on the existence of markov consistent plans under production uncertainty strotz 1956 and pollak 1968 were among the first to study the behaviour of an economic agent whose preferences change over time they suggested that such an agent would choose a consistent plan which they described as the best plan that he would actually follow a markov consistent plan has a particularly simple structure current decisions are independent of past decisions except insofar as past decisions affect the current values of state variables unfortunately markov consistent plans do not generally exist in this paper we demonstrate that the existence problem dissappears for finite horizon problems when one introduces even a small amount of smooth uncertainty into production

an analysis of policy scenario effects on the adoption of energy production on the farm a case study in emilia romagna italy abstract the agriculture sector s contribution to energy production is a central issue in ongoing policy debates and one of the central elements of the development of bioeconomy sector the common agricultural policy cap is one of the main determinants of the different farm strategies of european farmers the cap is now undergoing a thorough revision process which necessarily includes a debate of the role of the policy in rural areas and the effectiveness of the various cap policy mechanisms the objective of this paper is to assess the impact of alternative cap scenarios in the light of the possible changes in 2013 and the willingness to adopt energy plants for energy crops in the province of bologna italy this is pursued using both survey information and farm household mathematical programming models hence using stated intentions and simulated profitability to analyse the adopt of new technologies for energy production the results underscore the relevance of the cap scenarios in altering intentions with regard to the adoption of energy production and the relevant effect of uncertainty in delaying the diffusion of energy production systems

animal spirits in a monetary model abstract we integrate keynesian economics with general equilibrium theory in a new way we develop a simple graphical apparatus the is lm nac framework that can be used by policy makers to understand how policy affects the economy a new element the no arbitrage condition nac curve connects the interest rate to current and expected future values of the stock market and it explains how animal spirits influence economic activity our framework provides a rich new approach to policy analysis that explains the short run and long run effects of policy

existence of stationary bargaining equilibria abstract this paper addresses the question of existence of stationary markov perfect equilibria in a class of dynamic games that includes many known bargaining models and models of coalition formation general sufficient conditions for existence of equilibria are currently lacking in a number of interesting environments e g models with non convexities consumption lower bounds or an evolving state variable the main result establishes existence of equilibrium under compactness and continuity conditions without the structure of convexity or strict comprehensiveness used in the extant literature the proof requires a precise selection of voting equilibria following different proposals using a generalization of fatou s lemma

challenges of existing in a market as a small low quality producer this paper explores the strategy of a small firm entering a monopolist s market thereby creating a duopoly market the small firm avoids competing with the larger incumbent firm by producing a lower quality product at a lower price the model here establishes an equilibrium under a specific set of assumptions and examines how exogenous factors affect prices qualities and profits although the strategy might allow the firm to enter and earn a profit the market conditions may make this position much less desirable to that of the large firm for several reasons in the case explored here where tastes for the product are uniformly distributed the small firm s profit is about six percent of that of the larger firm the smaller firm is more severely threatened by the entrance of a third firm furthermore even if the smaller firm can cut costs its position is not well suited for exploiting such increases in efficiencies

global land use implications of first and second generation biofuel targets recently an active debate has emerged around greenhouse gas emissions due to indirect land use change iluc of expanding agricultural areas dedicated to biofuel production in this paper we provide a detailed analysis of the iluc effect and further address the issues of deforestation irrigation water use and crop price increases due to expanding biofuel acreage we use globiom an economic partial equilibrium model of the global forest agriculture and biomass sectors with a bottom up representation of agricultural and forestry management practices the results indicate that second generation biofuel production fed by wood from sustainably managed existing forests would lead to a negative iluc factor meaning that overall emissions are 27 lower compared to the no biofuel scenario by 2030 the iluc factor of first generation biofuels global expansion is generally positive requiring some 25 years to be paid back by the ghg savings from the substitution of biofuels for conventional fuels second generation biofuels perform better also with respect to the other investigated criteria on the condition that they are not sourced from dedicated plantations directly competing for agricultural land if so then efficient first generation systems are preferable since no clear technology champion for all situations exists we would recommend targeting policy instruments directly at the positive and negative effects of biofuel production rather than at the production itself

markov perfect equilibria in intergenerational games with consistent preferences abstract this paper considers the subgame perfect equilibria in markov strategies of an abstract intergenerational game in which the generations preferences are consistent in the sense that they admit recursive aggregators given biconvergence i show that such equilibria exist and are equivalent both to the solutions of bellman s recursive optimality equations and to the optima of the first generation s utility function these results are then applied to a simple model casting new light on the neutrality of government debt and to another accommodating impure altruism finally two new examples crisply illustrate how the paper s equivalences fail when biconvergence fails

search intensity job advertising and efficiency this paper demonstrates that if both firms and workers search the other side of the market for job matches the equilibrium rate of unemployment is likely to be too high both sides ignore a positive externality of their search when they establish a job match they remove from the market a job searcher so they save society his search costs i show that there is no feasible wage rate that can internalize this externality under fairly weak restrictions on the technology of search

equilibrium price formation and the value of private information an economy is analyzed in which agents first choose whether to acquire costly information about the return to a risky asset and then choose demand functions that determine the allocation of assets it is a well known paradox that if agents are price takers and prices are fully revealing then an equilibrium with costly information acquisition does not exist it is shown that if the price formation process is modeled explicitly and agnets are not price takers then it is possible to have an equilibrium with fully revealing prices and costly information acquisition article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

markov perfect equilibria in altruistic growth economies with production uncertainty this paper concerns the existence of markov perfect equilibria in altruistic growth economies previous work on deterministic models has established existence only under extremely restrictive conditions we show that the introduction of production uncertainly yields an existence theorem for aggregative infinite horizon models with very general forms of altruism journal of economic literature classification numbers

discounted stochastic games with no stationary nash equilibrium two examples we present two examples of discounted stochastic games each with a continuum of states finitely many players and actions that possess no stationary equilibria the first example has deterministic transitions an assumption undertaken in most of the early applications of dynamics games in economics and perfect information and does not possess even stationary approximate equilibria or markovian equilibria the second example satisfies in addition to stronger regularity assumptions that all transitions are absolutely continuous with respect to a fixed measure an assumption that has been widely used in more recent economic applications this assumption has been undertaken in several positive results on the existence of stationary equilibria in special cases and in particular guarantees the existence of stationary approximate equilibria

sticky information in general equilibrium this paper develops and analyzes a general equilibrium model with sticky information the only rigidity in goods labor and financial markets is that agents are inattentive sporadically updating their information sets when setting prices wages and consumption after presenting the ingredients of such a model the paper develops an algorithm to solve this class of models and uses it to study the model s dynamic properties it then estimates the parameters of the model using u s data on five key macroeconomic time series it finds that information stickiness is present in all markets and is especially pronounced for consumers and workers variance decompositions show that monetary policy and aggregate demand shocks account for most of the variance of inflation output and hours jel e30 e10

natural rate doubts abstract we study the low frequency comovements in unemployment inflation and the federal funds rate in the u s from 1970 through 1979 all three series trended up together after 1979 they all trended down the conventional explanation for the buildup of inflation in the 1970s is that the fed reacted to an increase in the natural rate of unemployment by conducting an overly passive monetary policy we show that this explanation is difficult to reconcile with the observed comovement of the fed funds rate and inflation we argue instead that the source of the inflation buildup in the 1970s was a downward drift in the real interest rate that was translated into a simultaneous increase in unemployment and inflation by passive fed policy our explanation relies on the existence in the data of a positive long run unemployment inflation relationship this is consistent with non superneutrality of money in the long run and hence the title of our paper natural rate doubts

perfect equilibrium timing of a backstop technology limit pricing induced by trigger zones this paper considers strategic use of r d in the context of an exhaustible resource market where the consuming countries control r d and a cartel controls the resource it is shown that r d investments to develop a backstop technology can be used as a credible threat to induce a low price profile for the resource the price path associated with the unique perfect equilibrium exhibits limit pricing the backstop is eventually introduced but in a period before this event the cartel keeps the price sufficiently low to make delayed investment the preferred alternative for the consuming nations

bargaining without a common prior an immediate agreement theorem in sequential bargaining models without outside options each player s bargaining power is ultimately determined by which player will make an offer and when this paper analyzes a sequential bargaining model in which players may hold different beliefs about which player will make an offer and when excessive optimism about making offers in the future can cause delays in agreement the main result states that despite this if players will remain sufficiently optimistic for a sufficiently long future then in equilibrium they will agree immediately this result is also extended to other canonical models of optimism

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

co2 taxes equity and the double dividend macroeconomic model simulations for austria abstract this paper investigates the impacts of co2 tax schemes on co2 emissions equity and macroeconomic indicators in austria with the macroeconomic model dynk aut our scenarios focus on non ets co2 emissions and comprise different tax rates and revenue recycling options lower labor taxes lower vat and lump sum payments the short term comparative scenario analysis indicates that co2 taxes without recycling lead to significant co2 emission reductions at moderate economic costs equity impacts on households depend on the indicator used but can be regressive without recycling most recycling schemes can achieve a double dividend i e emission reductions and increases in gdp lump sum payments are less efficient than reducing the vat or labor taxes equity impacts are progressive with lump sum payments rather proportional with lower vat and regressive with lower labor taxes a combination of recycling schemes and or a restriction of lump sum payments to lower income households can minimize the trade off between equity and efficiency our simulations suggest that well designed co2 tax schemes could be a crucial and socially acceptable element within a comprehensive policy package to achieve ghg emission targets for non ets sectors in austria

contract negotiation and the coase conjecture a strategic foundation for renegotiation proof contracts what does contract negotiation look like when some parties hold private information and negotiation frictions are negligible this paper analyzes this question and provides a foundation for renegotiation proof contracts in this environment the model extends the framework of the coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which preferences are nonseparable in the traded goods as frictions become negligible all equilibria converge to a unique outcome which is separating efficient and straightforward to characterize

effects of changes in italian bioenergy promotion schemes for agricultural biogas projects insights from a regional optimization model italy has witnessed an extraordinary growth in biogas generation from livestock effluents and agricultural activities in the last few years as well as a severe isomorphic process leading to a market dominance of 999 kw power plants owned by entrepreneurial farms under the pressure of the economic crisis in the country the italian government has restructured renewable energy support schemes introducing a new program in 2013 in this paper the effects of the previous and current support schemes on the optimal plant size feedstock mix and profitability were investigated by introducing a spatially explicit biogas supply chain optimization model which accounts for different incentive structures by applying the model to a regional case study homogenization observed to date is recognized as a result of former incentive structures considerable reductions in local economic potentials for agricultural biogas power plants without external heat use are estimated new plants are likely to be manure based and due to the lower energy density of such feedstock wider supply chains are expected although optimal plant size will be smaller the new support scheme will therefore most likely eliminate past distortions but also slow down investments in agricultural biogas plants

emission trading schemes potential revenue effects compliance costs and overall tax policy issues the case for the imposition of carbon emission taxes or tradable carbon permits in important tax jurisdictions is arguably strong based upon the polluter pays principle first proposed by pigou almost a century ago this paper briefly reviews the arguments for and against these market based instruments and discusses their relative advantages and disadvantages in a practical context in the case of australia the revenue effect of the proposed tradable carbon permits scheme is estimated to be a 11 5 billion in 2010 11 for comparison this is roughly equivalent to a quarter of the revenue from the goods and services tax the paper focuses on three neglected aspects of climate change taxation discussion to date how much tax revenue is likely to be raised and the administrative and compliance costs of an emissions trading scheme with particular reference to australia in discussing these issues the paper draws upon selected and relevant international experience particularly the european union emissions trading scheme the challenges of an emissions trading scheme including integration with the existing tax system particularly in an australian context are also discussed the paper concludes by emphasising the key challenges and issues facing this ultimate externality debate particularly from a taxation policy perspective

the hidden costs of renewables promotion the case of crop based biogas abstract this paper finds that specific characteristics of bioenergy investments namely long times to build relatively high variable costs and the managerial ability of corrective actions during the project help bioenergy producers to respond to market uncertainties this effect is shown to compromise the economic effectiveness of bioenergy policies the paper compares the effectiveness of financial and regulatory incentive programs aiming to stimulate production of crop based biogas a stylized stochastic real options based investment model is developed to analyze the investment behavior of biogas producers under alternative policies the model is solved by a numerical approach combining stochastic simulations and the genetic algorithm technique unless bioenergy schemes account for structural characteristics of the bioenergy industry they will tend to encourage investments in unused production capacities this would cause additional welfare costs and benefit mainly crop producers

animal spirits financial crises and persistent unemployment this article uses a rational expectations model with multiple equilibrium unemployment rates to explain financial crises the model has equilibria where asset prices are unbounded above i argue that this is an important feature of any rational agent explanation of a financial crisis since for the expansion phase of the crisis to be rational investors must credibly believe that asset prices could keep increasing forever with positive probability i explain the sudden crash in asset prices that precipitates a financial crisis as a large shock to expectations that leads to a permanent increase in the unemployment rate

the timing of contracting with externalities abstract this paper endogenizes the timing of bilateral contracting between one principal and multiple agents in the presence of externalities contracting simultaneously with all agents is optimal for the principal if externalities become weaker the more an agent trades if instead externalities become stronger sequential negotiations might benefit the principal as they lower the agents outside options under some linearity conditions the principal s preferences with respect to different timings of contracting are opposed to their efficiency ranking

nonpaternalistic intergenerational altruism abstract the paper develops a concept of equilibrium behaviour and establishes its existence in a model of nonpaternalistic intergenerational altruism each generation derives utility from its own consumption and the utilities of its successors equilibrium capital stocks are time monotone and therefore converge to a steady state finally when each generation s utility depends on that of at least two successors equilibria may be inefficient this is shown by an example where feasible programs exist providing greater consumption compared to the equilibrium path for every generation

optimal design of supply chains for second generation biofuels incorporating european biofuel regulations abstract expected changes in european biofuel regulations lead to uncertainty in supply chain planning for second generation biofuel industries previous studies used optimization to design biofuels supply chains and a few of them analyzed the impact of selected biofuel policy instruments on sustainability targets this study presents a mixed integer programming model for the optimal design of second generation biofuel supply chains considering all policy instruments of european biofuel regulations the model maximizes the net present value of second generation biofuel supply chains considering time dependent quotas for biofuel market shares and greenhouse gas emission savings the model includes multiple counting of second generation biofuel towards meeting biofuel market share targets and captures all greenhouse gas emissions of the second generation biofuel supply chain including land use change emissions we demonstrated the use of the model through the case study of second generation biodiesel in a german region and evaluated the sensitivity of the optimal solution to model parameters and policy instruments levels a set of remarks were made regarding the impact of policy instruments on the performance of second generation biodiesel supply chain under study future work entails the application of the analysis to the aggregate level in the european union

poverty and self control we argue that poverty can perpetuate itself by undermining the capacity for self control in line with a distinguished psychological literature we consider modes of self control that involve the self imposed use of contingent punishments and rewards we study settings in which consumers with quasi hyperbolic preferences confront an otherwise standard intertemporal allocation problem with credit constraints our main result demonstrates that low initial assets can limit self control trapping people in poverty while individuals with high initial assets can accumulate indefinitely thus even temporary policies that initiate accumulation among the poor may be effective we examine implications concerning the effect of access to credit on saving the demand for commitment devices the design of financial accounts to promote accumulation and the variation of the marginal propensity to consume across income from different sources we also explore the nature of optimal self control demonstrating that it has a simple and behaviorally plausible structure that is immune to self renegotiation

dynamic allocation in an altruistic overlapping generations economy abstract this paper is concerned with the issue does there exist a social security program which can be maintained period after period to address this issue the paper considers dynamic allocation in an altruistic overlapping generations economy the altruism is intergenerational nonpaternalistic and two sided it is assumed that generations coexisting in the same period agree on a social welfare function which evaluates the consumption of various generations and play a game against those living in different periods a perfect equilibrium of this game is shown to exist and its properties are examined journal of economic literature classification numbers c72 d62 h55

vertical product differentiation with entry abstract this paper examines the non cooperative behaviour of established firms that compete in product quality and prices while foreseeing the effects of their rivalry on the decisions made by the later entrants we prove an existence and uniqueness of the equilibrium and show that the dominant firms engage in maximal product differentiation i e select the highest and lowest technologically feasible qualities later entrant however always selects an intermediate quality moreover we show that the equilibrium configuration is identical to that generated by perfect foresight equilibrium in a model of sequential entry furthermore the profits earned by each firm are ranked in the same order as the qualities implifying that the later entrant despite being the last mover ends up with higher profits and larger market share than one of the incumbents

exploiting the medium term biomass energy potentials in austria a comparison of costs and macroeconomic impact the transition to an implicitly solar basedenergy system can make use of various specificbiomass energy systems this paper provideseconomic and environmental indicators forevaluating alternative options the paper proceeds in three empirical steps first an expert survey supplies the primarybiomass potentials available for non food usein austria and their respective costs second an inquiry into investment operating andfinancing costs of 30 different biomass energyuse systems allows a standardized comparisonamong them and their relationship to fossilreference technologies third a computablegeneral equilibrium model of the austrianeconomy is employed to quantify the impacts offostering the use of distinct biomass energytechnologies the results allow us to distinguish betweenthose technologies that tend to lead to anincrease in both gdp and employment e g combined heat and power production from sewagesludge biogas to an increase only inemployment while gdp tends to diminish e g district heating based on agricultural pellets or to a decline in both e g co firing basedon wood chips bark or industrial pellets individual technologies could account for up toone third of austrias kyoto obligation whilecombinations of technologies triggered by acombined co2 tax and biomass energysubsidy for example could almost fully lead toaustrian kyoto compliance

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

bioenergy expansion in the eu cost effective climate change mitigation employment creation and reduced dependency on imported fuels presently the european union eu is promoting bioenergy the aim of this paper is to study the prospects for using domestic biomass resources in europe and specifically to investigate whether different policy objectives underlying the promotion of bioenergy cost effective climate change mitigation employment creation and reduced dependency on imported fuels agree on which bioenergy options that should be used we model bioenergy use from a cost effectiveness perspective with a linear regionalized energy and transport system model and perform supplementary analysis it is found that the different policy objectives do not agree on the order of priority among bioenergy options maximizing climate benefits cost effectively is in conflict with maximizing employment creation the former perspective proposes the use of lignocellulosic biomass in the stationary sector while the latter requires biofuels for transport based on traditional agricultural crops further from a security of supply perspective the appeal of a given bioenergy option depends on how oil and gas import dependencies are weighed relative to each other consequently there are tradeoffs that need to be addressed by policymakers promoting the use of bioenergy also the importance of bioenergy in relation to employment creation and fuel import dependency reduction needs to be further addressed

inducing efficiency externalities missing markets and the coase theorem the capacity of side payments to induce an efficient outcome as predicted by the coase theorem is studied side payments are formally introduced in a bimatrix game involving externalities and the resulting equilibrium is called an induced equilibrium when induced equilibria exist they weakly pareto dominate a nash equilibrium of the original game without side payments when because of externalities one market is missing an induced equilibrium always exists is uniquely valued and is pareto efficient when more than one market is missing induced equilibria may not exist may be pareto inefficient and may be pareto ranked copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

limited asset markets participation monetary policy and inverted aggregate demand logic abstract this paper incorporates limited asset markets participation in dynamic general equilibrium and develops a simple analytical framework for monetary policy analysis aggregate dynamics and stability properties of an otherwise standard business cycle model depend nonlinearly on the degree of asset market participation while moderate participation rates strengthen the role of monetary policy low enough participation causes an inversion of results dictated by conventional wisdom the slope of the is curve changes sign the taylor principle is inverted optimal welfare maximizing discretionary monetary policy requires a passive policy rule and the effects and propagation of shocks are changed however a targeting rule implementing optimal policy under commitment delivers equilibrium determinacy regardless of the degree of asset market participation our results may justify fed s behavior during the great inflation period

ecosystem services and economic development in austrian agricultural landscapes the impact of policy and climate change scenarios on trade offs and synergies we have developed an integrated modeling framework imf to quantify indicators for ecosystem services es and economic development ed in agricultural landscapes austria serves as a case study in which impacts trade offs and synergies of es and ed are assessed for different agricultural policy pathways and regional climate change scenarios agricultural intensification and incentivized use of provisioning es e g biomass production lead to higher macro economic output e g gdp but usually reduce es related to regulation and maintenance e g ecological integrity climate regulation as well as cultural services landscape diversity we revealed both synergies for certain es e g biomass production and soil organic carbon stocks as well as large spatial deviations from the national mean across the heterogeneous agricultural landscapes in austria climate change scenarios i lead to substantial variation in es and ed indicators and ii usually amplify trade offs by stimulating land use intensification our findings depict the complex relationship between different es and ed indicators as well as the importance of considering spatial heterogeneity and regional climate change this assessment can help to improve targeting of agri environmental schemes in order to provide a more balanced and efficient supply of es and to foster rural development

regional energy autarky potentials costs and consequences for an austrian region local actors at community level often thrive for energy autarky to decrease the dependence on imported energy resources we assess the potentials and trade offs between benefits and costs of increasing levels of energy autarky for a small rural region of around 21 000 inhabitants in austria we use a novel modeling approach which couples a regional energy system model with a regional land use optimization model we have collected and processed data on the spatial distribution of energy demand and potentials of biomass photovoltaics and solar thermal resources the impacts of increasing biomass production on the agricultural sector are assessed with a land use optimization model that allows deriving regional biomass supply curves an energy system model is subsequently applied to find the least cost solution for supplying the region with energy resources model results indicate that fossil fuel use for heating can be replaced at low costs by increasing forestry and agricultural biomass production however autarky in the electricity and the heating sector would significantly increase biomass production and require a full use of the potentials of photovoltaics on roof tops attaining energy autarky implies high costs to consumers and a decline in the local production of food and feed

confidence crashes and animal spirits this article is an attempt to reformulate what i take to be two key insights from keyness general theory keynes 1936 the first is that there is something profoundly different about the labour market from most other markets in the economy the second is that the beliefs of participants in the asset markets have an independent influence on economic activity in the language of modern dynamic general equilibrium theory we would say that there is a continuum of labour market equilibria and that beliefs about the value of the stock market select an equilibrium the general theory contains many ideas some of which are internally inconsistent and keynes did not try to reconcile his theory with walrasian economics that task was carried out by a group of interpreters including hansen 1936 and hicks 1937 the current dominant paradigm new keynesian economics originated with the third edition of samuelson s 1955 undergraduate textbook in which he introduced the idea of the neoclassical synthesis according to this doctrine the economy is keynesian in the short run but classical in the long run the short run is defined as the period over which not all prices have had time to adjust to their walrasian levels this article introduces a different interpretation of the key ideas from the general theory 1 although my work is inspired by keynesian economics this article is not about the history of thought i offer a way of formulating the idea that market economies are not inherently self stabilising without assuming that prices or wages are prevented from adjusting to their equilibrium levels by some kind of friction instead i claim that high persistent unemployment is a potentially permanent feature of a market economy in a steady state equilibrium

the new keynesian cross abstract the new keynesian nk cross is a graphical and analytical apparatus for heterogeneous agent hank models expressing key aggregate demand objects mpc and multipliers as functions of heterogeneity parameters it affords analytical insights into monetary fiscal and forward guidance multipliers and replicates the aggregate implications of quantitative hank the key parameter the constrained agents income elasticity to aggregate income depends on fiscal redistribution when it is larger smaller than one the effects of policies and shocks are amplified dampened with uninsurable idiosyncratic uncertainty this translates intertemporally through compounding discounting in the aggregate euler equation into further amplification dampening of future shocks

coalition formation with binding agreements we study coalition formation in real time a situation in which coalition formation is intertwined with the ongoing receipt of pay offs agreements are assumed to be permanently binding they can only be altered with the full consent of existing signatories for characteristic function games we prove that equilibrium processes whether or not these are history dependent must converge to efficient absorbing states for three player games with externalities each player has enough veto power that a general efficiency result can be established however there exist four player games in which all markov equilibria are inefficient from every initial condition despite the ability to write permanently binding agreements copyright 2007 wiley blackwell

cost effective policy instruments for greenhouse gas emission reduction and fossil fuel substitution through bioenergy production in austria abstract climate change mitigation and security of energy supply are important targets of austrian energy policy bioenergy production based on resources from agriculture and forestry is an important option for attaining these targets to increase the share of bioenergy in the energy supply supporting policy instruments are necessary the cost effectiveness of these instruments in attaining policy targets depends on the availability of bioenergy technologies advanced technologies such as second generation biofuels biomass gasification for power production and bioenergy with carbon capture and storage beccs will likely change the performance of policy instruments this article assesses the cost effectiveness of energy policy instruments considering new bioenergy technologies for the year 2030 with respect to greenhouse gas emission ghg reduction and fossil fuel substitution instruments that directly subsidize bioenergy are compared with instruments that aim at reducing ghg emissions a spatially explicit modeling approach is used to account for biomass supply and energy distribution costs in austria results indicate that a carbon tax performs cost effectively with respect to both policy targets if beccs is not available however the availability of beccs creates a trade off between ghg emission reduction and fossil fuel substitution biofuel blending obligations are costly in terms of attaining the policy targets

the stock market crash of 2008 caused the great recession theory and evidence abstract this paper argues that the stock market crash of 2008 triggered by a collapse in house prices caused the great recession the paper has three parts first it provides evidence of a high correlation between the value of the stock market and the unemployment rate in u s data since 1929 second it compares a new model of the economy developed in recent papers and books by farmer with a classical model and with a textbook keynesian approach third it provides evidence that fiscal stimulus will not permanently restore full employment in farmer s model as in the keynesian model employment is demand determined but aggregate demand depends on wealth not on income

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

endogenous games and mechanisms side payments among players we characterize the outcomes of games when players may make binding offers of strategy contingent side payments before the game is played this does not always lead to efficient outcomes despite complete information and costless contracting the characterizations are illustrated in a series of examples including voluntary contribution public good games cournot and bertrand oligopoly principal agent problems and commons games among others

sequential nonzero sum blotto allocating defensive resources prior to attack abstract the strategic allocation of resources across multiple fronts has long been studied in the context of blotto games in which two players simultaneously select their allocations however many allocation problems are sequential for example a state trying to defend against a terrorist attack generally allocates some or all of its resources before the attacker decides where to strike this paper studies the allocation problem confronting a defender who must decide how to distribute limited resources across multiple sites before an attacker chooses where to strike unlike many blotto games which only have very complicated mixed strategy equilibria the sequential nonzero sum blotto game always has a very simple pure strategy subgame perfect equilibrium further the defender always plays the same pure strategy in any equilibrium and the attacker s equilibrium response is generically unique and entails no mixing the defender minmaxes the attacker in equilibrium even though the game is nonzero sum and the attacker strikes the site among its best replies that minimizes the defender s expected losses

keynesian economics without the phillips curve abstract we extend farmer s 2012b monetary fm model in three ways first we derive an analog of the taylor principle and we show that it fails in u s data second we use the fact that the model displays dynamic indeterminacy to explain the real effects of nominal shocks third we use the fact the model displays steady state indeterminacy to explain the persistence of unemployment we show that the fm model outperforms the new keynesian model and we argue that its superior performance arises from the fact that the reduced form of the fm model is a vecm as opposed to a var this article is part of a special issue entitled fiscal and monetary policies

on the existence of rational expectations equilibrium abstract we prove a theorem on the existence of rational expectations general economic equilibrium when agents condition on prices as well as on private information and maximize the expectation of a state dependent utility function the key to the result is a new idealization of what it means for a set of empirical distributions to support agents expectations this idealization depends on the notion that agents compare their expectations with continuous versions of the random empirical distributions that are generated by the workings of the economy the existence theorem covers all strictly concave utility functions arbitrary distributions of the state variable and situations in which the dimension of the state variable is large relative to the number of commodities

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

debt deficits and finite horizons the stochastic case abstract we introduce aggregate uncertainty and complete markets into blanchard s 1985 perpetual youth model we derive a simple expression for the pricing kernel that can be used to close a variety of equilibrium models in which the set of agents changes over time