an efficiency theorem for incompletely known preferences there are n agents who have von neumann morgenstern utility functions on a finite set of alternatives a each agent i s utility function is known to lie in the nonempty convex relatively open set ui suppose l is a lottery on a that is undominated meaning that there is no other lottery that is guaranteed to pareto dominate l no matter what the true utility functions are then there exist utility functions ui ui for which l is pareto efficient this result includes the ordinal efficiency welfare theorem as a special case

on the existence of a strictly strong nash equilibrium under the student optimal deferred acceptance algorithm abstract this study analyzes a preference revelation game in the student optimal deferred acceptance algorithm in a college admission problem we assume that each college s true preferences are known publicly and analyze the strategic behavior of students we demonstrate the existence of a strictly strong nash equilibrium in the preference revelation game through a simple algorithm that finds it specifically i the equilibrium outcome from our algorithm is the same matching as in the efficiency adjusted deferred acceptance algorithm and ii in a one to one matching market it coincides with the student optimal von neumann morgenstern vnm stable matching we also show that i when a strict core allocation in a housing market derived from a college admission market exists it can be supported by a strictly strong nash equilibrium and ii there exists a strictly strong nash equilibrium under the college optimal deferred acceptance algorithm if and only if the student optimal stable matching is pareto efficient for students

federal borrowing and short term interest rates this paper is an empirical study of the effects of federal government borrowing on short term interest rates it is often taken for granted that increases in federal borrowing cause higher short term rates but little empirical support exists for this assumption in fact this paper demonstrates that federal borrowing is a relatively unimportant and insignificant determinant of short term rates an implication of this result is that financial crowding out effects of government deficit spending may not be overly large postulates about interest rate behavior are the driving force behind many hypotheses of the crowding out literature however these interest rate effects have received relatively little direct attention in this literature this is surprising since as a general rule the stronger the interest rate effect is the stronger the crowding out effect will be an empirical determination of the size of the deficit spending interest rate effect gives some empirical content to the crowding out controversy in section ii of this paper the relationship between federal borrowing interest rates and crowding out is discussed and a loanable funds model of short term interest rates is developed in section iii the regression model is generated and tested the essential result is that variation in three month treasury bill rates is caused by expected inflation changes in the monetary base and by changes in the level of economic activity there is no statistically significant relation between short term interest rates and federal borrowing in section iv additional regression tests are performed which confirm the results in section iii and the problem of simultaneous equation bias is discussed the final part of the paper is a discussion of some implications of the results reported in sections iii and iv

on two competing mechanisms for priority based allocation problems we consider the priority based allocation problem there is a set of indivisible objects with multiple supplies e g schools with seats and a set of agents e g students with priorities over objects e g proximity of residence area we study two well known and competing mechanisms the agentoptimal stable mechanism aosm allots objects via the deferred acceptance algorithm the top trading cycles mechanism ttcm allots objects via gale s top trading cycles algorithm we show that the two mechanisms are equivalent or ttcm is fair i e respects agents priorities or resource monotonic o rpopulation monotonic if and only if the priority structure is acyclic furthermore if aosm fails to be efficient consistent for a problem ttcm also fails to be fair consistent for it however the converse is not necessarily true

boston versus deferred acceptance in an interim setting an experimental investigation abstract while much of the school choice literature advocates strategyproofness recent research has aimed to improve efficiency using mechanisms that rely on non truthtelling equilibria we address two issues that arise from this approach we first show that even in simple environments with ample feedback and repetition agents fail to reach non truthtelling equilibria we offer another way forward implementing truth telling as an ordinal bayes nash equilibrium rather than as a dominant strategy equilibrium we show that this weaker solution concept can allow for more efficient mechanisms in theory and provide experimental evidence that this is also the case in practice in fact truth telling rates are basically the same whether truthtelling is implemented as an ordinal bayes nash equilibrium or a dominant strategy equilibrium this provides a proof of concept that ordinal bayes nash design might provide a middle path achieving efficiency gains over strategy proof mechanisms without relying on real life agents playing a non truth telling equilibrium

is perfect competition an empirically inadequate model this paper examines the empirical content of the neoclassical theory of the firm the main models perfect competition monopolistic competition pure monopoly are specified in terms of observable anomalies these models are then tested against data and against each other the findings pave the way for an appraisal of the empirical status of the perfectly competitive model relative to the data and relative to the other neoclassical models

the economic consequences of federal deficits an examination of the net wealth and instability issues there is currently disagreement over the economic consequences of federal deficits some economists argue that deficits put upward pressure on real interest rates and thereby crowd out interest sensitive private spending others argue that deficits stemming from lump sum tax cuts do not raise interest rates because the response of individuals will be to increase their saving by the full amount of the resulting deficit to enable future generations to service i e make interest and principal payments on the additional debt without curtailing their consumption in other words individuals view debt and taxes as perfect substitutes because debt financed tax cuts imply higher taxes in the future to service that debt this effectively means that there really is no permanent tax cut so there is no increase in private net wealth current consumption or interest rates stated another way the debt that is issued to finance a tax cut does not add to private net wealth because it implies an offsetting future tax liability but if debt is not viewed as implying future tax increases then debt and taxes are not perfect substitutes and increases in debt resulting from tax cuts will indeed add to private net wealth stimulate consumption and raise interest rates 2

constrained school choice an experimental study 31 pages 18 tables jel classification c72 c78 d78 i20 trabajo publicado como articulo en american economic review 100 4 1860 1874 2010 http dx doi org 10 1257 aer 100 4 1860

efficient resource allocation under multi unit demand abstract we study resource allocation with multi unit demand such as the allocation of courses to students in contrast to the case of single unit demand no stable mechanism not even the student proposing deferred acceptance algorithm achieves desirable properties it is not strategy proof and the resulting allocation is not even weakly efficient under submitted preferences we characterize the priority structure of courses over students under which stability is consistent with strategy proofness or efficiency we show that stability is compatible with strategy proofness or efficiency if and only if the priority structure is essentially homogeneous this result suggests that efficient allocation under multi unit demand is difficult and that the use of stable mechanisms may not deliver desirable outcomes

the differing effects of pre and post 1981 federal budget deficits on tax adjusted real interest rates this paper employs an estimating equation relating tax adjusted real interest rates to deficits and other economic variables to examine the differing effects of pre and post 1981 federal budget deficits on ex ante and ex post real tax adjusted short term interest rates over the period 1961 1 1992 2 the results for the 1961 1 1992 2 period taking into account a shift in the linkage between the ratio of alternative measures of the deficit to potential gdp occurring in 1981 1 indicate that the ratio of both the nipa deficit and the cyclically adjusted deficit to potential gdp have a significant effect on ex ante and ex post real tax adjusted interest rates for the post 1981 period but no significant effect before 1981

matching markets with mixed ownership the case for a real life assignment mechanism we consider a common indivisible good allocation problem whose popular applications include on campus housing kidney exchange and school choice we show that the so called new house 4 nh4 mechanism which has been in use at mit since the 1980s is equivalent to a natural adaptation of the well known gale shapley gs mechanism we run two experiments comparing nh4 with the prominently advocated top trading cycles ttc mechanism and nh4 with gs we find that under nh4 the participation rate is significantly higher than under ttc based on a new ordinal test of efficiency nh4 is more likely to pareto dominate ttc

price changes supply elasticities industry organization and dairy output distribution long run price elasticities of milk supply are decomposed into price elasticities of yield herd size and farm population for northeastern u s dairy farms these elasticities are shown to vary with farm size because of size related differences in capital intensity specialization yield and herd size variability and rates of entry exit into dairy in the short run price responsiveness is shown to decrease with farm size in the long run large farms are shown to be most price responsive results suggest that lower milk prices could make revenue distribution less equal in both the short and long run by altering output and population distributions

the equitable top trading cycles mechanism for school choice the equitable top trading cycles mechanism a particular adaptation of gale s top trading cycles ttc procedure applied to school choice the so called ttc mechanism has attracted much attention both in theory and practice due to its superior efficiency and incentive features we discuss and introduce alternative adaptations of gale s original procedure that can offer improvements over ttc in terms of equity along with various other distributional considerations instead of giving all the trading power to those students with the highest priority for a school we argue for the distribution of the trading rights of all slots of each school this allows them to trade in a thick market where additional constraints can be accommodated by choosing an appropriate pointing rule we propose a particular mechanism of this kind the equitable top trading cycle ettc mechanism which is also pareto efficient and group strategy proof just like ttc and eliminates avoidable justified envy situations ettc generates significantly fewer justified envy situations than ttc both in simulations and the lab

analysis of a small open economy the case of energy prices in canada the analysis suggests that land rental price decrease in the long run as a consequence of higher energy prices energy demand from agriculture decreases if land and energy are substitute inputs the necessary and sufficient conditions for expecting increasing average farm size decreasing agricultural output and number of farms also have been provided the analysis considers a competitive equilibrium environment with specific proviso that land prices adjust in response to higher domestic energy prices simple expressions for calculating long run agricultural responses to higher domestic energy prices were derived and used in estimating such responses for canadian agriculture

competition economies of scale and diversity of firm sizes this paper presents an empirical example in which small firms are able to compete by specializing without monopolistic conduct despite economies of scale the viability of small commercial banks in illinois is established both by casual observation and by a finding of constant returns to scale not correcting for specialization a second specification of the cost function correcting for specialization exhibits economies of scale suggesting that specialization is the means by which small banks survive monopoly conduct is ruled out by a rosse panzar test rejecting the alternative hypothesis that monopoly power has allowed inefficient banks to survive

the theory of the firm in long run equilibrium in a recent series of articles economists have investigated the comparative statics of the neoclassical firm in a competitive environment with the specific proviso that output price adjusts in response to changes in factor prices the older theory of the firm such as is found for example in paul samuelson 1947 is deficient in this regard metaphors such as short run have been used to gloss over the inconsistency of holding output price constant in the face of changing costs through changing factor prices in this paper a simple yet thorough analysis of a firm in a competitive industry i e a firm facing zero entry and adjustment cost conditions is given new results pertaining to restrictions on the behavior of such firms are offered also the length and complexity of established results is substantially reduced

unraveling reduces mobility in a labor market gastroenterology with and without a centralized match the entry level market for american gastroenterologists was organized by a centralized clearinghouse from 1986 to 1996 before and since it has been conducted via a decentralized market in which appointment dates have unraveled to well over a year before the start of employment we find that both before and after the years in which the centralized clearinghouse was used gastroenterologists are less mobile and more likely to be employed at the same hospital in which they were internal medicine residents than when the clearinghouse was in use this suggests that the clearinghouse not only coordinates the timing of appointments but also increases the scope of the market compared to a decentralized market with early appointments

the welfare effects of coordinated assignment evidence from the new york city high school match abstract coordinated single offer school assignment systems are a popular education reform we show that uncoordinated offers in nyc s school assignment mechanism generated mismatches one third of

survey measures of family decision processes for econometric analysis of schooling decisions in this article we consider the collection of novel subjective data on family processes of schooling decisions in particular we review recent progress on survey measurement of expectations information and locus of decision of american families within the context of secondary schooling and we discuss possible future developments by providing concrete examples from recent exploratory efforts we argue that collection of data on adolescents and parents perceptions of the available school options and the application and admission rules their subjective expectations about short and long term consequences of alternative choices and their assessments of the locus of decision making within families could greatly enhance economic modeling and contribute to effective econometric analysis of schooling decisions jel c83 d19 d79 d83 d84 i21 i26 j24

affirmative action through minority reserves an experimental study on school choice abstract minority reserves are an affirmative action policy proposed by hafalir et al 2013 in the context of school choice in a laboratory experiment we find that adding minority reserves to the gs and ttc mechanisms has positive effects on stability but is quite disappointing in terms of efficiency also gs induces higher rates of truth telling by minority students and thus outclasses ttc

input price input quantity relations and the numeraire the fact that a competitive agent faces given input prices does not necessarily mean that these prices can be completely arbitrary especially in the long run an obvious case but not the only one is when there are input output relations among industries but as soon as long run input price interrelatedness is taken seriously the very conception of a downward sloping input demand curve encounters serious difficulties although one can always draw an input price input quantity relation its main qualitative property the sign of its slope is not generally independent of the arbitrary choice of numeraire copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

an empirical investigation into the impact of us federal government budget deficits on the real interest rate yield on intermediate term treasury issues 1972 2012 this study provides new empirical evidence on the impact of the federal budget deficit on the real interest rate yields on intermediate term debt issues of the us treasury represented herein by the ex post real interest rate yields on 3 year treasury notes and 7 year treasury notes two interest rate measures that have received essentially no attention in the economics and finance literature in recent years this study is couched within a loanable funds model that includes two ex post real interest rate yields the monetary base as a per cent of gdp the change in per capita real gdp net financial capital inflows as a per cent of gdp and the budget deficit as a per cent of gdp this study uses annual data for the study period 1972 to 2012 a time period that includes quantitative easing monetary policies by the federal reserve two stage least squares estimations reveal that the federal budget deficit expressed as a per cent of gdp exercised a positive and statistically significant impact on the ex

competitive industry equilibrium under uncertainty and free entry this paper investigates the properties of industry equilibrium under price uncertainty given free entry and exit for any form of risk averse behavior it is shown that an increase in demand uncertainty as measured by a mean preserving spread increases mean output price and reduces output of firms in long run equilibrium

reserve design unintended consequences and the demise of boston s walk zones we show that in the presence of admissions reserves the effect of the precedence order i e the order in which different types of seats are filled is comparable to the effect of adjusting reser

on the comparative statics of a competitive industry with inframarginal firms recently economists have begun to develop a theory of the perfectly competitive firm and industry in long run equilibrium in contrast to the traditional model2 in which all prices are parametric this new theory takes explicit recognition of the fact that output price must adjust to exogenous changes in input prices before the industry can be said to be in long run competitive equilibrium the focus of this analysis has been to derive implications of competitive theory which can be tested using data generated by observing individual firms in

differential importance and comparative statics an application to inventory management abstract in this work we deal with the problem of establishing which parameters impact an inventory policy the most a new sensitivity measure is introduced by relating the differential importance d and the comparative statics cs techniques we discuss the properties of the new indicator and show that it shares the additivity property we provide the expression of for optimization models numerical results are offered for the sensitivity analysis of a recently introduced inventory management model

a cointegrating approach to budget deficits and long term interest rates a cointegrating approach is undertaken in this study to determine if there is a long run equilibrium relationship between budget deficits and long term interest rates for the united states and nine european countries the cointegration approach consists of conducting cointegration tests and then testing several hypothesized values for the deficit and price expectations variables the cointegration results suggest the existence of several significant cointegrating vectors for each of the ten countries which would seem to appeal to the view of budget deficits having a positive impact on long term interest rates the hypothesized values for the deficit and price expectations variables are found to be too strict since the hypotheses are rejected in every case but one

leveling the playing field sincere and sophisticated players in the boston mechanism empirical and experimental evidence suggests different levels of sophistication among families in the boston public school student assignment plan we analyze the preference revelation game induced by the boston mechanism with sincere players who report their true preferences and sophisticated players who play a best response we characterize the set of nash equilibrium outcomes as the set of stable matchings of a modified economy where sincere students lose priority to sophisticated students any sophisticated student weakly prefers her assignment under the pareto dominant nash equilibrium of the boston mechanism to her assignment under the recently adopted student optimal stable mechanism jel d82 i21

the tax rate induced bond substitution hypothesis and the traditional textbook treatment of the relationship between tax free and taxable bond yields abstractthis empirical study posits and tests the tax rate induced bond substitution hypothesis wherein the propensity for bond buyers to substitute tax exempt municipal bonds for taxable bonds

rents producers surplus and the long run industry supply curve the term producer surplus conventionally has been used to refer to the area above the competitive industry supply curve for output and below the equilibrium price for the short run there is general agreement as to the meaning of this area in the short run this area equals the payments to the firm in excess of the firm s total variable costs such payments are often referred to as quasirents for the long run there is no general agreement as to the meaning of this area some claim that this area has no particular meaning except under very special circumstances for example see mishan 7 221 22 225 30 and formby 1 316 323 24 others argue that this area is equal to the rents paid to factors of production for example see shepherd 9 and helmberger and rosine 2 helmberger and rosine 2 were the only ones to present an analytical example to support their position they demonstrated that producer surplus will in fact equal rents if i an aggregate production function is used ii the production function has four inputs is of the cobb douglas variety and exhibits constant returns to scale and iii two of the industry input supply functions are log linear and two are perfectly elastic the current paper brings the analysis down to the level of the individual firm and significantly extends the result of helmberger and rosine 2 it is demonstrated that producer surplus equals rents whenever the individual firm has a u shaped long run average cost curve regardless of i the form of the industry input supply functions and ii the number of inputs throughout the paper the analysis is general that is no specific functional forms are used

broken symmetry symmetry and price uncertainty or short and long run comparative statics of the competitive firm abstract the notion of broken or hidden symmetry is applied to a long run characterization of a competitive firm operating under price uncertainty the main result of the paper is the restoration of a slutsky type symmetry of the input demand functions within an expected utility framework which does not involve any assumption about risk aversion a second conclusion is that economic relations expressed in terms of relative quantities are essential in the long run comparative statics under price uncertainty

is a military really a luxury good an international panel study of ldcs this paper introduces country specific fixed effects into a theoretical and empirical model of military expenditure contrary to the existing literature the model indicates that the share of military expenditure decreases with a country s income

an empirical analysis of federal budget deficits and interest rates directly affecting savings and loans the crisis in the savings and loan sl furthermore over the same period there were some eight years when only one federally insured sl 4 6 7 10 11 13 15 16 17 18 none of the published research has investigated the impact of the budget deficit on interest rate measures directly faced by s ls such as the cost of funds to the s ls the yield on new home mortgages at s ls or the s l mortgage portfolio yield accordingly this study investigates empirically the impact of federal budget deficits upon these interest rate measures that directly affect s ls

on the economics of effluent charges using the theory of the competitive firm in long run industry equilibrium the authors investigate the effectiveness of an effluent charge in controlling an industry s long run level of pollution the success or failure of such a charge turns out to hinge upon the conditions prevailing in the industry s output and input markets if merely one of these markets is less than perfectly elastic and if in addition the corresponding demand or supply schedule has the normal slope the success of the charge is guaranteed otherwise it is not

matching with branch of choice contracts at the united states military academy branch selection is a key decision in a cadet s military career cadets at usma can increase their branch priorities at a fraction of slots by extending their service agreement this real life matching problem lls an important gap in market design literature although priorities fail a key substitutes condition the agent optimal stable mechanism is well dened and in contrast to the current usma mechanism it is fair stable and strategy proof adoption of this mechanism benets cadets and the army this new

what parents want school preferences and school choice we investigate parents preferences for school attributes in a unique data set of survey administrative census and spatial data using a conditional logit incorporating characteristics of households schools and home school distance we show that most families have strong preferences for schools academic performance parents also value schools socio economic composition and distance which may limit the potential of school choice to improve academic standards most of the variation in preferences for school quality across socio economic groups arises from differences in the quality of accessible schools rather than differences in parents preferences although more advantaged parents have stronger preferences for academic performance

government borrowing and tax adjusted real and nominal interest rates the purpose of this paper is to test for the effect of federal government budget deficits on one year tax adjusted nominal and real interest rates in an is lm as model the results suggest that the specification of the dependent variable is a crucial issue in the debate over the linkage between deficits and interest rates the evidence shows a positive and significant effect of various measures of the federal government deficit and debt on the real tax adjusted treasury bill rate in both the levels and the first differenced equations but not on the nominal tax adjusted rate the positive and significant deficit debt coefficients are also confirmed when the first differenced equation is estimated by instrumental variables and when the equation is estimated over various time periods thus there is robust evidence of a positive linkage between federal government borrowing and the tax adjusted real but not nominal interest rates

strategy proofness and stability of the boston mechanism an almost impossibility result abstract public school systems generally use one of the three competing mechanisms the boston mechanism the deferred acceptance mechanism and the top trading cycle mechanism for assigning students to specific schools although the literature generally claims that the boston mechanism is pareto efficient but neither stable nor strategy proof this study delineates a subset of school priority structures for which it fulfills all three criteria we show that the boston mechanism is stable if and only if it is strategy proof if and only if the priority structure is strongly acyclic however we find that the condition of strong acyclicity is nearly impossible to satisfy any priority structure is quasi cyclic whenever there are two schools whose admission quotas are less than the number of students seeking admission

an experimental study on decentralized networked markets abstract we design a laboratory experiment to investigate matching in a decentralized market of deferred acceptance agents are undifferentiated and may have multiple partners their payoff depends on who they match with the experiment is designed in such a way that a stable configuration exists but cannot be eyeballed by the participants due to the computational complexity of the game in spite of this subjects are remarkably good at reaching a stable match even when the payoffs of others are not publicly observed more information does however speed up convergence thanks to self censoring we trace irrational matching choices mostly to two sources the tendency of over think in a setting where strategic thinking is not necessary and the reluctance to accept matching offers from those who have been disloyal in the past

demand analysis using strategic reports an application to a school choice mechanism several school districts use assignment systems that give students an incentive to misrepresent their preferences we find evidence consistent with strategic behavior in cambridge such strategizing can complicate preference analysis this paper develops empirical methods for studying random utility models in a new and large class of school choice mechanisms we show that preferences are non parametrically identified under either sufficient variation in choice environments or a preference shifter we then develop a tractable estimation procedure and apply it to cambridge estimates suggest that while 82 of students are assigned to their stated first choice only 72 are assigned to their true first choice because students avoid ranking competitive schools assuming that students behave optimally the immediate acceptance mechanism is preferred by the average student to the deferred acceptance mechanism by an equivalent of 0 08 miles the estimated difference is smaller if beliefs are biased and reversed if students report truthfully

priorities in school choice the case of the boston mechanism in barcelona abstract the boston mechanism is a school allocation procedure that is widely used around the world and has been criticized for its incentive problems in order to resolve overdemands for a given school most often priority is given to families living in the neighborhood of the school using a very rich data set on school applications for the case of the boston mechanism in barcelona we exploit an unexpected change in the definition of neighborhood this change allows us to identify that a large fraction of families systematically ranks first high priority schools neighborhood schools in this case additional data on school enrollment decisions and census data shows that some seemingly unsophisticated parents are high income families that can rank hard to get schools because they can afford the outside option of a private school in case they do not get in this sheds light on important inequalities beyond parents lack of sophistication found in the literature

produced input use per unit of output abstract when an input price and the output price change to keep a firm in equilibrium useful results follow concerning input use per unit of output silberberg only some of them survive when input supply firms are also kept in equilibrium

mistaken play in the deferred acceptance algorithm implications for positive assortative matching abstract recent literature has documented failures of truthful preference reporting in the strategy proof deferred acceptance algorithm i consider the implications of these strategic mistakes for a common welfare consideration the ability of the mechanism to sort the best students to the best schools i find that these mistakes have the potential to significantly help or significantly hinder sorting through this channel the presence of mistaken play may have widely varying welfare effects i discuss related considerations in the welfare evaluation of mistaken play in the deferred acceptance algorithm and the implications for nudges that correct these mistakes

the effect of federal deficits and debt on the tax adjusted short term real interest rate the stock versus flow effect of the federal debt deficit on a real interest rate is examined in a reduced form equation the evidence shows a positive and significant linkage between the federal debt and an ex post tax adjusted short term real interest rate

recombinant estimation for normal form games with applications to auctions and bargaining abstract when analyzing economic games researchers frequently estimate quantities describing group outcomes such as the expected revenue in an auction for such applications we propose an improved statistical estimation technique called recombinant estimation the technique takes observations of players strategies and recombines them to compute all possible group outcomes that could have resulted from different player combinations in applications to an auction and a bargaining game the improved efficiency of our estimator is equivalent to increasing the sample size between 25 and 200 we discuss how to design experiments in order to utilize recombinant estimation we also discuss practical computational issues and provide software for computing estimates and standard errors

budget deficits short term real interest rates and the specification of expected inflation an empirical investigation the purpose of this paper is to illustrate whether empirical estimates of the effects of budget deficits on short term real interest rates are sensitive to the choice of the expected inflation variable survey data on expected inflation and the rational expectations method described by mishkin 1981 are used to construct two measures of the short term real interest rate results for two previous studies on this deficit interest rate relationship are re estimated using these measures of expected inflation and the interest rate variables additional results reported in this paper further indicate that empirical estimates of the interest rate effects of budget deficits are sensitive to the choice of the expected inflation variable in addition to the choice of the inflation variable a number of other robustness tests are included we are able to conclude that 1 increases in budget deficits do not generally raise short term real interest rates and 2 short term real interest rates are not independent of

theory of the firm in short run industry equilibrium a number of economists have studied the long run input behavior eugene silberberg 1974a lowell bassett and thomas borcherding 1 970a b c c e ferguson and thomas saving and paul meyer 1967 of a competitive industry in which entry or exit continues until industry output price moves to the minimum average cost of the marginal firm in the industry however this analysis requires very strong assumptions which severely restrict diversity between firms silberberg 1974a for example assumes all firms production functions are identical except for a scale factor complementary to these long run investigations i will present a compact but thorough analysis of the short run case in which technology and the number of firms are fixed but industry output price responds to aggregate supply changes of existing firms resulting from changes in factor prices in contrast to the long run analysis no assumptions limiting interfirm diversity nor any other restrictions beyond definition of the usual neoclassical firm are needed furthermore results are obtained for industry factor demand which do not necessarily hold for individual firms when they respond to factor prices jointly with other firms in the industry this contradicts the older methodology associated with paul samuelson 1947 in which factor demand responses are derived for firms acting in isolation from each other and their isolated responses are aggregated to obtain the industry factor response for example traditional theory shows input response obeys the law of demand for isolated firms but this standard result no longer holds when a firm adjusts within a larger industry of firms whose collective output response can affect output price thus the law of demand for industry factor behavior cannot be established by aggregation of isolated firm responses however its validity does nevertheless hold in the short run in which the number of firms in the industry is constant therefore the purpose of this paper is to characterize the short run industry level factor demand implications and to show how these implications relate to the traditional theory of isolated firm behavior in addition it is briefly shown how these short run results also imply that the law of demand is likely to hold even in the long run where entry and exit from the industry can occur even for an industry of quite dissimilar firms given the well established literature of the standard neoclassical firm the main body of the paper will confine presentation to required definitions and the statement plus interpretation of the main results all proofs and derivations are reserved for the appendix