dynamic matching and evolving reputations this paper introduces a general model of matching that includes evolving public bayesian reputations and stochastic production despite productive complementarity assortative matching robustly fails for high discount factors unlike in becker 1973 this failure holds around the highest lowest reputation agents for high skill low skill technologies we find that matches of likes eventually dissolve in another life cycle finding young workers are paid less than their marginal product and old workers more also wages rise with tenure but need not reflect marginal products information rents produce non monotone and discontinuous wage profiles

nonstationarity in job search theory generally structural job search models are taken to be stationary in this paper models are examined in which every exogenous variable can cause nonstationarity for instance because its value is dependent on unemployment duration a general differential equation that describes the evolution of the reservation wage over time is derived as an empirical illustration a nonstationary structural model is estimated that focuses on the consequences of a downward shift in the level of benefits it appears that the elasticity of duration with respect to the level of benefits after the shift is much larger than the elasticity with respect to the level before the shift this paper examines the movement of a job seeking individual s reservation wage over time in a general nonstationary job search model also results concerning comparative dynamics of the reservation wage and the distribution of the duration of unemployment are derived as an empirical illustration a nonstationary structural model is estimated the nonstationarity originates from the decrease in the level of benefits when unemployment duration equals two years from the results some detailed policy recommendations can be deduced as one is able to distinguish the effect of a change in the level of benefits in the first two years of unemployment from the effect of a change in the level after that period recently the use of job search models for the analysis of unemployment duration has become widespread the reduced form approach in empirical studies see e g lancaster 1979 in which only the hazard of the duration distribution is estimated is gradually being replaced by a more structural approach the latter way of modelling is characterized by the explicit use in empirical analysis of the reservation wage equation as stated by the theory e g yoon 1981 lancaster and chesher 1983 lynch 1983 narendranathan and nickell 1985 and van den berg 1988 use the complete theoretical framework of job search theory to make inferences about search behaviour however the structural models used in these studies are stationary this implies that variables like unemployment benefits or the rate of arrival of job offers are assumed to be constant over the spell of unemployment which is often at variance with reality what is more various reduced form empirical studies indicate a significant durationdependence of the re employment probability which is generally interpreted as evidence in favour of the presence of nonstationarity see e g blau and robins 1986 kooreman and ridder 1983 lancaster 1979 and narendranathan nickell and stern 1985 consequently there is a need to model reservation wage movements over time based on a nonstationary theoretical framework

credible spatial preemption it is often argued that incumbent firms may deter entry by preemptive investment in new goods we show that these conclusions are reversed when multiproduct incumbentfirms may exit in response to entry once entrants are in an industry an incumbent will often want to withdraw some goods to prevent competition with the entrant from reducing profits on other goods such a reaction makes entry more attractive to a potential entrant the equilibrium industry structure is less likely to be monopolistic as the goods are better substitutes as exit costs are low and as the competition between producers of the same good is more intense

gift giving and the evolution of cooperation gift giving is a practice common to many societies in an evolutionary model the social custom of giving gifts at the beginning of a relationship can lead to trust and cooperation the evolutionary approach makes predictions about the character of the goods that can be used as gifts for example gift goods may have little use value even at low levels of consumption although the gifts themselves are useless the institution is not

comparative statics in matching markets abstract this paper studies the comparative statics of adding agents to matching markets that generalize the marriage and college admissions markets of d gale and l shapley amer math monthly 69 1962 9 15 it is shown for the wide class of matching markets studied by a roth econometrica 52 1984 47 57 that adding an agent to one side of the market weakens the competitive positions of the other agents on that side and strengthens the competitive positions of the agents on the other side

risk sharing and information revelation mechanism of a one manufacturer and one retailer supply chain facing an integrated competitor this paper develops an information revelation mechanism model of a one manufacturer and one retailer supply chain facing an outside integrated competitor under demand uncertainty we investigate how the manufacturer designs a wholesale price order quantity contract to induce the retailer to report his risk sensitivity information truthfully we try to explore the effects of the outside competitor and the risk sharing rule on the optimal price service level decisions of the retailer and the optimal wholesale prices of the manufacturer we find that the strategic interaction plays an important role in the effect of risk sensitivity on the order quantity for the retailer when the fraction of the risk cost shared by the manufacturer is sufficiently large small the optimal wholesale price for the high risk averse retailer is higher lower than that for the low risk averse retailer

the effect of exit on entry deterrence strategies abstract recent analyses of entry deterrence strategies have required an incumbent s post entry output or pricing strategy to be profit maximizing however most papers have continued to assume that either an incumbent can commit not to exit after entry or that exit is never optimal when there are avoidable fixed costs of operating in any period however exit can be the optimal strategy in this situation entry deterrence strategies operate very differently than when exit is never optimal in fact the possibility of exit can make some previously effective strategies completely ineffective while improving the effectiveness of others

reputation and entry deterrence under short run ownership of a firm abstract this paper discusses the role of the changing ownership of a long run firm facing a sequence of potential entrants to its market when there is uncertainty about the firm s type about its cost of taking an aggressive action that is observed only by the current owner it is shown that there exists an equilibrium in which each generation of owners takes the same aggressive action to deter entry regardless of the type under a natural refinement of equilibrium beliefs the path induced by this pooling equilibrium is shown to be unique the results sharply contrast with the case of long run ownership where for the same discount factor the firm s owner separates his actions depending on the type of the firm so that the high coat firm allows entry every period while the low cost firm plays aggressively every period consequently the value of the high cost firm is shown to be strictly higher under short run ownership than under long run ownership journal of economic literature classification numbers c72 l13

sunk costs entry deterrence and financial constraints this paper studies how sunk costs affect a financially constrained incumbent s ability to deter entry into its market sunk costs make it less attractive to the incumbent to accommodate entry by liquidating assets in place and exiting the market this may render entry by a prospective rival unprofitable and thereby facilitate entry deterrence however sunk costs also make it harder for the incumbent to pledge valuable collateral to outside investors to make up for the poor collateral value the incumbent will have to give stronger liquidation rights to its lenders consequently a larger fraction of the incumbent s assets will be liquidated in the event of a liquidity default this potentially creates room for profitable entry the overall effect of sunk costs on the incumbent s ability to deter entry into its market is thus ambiguous

location choice product proliferation and entry deterrence within a slightly modified version of hotelling s model we reconsider the claim that the threat of entry induces existing firms to produce a larger number of products than they would otherwise we show that entry deterrence although optimal need not be achieved through product proliferation in some cases the incumbent monopolist resorts to an entry deterring strategy based on location choice rather than product proliferation we also show that in some cases the number of products chosen by the incumbent facing the threat of entry is strictly greater than the minimum number required to deter entry

matching to share risk without commitment this paper studies the effect of limited commitment on sorting when two sides of a frictionless market form pairs to share risk on each side agents are identical except for their risk preferences first we provide analytical results when transfers do not condition on the history of shocks more risk averse agents can commit to larger transfers as long as their consumption is less risky than their endowment with sufficiently large idiosyncratic risk and sufficient discounting of the future matching is positive assortative unlike under full commitment second we find positive assortative stable matchings when transfers are history dependent using a numerical algorithm

unemployment insurance and male unemployment duration in canada a model of unemployment duration is estimated with weekly micro data on canadian men entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment the probability of a worker leaving unemployment declines with the duration of unemployment holding unemployment insurance entitlement constant when entitlement is allowed to vary the probability of leaving first falls and then generally rises with unemployment duration these results are robust with respect to allowing for person specific unobserved heterogeneity and alternative specifications of duration dependence

assortative matching with explicit search costs in this paper i analyze a decentralized search and matching economy with transferable utility composed of heterogeneous agents i explore whether becker s assortative matching result generalizes to an economy where agents engage in costly search in an economy with explicit additive search costs complementarities in joint production supermodularity of the joint production function lead to assortative matching this is in contrast to previous literature which had shown that in a search economy with discounting assortative matching may fail even when the joint production function is supermodular

oligopoly limit pricing we expand milgrom and roberts 1982 limit pricing model to allow for multiple incumbents each incumbent is informed as to the level of an industry cost parameter and selects a preentry price while a single entrant observes each incumbent s preentry price we find that incumbents are unable to coordinate deception which results in a separating equilibrium in which preentry prices are not distorted further introducing the refinement of unprejudiced beliefs we show that the no distortion equilibrium is the only refined separating equilibrium plausible pooling equilibria fail to exist or involve downward distortions in preentry prices

limit pricing when incumbents have conflicting interests abstract this paper considers entry into a market with two incumbents where one prefers entry and one dislikes it unlike the entrant incumbents know market demand in separating equilibria incumbents play full information nash equilibrium strategies when beliefs are unprejudiced separating equilibria only exist if entry is relatively unimportant for an incumbent in growing markets this condition will tend to be violated so that only pooling equilibria may exist

capacity and entry issues in online exchanges abstract with the advent of open standards and internet technologies the number of sellers who can participate in online exchanges is greatly increased we model the competition between identical sellers vying for the same business and find that there exists a mixed strategy equilibrium in prices the results help us understand the dynamics between a seller s capacity and his motivation to participate in an auction

entry deterrence and the free rider problem the public good aspect of entry prevention is examined in an industry characterized by an established oligopoly facing a potential entrant although incumbent firms act noncooperatively underinvestment in entry deterrence does not occur and in fact incumbents may find themselves in a pareto dominated arrangement in terms of profits by preventing entry

do firms pay efficiency wages evidence with data at the firm level this study tests the efficiency wage hypothesis by estimating wage and quit equations with data from the employment opportunity pilot project survey of firms an efficiency wage model is derived that predicts effects of turnover costs and unemployment on wages as functions of first and second derivatives from the quit equation the model is tested by examining the relationships between the coefficients in the wage and quit equations the results are generally favorable to efficiency wage theory other important findings are that firm characteristics raising workers productivity tend to raise wages and that a rise in turnover costs reduces quits

risk sharing vs incentives contract design under two sided heterogeneity we study the matching patterns between heterogeneous principals and agents in a principal agent model the resulting equilibrium relationship between risk and incentives could be negative positive or u shaped these results may provide an explanation for the absence of systematic empirical support for the standard risk model d 2005 elsevier b v all rights reserved

cooperation in community interaction without information flows we study cooperative behaviour in communities where the flow of information regarding past conduct is limited or missing players are initially randomly matched with no knowledge of each other s past actions they endogenously decide whether or not to continue the repeated relationship there is incomplete information regarding player types a subset of the population is myopic while the remainder have discount factors that permit cooperation in principle we define social equilibrium in such communities such equilibria are characterized by an initial testing phase followed by cooperation if the test is successful it is precisely the presence of myopic types that permit cooperation by raising barriers to entry into new relationships we examine the implications of increased patience which takes two forms an increase in the number of non myopic types and an increase in the discount factor of non myopic types these two notions turn out to have strikingly different implications for the degree of cooperation that can be sustained

capital as a commitment strategic investment to deter mobility abstract this paper analyzes how an early entrant in a market can exploit its head start by strategic investment the analysis is based on spence s paper investment strategy and growth in a new market bell j econ 10 1979 1 19 we frist study the investment game in the no discounting case which embodies the key features of mobility deterrence we establish the existence of a set of perfect equilibria and suggest that one particular equilibrium is most reasonable this equilibrium also valid with discounting involves the follower firm being forever deterred from investing to its steady state reaction curve in contrast to spence s proposed solution

voluntarily separable repeated prisoner s dilemma ordinary repeated games do not apply to real societies where one can cheat and run away from partners we formulate a model of endogenous relationships which one can unilaterally end and start with a randomly assigned new partner with no information flow focusing on two person two action prisoner s dilemma we show that the endogenous duration of partnerships gives rise to a significantly dierent evolutionary stability structure from the ordinary evolutionary games monomorphic equilibria require initial trust building while a polymorphic equilibrium includes early cooperators than any strategy in monomorphic equilibria and is thus more ecient this

a theory of market structure with sequential entry this article sets out a theory of market structure with sequential entry we characterize the perfect nash equilibrium to the entry game in several propositions first equilibria never involve excess capacity second a sufficient statistic for the entry of any firm is that its profits are positive when computed myopically i e with no further entry third the equilibrium number of firms is the smallest number that can deter entry fourth aggregate output in equilibrium is no smaller than the limit output we calculate some explicit solutions to the model and examine comparative static properties

unemployment duration stigma and re employment earnings a nonstationary model of individual labor market histories where the distribution of wages offers depends on elapsed unemployment duration and where unemployment compensation is claimed for a limited period only is estimated from sample information on completed unemployment duration accepted earnings and accepted job duration and can identify movements in the reservation wages induced by human capital loss from those caused by benefit exhaustion the results indicate that individuals seem to be much more sensitive to benefit exhaustion than human capital loss the estimated structural parameters provide an explanation for the existence of a statistical relationship between continuous unemployment and accepted job durations

oligopoly limit pricing strategic substitutes strategic complements abstract conditions are outlined under which it is a sequential equilibrium for firms to forgo current profit to reduce the likelihood of entry if firms are uncertain about rivals costs the assumptions about out of equilibrium beliefs that sustain such equilibria are more plausible if firms produce strategic substitutes than if firms produce strategic complements

negative assortative matching of risk averse agents with transferable expected utility abstract i give necessary and sufficient conditions for expected utility to be transferable among agents with different state independent risk preferences who share a risk they cannot influence in an assignment game where participants choose partners based on risk aversion the conditions permit a simple proof that matching is negative assortative

noncooperative entry deterrence uncertainty and the free rider problem previous authors who have considered the issue of noncooperative entry deterrence have not found the free rider problem to be a significant factor these authors however have only considered models in which the exact investment needed to deter entry is known with certainty in this paper i add uncertainty to the models investigated by these previous authors and demonstrate that the free rider problem can be significant but is not so in all cases that is for certain types of entry deterring investments the introduction of uncertainty causes the oligopoly to underinvest in entry deterrence however for other types no underinvestment result arises

can low price guarantees deter entry abstract this paper examines the strategic use of low price guarantees lpgs as an entry deterrent the entire space of contemporaneous lpg messages is partitioned according to their ability to deter entry and or increase the incumbent s profits while most price matching and price beating guarantees cannot deter entry into a perfectly contestable market there do exist special classes of price beating guarantees that enable the incumbent to prevent entry interestingly both price matching and price beating can be a part of the incumbent s strategy in subgame perfect equilibria of the game where the firms choose lpgs from 14 classes defined in the paper

too good to fire non assortative matching to play a dynamic game abstract we model stable non assortative labor market matchings we endogenize how transferable utility is a matched firm and worker play an infinite horizon game with one sided moral hazard becker s 1973 result that complementarity yields positively assortative matching fails because increasing match quality harms dynamic incentives a firm cannot credibly threaten to fire a worker who is productive even with low effort thus firms may prefer lower type workers who will exert more effort we offer a new interpretation of efficiency wages committing to a high wage improves effort incentives indirectly by increasing the firm s willingness to walk away we also show that the set of stable outcomes has a lattice structure

marriage and class here we consider a matching model where agents are heterogeneous and utilities nontransferable we utilize this framework to study how equilibrium sorting takes place in marriage markets we impose conditions that guarantee the existence of a steady state equilibrium and then characterize it several examples are developed to illustrate the richness of equilibria the model reveals an interesting sorting externality that can support multiple steady state equilibria even with constant returns to matching excerpt

optimal unemployment insurance with human capital depreciation and duration dependence this paper studies the effect of human capital depreciation and duration dependence on the design of an optimal unemployment insurance ui scheme our results partially confirm those obtained in most previous studies benefits should decrease with unemployment duration the optimal program also generates two main novel features which are not present in stationary models first if human capital depreciates rapidly enough during unemployment ui transfers are bounded below by a minimal assistance level that arises endogenously in the efficient program second we study the optimality of imposing a history contingent wage tax after reemployment our numerical simulations based on the spanish and us economies show that the wage tax should decrease with the length of worker s previous unemployment spell and become a wage subsidy for long term unemployed workers as a by product of our study we develop a systematic approach suitable for studying recursively a wide range of dynamic moral hazard problems and other models with similar characteristics

sequential entry industry structure and welfare in this paper we reexamine the relationship between potential competition industry structure and welfare in a market subject to a sequential entry threat where firms can make quantity commitments and have access to a constant returns technology it is shown that provided entry is not blockaded the incumbent s will either prevent entry or allow all the potential entrants in furthermore actual entry may decrease but social welfare never goes down with more potential entrants nevertheless with a finite number of potential entrants policies which lower the cost of entry need not be beneficial in welfare terms

impact of product pricing and timing of investment decisions on supply chain co opetition abstract in supply chain co opetition firms simultaneously compete and co operate in order to maximize their profits we consider the nature of co opetition between two firms the product supplier invests in the technology to improve quality and the purchasing firm buyer invests in selling effort to develop the market for the product before uncertainty in demand is resolved we consider three different decision making structures and discuss the optimal configuration from each firm s perspective in case 1 the supplier invests in product quality and sets the wholesale price for the product the buyer then exerts selling effort to develop the market and following demand potential realization sets the resale price in case 2 the supplier invests in product quality followed by the buyer s investment in selling effort then after demand potential is observed the supplier sets the wholesale price and the buyer sets the resale price finally in case 3 both firms simultaneously invest in product quality and selling effort respectively subsequently observing the demand potential the supplier sets the wholesale price and the buyer sets the resale price we compare all configuration options from both the perspective of the supplier and the buyer and show that the level of investment by the firms depends on the nature of competition between them and the level of uncertainty in demand our analysis reveals that although configuration 1 results in the highest profits for the integrated channel there is no clear dominating preference on system configuration from the perspective of both parties the incentives of the co opetition partners and the investment levels are mainly governed by the cost structure and the level of uncertainty in demand we examine and discuss the relation between system parameters and the incentives in desiging the supply contract structure

dynamic entry deterrence in the uk pathology services market this paper describes work on a dynamic model of entry deterrence applied to the uk national health service nhs market for pathology services the model based on a game theoretical framework is concerned with decision support applications presented in this paper is a case study analysis of a geographical region in which a provider of pathology services is concerned at the prospect of being exposed to competition from a new entrant the incumbent provider may undertake strategic investments to create a stock of knowledge and goodwill with the intention of dissuading others from entering the market the effect of a new entrant is modelled as perturbation of a pre existing stable nash cournot equilibrium in an oligopolistic market and is influenced by market forces subject to government regulation the original contribution of this study is to identify the nature of these potential strategic investments and their interaction with cash flows recent historical data and managerial analysis are used to characterise market growth an estimate of the incumbent provider s market share which is at risk can be found by examining the local geographical distribution of providers and purchasers of pathology services on the basis of this analysis we propose a method for obtaining the strategic investment profile which minimises the total investment required to deter entry

weak entrants are welcome abstract this paper investigates the decision problem of an incumbent firm confronted by both a weak and strong entrant in a differentiated market suppose that the incumbent can deter entry of the weak firm but cannot deter entry of the strong firm by itself then the incumbent may allow entry of the weak firm and use it to alter the strong firm s entry decision the present paper formalizes this idea and it sheds new light on the fact that domestic firms are sometimes able to block strong foreign firms after trade liberalization the idea also explains why a dominant firm lets fringe firms be in the market

flexible supply contracts under price uncertainty abstract this article develops supply contracts covering environments with changing prices we investigate characterization properties of the price processes while considering costs and discount factors we determine expressions of the contract s expected low price and its second moment for a given horizon we then employ these expected price and second moment values to identify an expected optimum time before the contract expires at which the lowest price occurs simulation experiments verify our analysis and they illustrate how the optimum purchase time decreases as the drift term increases

cross market network effect with asymmetric customer loyalty implications for competitive advantage a cross market network effect exists in many industries e g newspaper publishing media software in which a seller sells both a primary and a secondary product e g a newspaper publisher sells newspapers to readers and advertising space to advertisers and the value of the secondary product depends on the size of the user base of the primary product this paper examines the competitive implications of asymmetric customer loyalty in such markets in traditional markets an advantage in customer loyalty generates a profit advantage we show here however that in the presence of a cross market network effect a midlevel of loyalty advantage in the primary product market can lead to an overall profit disadvantage this surprising result is derived from the interdependence of the two markets whereby a profit in one market may be gained at the cost of the other and by the positive relationship between a larger loyalty segment and a higher opportunity cost of price competition in the product of the primary market extending our model to a two period entry game also shows that under certain conditions the entrant with disadvantage in customer loyalty can outperform the incumbent in profit and market share this result suggests that asymmetry in customer loyalty can be a source of first mover advantage or disadvantage

heterogeneous or homogeneous quantity competition abstract every homogeneous goods cournot model is payoff equivalent to a heterogeneous goods model we characterize when the converse is true for linearly separable and multiplicatively separable models these results have implications that blur the distinction between process and product innovations

a bargaining model for a first time interaction under asymmetric beliefs of supply reliability we consider the case of a first time interaction between a buyer and a supplier who is unreliable in delivery the supplier declares her estimate of the ability to meet the order obligations but the buyer may have a different estimate which may be higher or lower than the suppliers estimate we derive the nash bargaining solution and discuss the role of using a down payment or nondelivery penalty in the contract for the case of buyer overtrust the down payment contract maximizes channel profits when the suppliers estimate is public information if the suppliers estimate is private information a nonsymmetric contract is shown to be efficient and incentive compatible for the case of buyer undertrust the contract structure is quite different as both players choose not to include down payments in the contract when delivery estimates are public information a nondelivery penalty contract is able to maximize channel profits if the buyer uses the suppliers estimate in making the ordering decision if estimates are private information channel profits are maximized only if the true estimates of both players are not far part we also discuss the effect of different risk profiles on the nature of the bargaining solution in three extensions of the model we consider the following variants of the basic problem first we analyze the effect of early versus late negotiation on the bargaining solution then we study the case of endogenous supply reliability and finally for the case of repeated interactions we discuss the impact of updating delivery estimates on the order quantity and negotiated prices of future orders

the inverse newsvendor problem choosing an optimal demand portfolio for capacitated resources the classical newsvendor problem is one of optimally choosing a level of capacity to respond to a known demand distribution the inverse newsvendor problem is one of optimally choosing a demand distribution with fixed capacity the applications of the inverse problem include industrial settings where demand management is relatively less costly than capacity adjustments demand distributions are chosen from an opportunity set which reflects the set of market opportunities for the firm we analyze the firm s profit as a function of these demand alternatives provide solution methods and insights and identify inefficient and dominated distributions we provide results when the opportunity set is known or only partially known we extend the results to cases in which there are multiple prioritized customer classes that share the firm s productive capacity this paper was motivated by an industrial application in a firm selling a semicommodity product into three prioritized industrial sectors we review the application of our methods to this setting

pricing strategy quality signaling and entry deterrence abstract i investigate a pricing strategy that is aimed at deterring entry by applying a two period model of a durable goods monopolist there exists an incumbent that is of two types that is high and low quality types they differ in terms of their r d capabilities and the incumbent s type is assumed to be unknown to an entrant if the entrant decided to enter the market nash bertrand price competition ensues between the incumbent and the entrant i show that not only limit pricing but also prestige pricing signals the incumbent s quality type which serves to discourage entry in the prestige pricing the high quality type sells the products at an intentionally higher price i also show that although limit pricing is more desirable than prestige pricing from a social welfare viewpoint the incumbent can still choose prestige pricing

strategic deterrence of sequential entry into an industry industrial entry deterrence is typically studied in a setting where an established firm or firms confront and attempt to deter a single potential competitor during the evolution of most industries however a sequence of firms enters or attempts to enter at distinct points in time consideration of issues arising from sequential entry fundamentally alters the qualitative nature of the deterrence decision undertaken by incumbent firms within a sequential setting counterintuitive behavior may be observed specifically numerous government policies designed to decrease industrial concentration penalties for anticompetitive practices subsidization of entry consent decrees restructuring industries may have the opposite effect

informative advertising and entry deterrence a bertrand model abstract this paper shows that strategic entry deterrence via informative advertising is impossible in a game of sequential advertising followed by simultaneous price setting in a homogenous product market it contrasts schmalensee s journal of political economy 91 1983 636 653 result that when the strategic variables at the post advertising stage are quantities not prices optimal entry deterrence is possible and involves underinvestment in advertising

the strategy structure of two sided matching markets we study two sided markets in which agents are buyers and sellers or firms and workers or men and women the agents are to form partnerships which provide them with satisfaction and at the same time make monetary transfers e g salaries or dowries the core of this market game is shown to have a particularly nice structure so that precise answers can be given to questions concerning comparative statics and manipulability the idea of using walrasian equilibrium as a mechanism for making allocations with desirable properties of fairness and efficiency has been studied extensively the scheme involves having agents specify their supply and demand functions the competitive equilibria are then calculated and allocations are made accordingly in general this procedure may run into two difficulties first nonuniqueness if there are several equilibria there may be no fair way to decide which one should be implemented and second manipulability if there is only one equilibrium an informed agent may be able to influence it by suitably falsifying his demand data however as we will show here using the walrasian mechanism does work remarkably well for a certain class of important markets these are the matching markets of our title and they include markets for single items like houses where it is assumed that traders do not wish to acquire more than one item they also include labor markets in which it is desired to match workers with jobs at suitable salaries academic markets in which students are to be assigned to educational institutions marriage markets where men and women are matched through negotiating of dowries it turns out that in these markets both the problems of nonuniqueness and manipulability can be resolved in a

a dynamic generalization of becker s assortative matching result abstract this paper considers a dynamic matching model in which each agent s future productivity depends in part on their current match as in labor markets schooling intergenerational marriage markets and other environments the planner s endogenous rankings of human distributions are characterized these planner rankings are then used to develop sufficient conditions for positive assortative matching to be dynamically efficient one lesson that emerges is that complementarity assumptions alone are insufficient for a robust sorting theory the curvature of the static production function is also critical to determine optimal sorting patterns in addition the planner s ranking of distributions over human capital yield characterizations of individual attitudes toward human capital gambles in an associated market equilibrium finally the implied dynamics for 1 individual wages and 2 wage distributions across age cohorts are characterized

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

strategic wholesale pricing in a supply chain with a potential entrant this paper develops an adverse selection model for a two stage supply chain with one supplier one retailer and a potential outside entrant supplier who makes a partially substitutable product the work is different from most research on entry deterrence that only considers a single stage model our main interest is to investigate how the incumbent supplier can strategically maximize her profit by a wholesale pricing policy when facing the potential entrant we focus on a model where the entrant supplier will sell her product through the same incumbent retailer we derive the optimal decisions for each player and study the comparative statics of the equilibrium to investigate how the supply chain structure may affect the deterrence strategy of the incumbent supplier we also consider three alternative models with different channel structures when both suppliers sell their products directly when the entrant has another independent retailer and when the entrant sells her product directly through the comparison we find that the existence of the common downstream retailer often enhances the deterring motivation of the incumbent supplier

unemployment and subsequent earnings estimating scarring among british men 1984 94 this paper estimates the impact of unemployment on earnings following re employment for a large and representative sample of british men 1984 94 unemployment incidence is found to have only a temporary effect an average earnings setback of 10 on initial re engagement largely eroding over two years the effect of unemployment duration by contrast is permanent a one year spell adding a further penalty of 10 percentage points these wage penalties are least for young men and the low paid those most at risk of unemployment and greatest for prime age and highly paid men

industry structure with sequential technology choice abstract noncooperative entry deterrence arises in a market where firms enter sequentially and irreversibly choose a technology in the case of delegated entry deterrence the earliest firms enter with a normal technology and pass on entry deterrence responsibilities to subsequent entrants in the case of partial entry deterrence the earlliest firms choose an inferior technology that allows some but not full entry of later firms with a normal technology in both cases entry is deterred in that the equilibrium number of firms is smaller than would prevail if all firms were to choose a normal technology

optimal r d investment strategies under the threat of new technology entry abstract this paper studies the r d investment decisions of a firm facing the threat of new technology entry the r d project is subject to technical uncertainty the incumbent can successfully prevent entry by innovating however in an entry deterrence situation the resulting monopoly is different from a monopoly without an entry threat because potential competition means that the monopolist completes the r d project which it otherwise would not have done greater technical uncertainty stimulates initiating exploratory r d and can result in implementation of more expensive research projects this is a result of the limited downside risk of the project it does not matter whether the outcome of an initial r d stage is disappointing or very disappointing since in both cases the firm will simply abandon the project the welfare analysis shows that the threat of entry may reduce welfare in case of entry deterrence

advertising and limit pricing we enrich milgrom and roberts 1982 limit pricing model to allow an incumbent to signal his costs with both price and advertisements our fundamental result is that a cost reducing distortion occurs in that the incumbent behaves as if there were complete information but his costs were lower than they are preentry price is therefore distorted downward and demand enhancing advertising is distorted upward as a consequence of signalling if advertising is a purely dissipative signal it is not used nor therefore distorted recent refinements of the sequential equilibrium concept are featured

occupational choice incentives and wealth distribution abstract we consider a model of occupational choice in large economies where individuals differ in their wealth endowment individuals can remain self employed or engage in productive matches with another individual i e form firms matches are subject to a moral hazard problem with limited liability the division of the gains from such matches is determined by competitive forces when the incentive problem is asymmetric matches are typically wealth heterogeneous with richer individuals choosing the occupation for which incentives are more important the utilities attained within a match depend on the wealth distribution and changes in the latter give rise to trickle down effects