslim teenage boys

contributions to cournot oligopoly theory abstract this work contributes to a number of questions concerning oligopoly models in particular uniqueness of the cournot equilibrium point is demonstrated under the assumption that either the unit price function is differentiable and the derivative is strictly negative or the cost functions are strictly convex also under the assumption of either strictly decreasing unit price function or strictly convex cost functions it is shown that a the total production level at equilibrium increases with entry of additional players b that cooperation between some of the players necessarily entails profit for the others and c cooperative grouping causes decrease in production levels

the existence of equilibrium in discontinuous economic games i theory the article presents information about the existence of equilibrium in discontinuous economic games in this paper and its sequel presents study the existence of nash equilibrium in games where agents payoff functions are discontinuous the enquiry is motivated by a number of recent studies that have uncovered serious existence problems in seemingly innocuous economic games in the sequel to this paper authors have explained the utility function in the economic games referred to earlier are neither continuous nor quasi concave however they demonstrate that the payoff functions in mildly modified versions of these constructs exhibit two weaker forms of continuity which together with the requirement of quasi concavity suffice for the existence of an equilibrium from this one may conclude that at least in the modified versions of these models discontinuities in the payoff functions are not the real source of the problem rather it is the failure of the payoff functions to the quasi concave which is responsible for the non existence of equilibrium these observations bear on the existence of nash equilibrium in pure strategies

psychological expected utility theory and anticipatory feelings we extend expected utility theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty we show how these anticipatory feelings may result in time inconsistency we provide an example from portfolio theory to illustrate the potential impact of anticipation on asset prices

macroeconomic consequences of terror theory and the case of israel abstract this paper analyzes the effect of terror on the economy terror endangers life such that the value of the future relative to the present is reduced hence due to a rise in terror activity investment goes down and in the long run income and consumption go down as well governments can offset terror by putting tax revenues into the production of security facing a tide in terror a government that acts optimally increases the proportion of output spent on defense but does not fully offset the tide thus when terror peaks the long run equilibrium with an optimizing government is of lower output and welfare next we show that this theory of terror and the economy helps to understand changes in trend and business cycle of the israeli economy the estimates show that terror has a large impact on the aggregate economy continued terror at the level of the death toll by about the same size as due to car accidents is expected to decrease annual consumption per capita by about 5 in 2004 had israel not suffered from terror during the last 3 years we estimate that the output per capita would have been 10 higher than it is today

news droughts news floods and u s disaster relief this paper studies the influence of mass media on u s government response to approximately 5 000 natural disasters occurring between 1968 and 2002 these disasters took nearly 63 000 lives and affected 125 million people per year we show that u s relief depends on whether the disaster occurs at the same time as other newsworthy events such as the olympic games which are obviously unrelated to need we argue that the only plausible explanation of this is that relief decisions are driven by news coverage of disasters and that the other newsworthy material crowds out this news coverage

the stability of the cournot oligopoly model a reassessment abstract the stability properties of the cournot oligopoly model are examined for the continuous adjustment process sufficient conditions for instability are established which are shown to be of significance when the number of firms n is small local and global stability are shown under appropriate conditions which for global stability include the restriction n 5 the proof of global stability corrects a well known proof by f hahn rev econ stud 29 1962 329 331 results for the discrete time adjustment process are reported and the restrictiveness of the model s assumptions are discussed

forward guidance and the state of the economy this paper analyzes forward guidance in a nonlinear model with a zero lower bound zlb on the nominal interest rate forward guidance is modeled with news shocks to the monetary policy rule which capture innovations in expectations from central bank communication about future policy rates whereas most studies use quasi linear models that disregard the expectational effects of hitting the zlb we show how the effectiveness of forward guidance nonlinearly depends on the state of the economy the speed of the recovery the degree of uncertainty the policy shock size and the forward guidance horizon when households account for the zlb jel e43 e58 e61

is a unique cournot equilibrium locally stable abstract we consider a homogeneous product oligopoly where the cournot equilibrium is regular and unique we show that for a duopoly a unique cournot equilibrium is always locally stable for a n firm asymmetric cost oligopoly a unique cournot equilibrium is locally stable under very general conditions the sufficient conditions for local stability of a unique cournot equilibrium are much less restrictive than what the existing literature suggests for a symmetric cost oligopoly the unique cournot equilibrium is almost always locally stable except for a perverse case journal of economic literature classification number l13

endogenous money or sticky prices abstract what explains the correlations between nominal and real variables in the postwar us data are these correlations indicative of significant nominal rigidity or do they simply reflect the particular way that monetary policymakers react to developments in the real economy to answer these questions this paper uses maximum likelihood to estimate a model of endogenous money this model allows but does not require nominal prices to be sticky the results show that nominal price rigidity over and above endogenous money plays a role in accounting for key features of the data

terrorism and the world economy abstract it has been argued that terrorism should not have a large effect on economic activity because terrorist attacks destroy only a small fraction of the stock of capital of a country see e g becker g murphy k 2001 prosperity will rise out of the ashes wall street journal october 29 2001 in contrast empirical estimates of the consequences of terrorism typically suggest large effects on economic outcomes see e g abadie a gardeazabal j 2003 the economic cost of conflict a case study of the basque country american economic review 93 113 132 the main theme of this article is that mobility of productive capital in an open economy may account for much of the difference between the direct and the equilibrium impact of terrorism we use a simple economic model to show that terrorism may have a large impact on the allocation of productive capital across countries even if it represents a small fraction of the overall economic risk the model emphasizes that in addition to increasing uncertainty terrorism reduces the expected return to investment as a result changes in the intensity of terrorism may cause large movements of capital across countries if the world economy is sufficiently open so international investors are able to diversify other types of country risks using a unique data set on terrorism and other country risks we find that in accordance with the predictions of the model higher levels of terrorist risks are associated with lower levels of net foreign direct investment positions even after controlling for other types of country risks on average a standard deviation increase in the terrorist risk is associated with a fall in the net foreign direct investment position of about 5 of gdp the magnitude of the estimated effect is large which suggests that the open economy channel impact of terrorism may be substantial

panic on the streets of london police crime and the july 2005 terror attacks in this paper we study the causal impact of police on crime by looking at what happened to crime before and after the terror attacks that hit central london in july 2005 the attacks resulted in a large redeployment of police officers to central london boroughs as compared to outer london in fact police deployment in central london increased by over 30 percent in the six weeks following the july 7 bombings during this time crime fell significantly in central relative to outer london study of the timing of the crime reductions and their magnitude the types of crime which were more likely to be affected and a series of robustness tests looking at possible biases all make us confident that our research approach identifies a causal impact of police on crime implementing an instrumental variable approach shows an elasticity of crime with respect to police of approximately 0 3 so that a 10 percent increase in police activity reduces crime by around 3 percent

supermodularity and complementarity in economics an elementary survey the literature on supermodular optimization and games is surveyed from the perspective of potential users in economics this methodology provides a new approach for comparative statics based only on critical assumptions and allows a general analysis of games with strategic complementarities the results are presented in a simplified yet rigourous manner without reference to lattice theory for the special case of one dimensional parameter and actions sets with the emphasis being on wide accessibility detailed applications are presented for well known models of consumer behavior monopoly pass through bertrand and cournot competition strategic r d search and matching wherever appropriate useful tricks for applications and comparative comments are inserted

network effects market structure and industry performance abstract this paper analyzes oligopolistic markets with network externalities exploiting a minimal complementarity structure on the model primitives that allows for pure network goods we prove existence of non trivial fulfilled expectations equilibrium we formalize the concept of industry viability investigate its determinants and show that it improves with more firms in the market and or by technological progress these results enlighten some well known conclusions from case studies in the management strategy literature we also characterize the effects of market structure on industry performance which depart substantially from ordinary markets the approach relies on lattice theoretic methods supplemented with basic insights from nonsmooth analysis

lechatelier samuelson principle in games and pass through of shocks abstract the lechatelier samuelson principle states that as a reaction to a shock an agent s short run adjustment of an affected action is smaller than its long run adjustment when the agent can also adjust other related actions we extend the principle to strategic environments where the long run adjustment also accounts for other players adjusting their strategies we show that the principle holds for supermodular games strategic complements satisfying monotone comparative statics and provide sufficient conditions for the principle to hold in games of strategic substitutes heterogeneity we discuss the principle s implications for cost pass through of multiproduct firms

on the effects of entry in cournot markets in the framework of symmetric cournot oligopoly this paper provides two minimal sets of assumptions on the demand and cost functions that imply respectively that as the number of firms increases the minimal and maximal equilibria lead to i decreasing industry price and increasing or decreasing per firm output and ii increasing industry price and decreasing per firm output in both cases per firm profits are decreasing the analysis relies crucially on lattice theoretic methods and yields general unambiguous and easily interpretable conclusions of a global nature as a byproduct of independent interest new insight into existence of cournot equilibrium is developed

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

destruction and distress using a quasi experiment to show the effects of the september 11 attacks on mental well being in the united kingdom using a longitudinal household panel dataset in the uk where a significant proportion of the interviews are conducted in september each year we are able to show that the attacks of september 11 resulted in lower levels of subjective well being for those interviewed after that date in 2001 compared with those interviewed before it this quasi experiment provides one of the first examples of the impact of a terrorist attack in one country on well being in another country

on the existence of cournot equilibrium this paper examines the existence of n firm cournot equilibrium in a market for a single homogeneous commodity it proves that if each firm s marginal revenue declines as the aggregate output of other firms increases which is implied by concave inverse demand then a cournot equilibrium exists without assuming that firms have nondecreasing marginal cost or identical technologies also if the marginal revenue condition fails at a potential optimal point there is a set of firms such that no cournot equilibrium exists the paper also contains an example of nonexistence with two nonidentical firms each with constant returns to scale production