marriage market divorce legislation and household labor supply this paper provides a theoretical framework for analyzing the impact of the marriage market and divorce legislation on household labor supply in our approach the sex ratio in the marriage market and the rules governing divorce are examples of distribution factors these factors are defined as variables that affect the household members bargaining position but not preferences or the joint budget set we extend the collective labor supply model developed by chiappori to allow for distribution factors we show that our model imposes new restrictions on the labor supply functions and eases the identification of individual preferences and the intrahousehold decision process the model is estimated using psid data for the year 1988 our results do not reject the restrictions imposed by the model also the sex ratio and divorce laws deemed favorable to women are found to affect labor supply behavior and the decision process in the directions predicted by the theory and to have sizable effects

bilateral bargaining with externalities this paper provides an analysis of a non cooperative pairwise bargaining game between agents in a network we establish that there exists an equilibrium that generates a coalitional bargaining division of the reduced surplus that arises as a result of externalities between agents that is we provide a non cooperative justification for a cooperative division of a non cooperative surplus the resulting division is related to the myerson shapley value with properties that are particularly useful and tractable in applications we demonstrate this by examining buyer seller networks and vertical foreclosure

the role of firm size in bilateral bargaining a study of the cable television industry we examine the effect of buyer merger on bilateral negotiations between a supplier and n buyers merger may have bargaining effects in addition to the usual efficiency effects the effect of merger on the buyers bargaining position depends on the curvature of the supplier s gross surplus function merger enhances worsens the buyers bargaining position if the function is concave convex based on a panel of advertising revenue in the cable television industry our estimates indicate that the gross surplus function for suppliers of program services is convex this result suggests that cable operators integrate horizontally to realize efficiency gains rather than to enhance their bargaining position vis a vis program suppliers

dynamic efficiency in overlapping generations models with stochastic production abstract we consider an overlapping generations economy as in diamond amer econ rev 55 1965 1126 1150 with stochastic production we define two types of efficiency for feasible production consumption allocations using first and second degree stochastic dominance we obtain a complete characterization of inefficiency of type i in this model for each given sequence of strictly concave utility functions for all generations the existence of a competitive equilibrium is proved it is shown that each competitive allocation is short run efficient of type ii

characterizing efficiency in stochastic overlapping generations models abstract we introduce uncertainty about production in diamond s olg model we compare any two feasible consumption production allocations using stochastic ordering and define two types of efficient allocations given initial capital stock for stationary allocations it is shown that a necessary and sufficient condition for efficiency type i is that e log r is greater or equal to log 1 n where r generates the stationary interest factors corresponding to this allocation n is the population growth rate a complete characterization of type ii efficient allocations is derived using the property of cyclical monotonicity between each generation s consumption allocation and the relevant interest rates

decentralized trading strategic behaviour and the walrasian outcome for a market with a finite number of agents pairwise matching and bargaining it is shown that even when the market is frictionless the equilibrium is not necessarily competitive it depends on the amount of information agents use if their behaviour is conditioned only on the sets of agents present and the time the competitive solution is the unique subgame perfect equilibrium if agents have full information and condition their behaviour on some of it there are also noncompetitive equilibria in which behaviour depends on specific information such as the identity of the trading partner and past events

how do sex ratios affect marriage and labor markets evidence from america s second generation sex ratios i e relative numbers of men and women can affect marriage prospects labor force participation and other social and economic variables but the observed association between sex ratios and social and economic conditions may be confounded by omitted variables and reverse causality this paper uses variation in immigrant flows as a natural experiment to study the effect of sex ratios on the children and grandchildren of immigrants the flow of immigrants affected the second generation marriage market because second generation marriages were mostly endogamous i e to members of the same ethnic group the empirical results suggest that high sex ratios had a large positive effect on the likelihood of female marriage and a large negative effect on female labor force participation perhaps surprisingly the marriage rates of second generation men appear to be a slightly increasing function of immigrant sex ratios higher sex ratios also appear to have raised male earnings and the incomes of parents with young children the empirical results are broadly consistent with theories where higher sex ratios increase female bargaining power in the marriage market

testing for imperfect competition at the fulton fish market in this article i report the results of a study of the prices paid by individual buyers at the fulton fish market in new york city in principle this is a highly competitive market in which there should be no predictable price differences across customers who are equally costly to service the results indicate that different buyers pay different prices for fish of identical quality for example asian buyers pay 7 less for whiting than do white buyers a result which is inconsistent with the model of perfect competition

money and market incompleteness in overlapping generations models abstract this paper investigates the extent to which the character of equilibria in stochastic overlapping generations models stems from the model s generic market incompleteness in addition it addreses the question of whether money serves to complete markets in these models we show that money does not complete markets in the sense of expanding the set of state contingent commodities that an individual may trade the introduction of money effects state contingent transfers of wealth between individuals this is a generalization of a result obtained by marshall sonstelie and gilles 1987 numerical simulation of the model suggests that the risk sharing induced in the monetary economy leads to substantial increases in welfare levels relative to the nonmonetary economy

stationary pareto optimality of stochastic asset equilibria with overlapping generations abstract a way of establishing the stationary pareto optimality of asset equilibria in stochastic settings with age diversity among the agents is suggested difficulties in obtaining such results arise because agents behavior is affected by random future state variables while pareto optimality defined in terms of expected lifetime utility of representative agents conditioned on their first period state involves redistributions of consumption among agents with different histories of realized states frobenius theorem is used to establish the existence of weights for which the so weighted sum of representative agents conditional expected utilities is maximized at the asset equilibrium allocation

quantifying the risk sharing welfare gains of social security the welfare effects of intergenerational risk sharing through a pay as you go social security system that is efficiently indexed to wages or interest rates are quantified comparing steady states there are large welfare gains of being born into an economy with efficient risk sharing as compared to the current u s system efficient policy involves an increasingly risky net of tax income over the life cycle when adjustment to steady state is taken into account the welfare gains largely turn negative the results are also compared and contrasted to the first best allocation

stochastic olg models market structure and optimality for a general class of pure exchange olg economies under uncertainty we provide a complete characterization of the efficency properties of competitive equilibria when markets are only sequentially complete and the criterion of efficency is conditional pareto optimality we also consider a particular case in which markets fail to be even sequentially complete and provide a characterization when the criterion of efficency is weakened to ex post pareto optimality

bargaining in a network of buyers and sellers abstract we analyze bargaining between buyers and sellers who are connected by an exogenously given network players can make repeated alternating public offers that may be accepted by any of the responders linked to each specific proposer our purpose is to find the conditions of the network which drive the price distribution in equilibrium this paper uses graph theory tools to provide necessary and sufficient conditions regarding the architecture of networks for the subgame perfect equilibrium of the bargaining game to coincide with the walrasian outcome

stable trading structures in bilateral oligopolies abstract this paper analyzes the formation of trading groups in a bilateral market where agents trade according to a shapley shubik j polit econ 85 1977 937 968 trading mechanism the only strongly stable trading structure is the grand coalition where all agents trade on the same market other weakly stable trading structures exist and are characterized by an ordering property trading groups can be ranked by size and cannot contain very different numbers of traders of the two types journal of economic literatureclassification numbers d43 d51

stationary monetary equilibria in overlapping generations models with incomplete markets abstract the objective of this paper is to study the stationary monetary equilibria of a stochastic overlapping generations model with a general incomplete asset structure it is proved that a stationary equilibrium with a nonzero price of money generically exists and is locally isolated when there is outside money for an open set of economies there is an equilibrium with positive money prices in all states the equilibrium is also given a neat characterisation in terms of the properties of the underlying state prices with only inside money there will instead be a continuum of equilibria journal of economic literature classification numbers d52 d90 e40

intergenerational risk sharing abstract in this paper we examine government debt and tax transfer policies that can be improve the allocation of risk between generations markets cannot allocate risk efficiently between two generations whenever the two generations are not both alive prior to the occurence of a stochastic event this implies that government policies transferring risk between generations have the potential to create first order welfare improvements our model provides a non keynesian justification for the debt finance of wars and recessions as well as an added rationale for social security type tax transfer schemes which aid unlucky generations e g the depression generation at the expense of luckier generations

a theory of buyer seller networks this paper introduces a new model of exchange networks rather than markets of buyers and sellers it begins with the empirically motivated premise that a buyer and seller must have a relationship a link to exchange goods networks buyers sellers and the pattern of links connecting them are common exchange environments this paper develops a methodology to study network structures and explains why agents may form networks in a model that captures characteristics of a variety of industries the paper shows that buyers and sellers acting strategically in their own self interests can form the network structures that maximize overall welfare

worker substitutability and patterns of unionisation a strategic three party bargaining model is developed in which one distinguished party the firm has to reac h agreements with the other two each of which is a group of workers in the prebargaining stage the two worker groups decide whether to organize jointly or separately the main observation relates the equi librium pattern of unionization to the substitutability in production between the two groups the outcome is joint or separate unions acco rding to whether the two groups are substitute or complementary facto rs of production the analysis also considers possibilities for firm s strategic intervention in the unionization process copyright 1988 by royal economic society

bubbles and inefficiencies abstract we study speculative behavior in a stochastic overlapping generations model and we show how the link between the existence of bubbles and dynamic inefficiency which has been established for the deterministic case is broken when risk related factors such as risk premia and capital gains are explicitly taken into account

endogenous market incompleteness without market frictions dynamic suboptimality of competitive equilibrium in multiperiod overlapping generations economies abstract in this paper we show that within the set of stochastic three period lived olg economies with productive assets such as land markets are necessarily sequentially incomplete and agents in the model do not share risk optimally we start by characterizing perfect risk sharing and find that it requires state dependent consumption claims which depend only on the exogenous shock realizations we show then that the recursive competitive equilibrium of any overlapping generations economy with weakly more than three generations is not strongly stationary this then allows us to show directly that there are short run pareto improvements possible in terms of risk sharing and hence that the recursive competitive equilibrium is not pareto optimal we then show that a financial reform which eliminates the equity asset and replaces it with zero net supply insurance contracts arrow securities will implement to pareto optimal stochastic steady state known to exist in the model finally we also show via numerical simulations that a system of government taxes and transfers can lead to a pareto improvement over the competitive equilibrium in the model

fiat money in a pairwise trading multi good overlapping generations model abstract this paper studies a stationary pure exchange overlapping generations model with a particular kind of randomly generated pairwise trading pattern this model in contrast to the usual overlapping generations models has the following implications as regards existence it is shown that a standard boundary condition on preferences is sufficient to imply the existence of a stationary monetary equilbrium as regards properties of the equilibrium for some specifications my model has a stationary equilibrium in which claims bear a higher rate of return than fiat money it is also proved that this stationary equilibrium is conditionally pareto optimal

information acquisition in an incomplete information model of business cycle abstract this paper studies the consequences of allowing information acquisition in a version of lucas barro incomplete information model of business cycle we apply the information equilibrium concept to show that an agent s information acquisition is not invariant to fluctuations of price level and that it has a significant effect on the size of output inflation tradeoff using the optimality criteria developed by muench we find that a change in mean money growth rate does not have any real consequences and that a constant money growth rule is superior to any monetary policy that induces all the agents to be fully informed

understanding young women s marriage decisions the role of labor and marriage market conditions using the 1970 1980 1990 censuses the authors investigate the impact of labor and marriage market conditions on the incidence of marriage of young women age 16 24 they first estimate the effects on marriage of personal characteristics and metropolitan statistical area msa indicators separately by race and education group they then regress the first stage msa effects on msa level labor and marriage market conditions and welfare benefits taking account of fixed effects and time trends specific to each msa better female labor markets worse female marriage markets worse male labor markets are found to lower marriage rates fr whites in all education groups results for these variables for blacks are sensitive to estimation technique although stronger results are obtained for an older age group 25 34 while welfare benefits have a negative effect in cross sectional analyses the association becomes considerably weaker in fixed effects specifications

the social discount rate what discount rate should be applied to social investments it is standard to use the market interest rate thereby respecting private preferences we show that application of this revealed preference criterion rests on faith not on logic it is justified only if preferences over all choices including past choices are time invariant the conditions for this to be true are stringent under more reasonable conditions policy makers should be more patient than private citizens whose choices define the most short sighted pareto optimum

upstream horizontal mergers vertical contracts and bargaining abstract we study horizontal mergers in the upstream sectors of vertically related industries when bargaining is present and contract types are endogenous we demonstrate that the contract types used can have significant implications for the equilibrium market structure and vice versa when trading takes place through two part tariff contracts merger incentives are absent however when the downstream firms are powerful merger incentives are restored since the merger leads then either to the exclusive or to the partial use of wholesale price contracts finally we show that whenever a merger occurs it is welfare detrimental

bilateral oligopoly the efficiency of intermediate goods markets abstract we show that intermediate goods markets may be efficient despite the presence of commonly accepted signs of market failure such as high concentration both among sellers and buyers sparse trading networks price dispersion and externalities the results are derived in an extensive form model of bilateral bargaining with multiple buyers and multiple sellers and with externalities between the negotiations we also characterize the structure of the endogenous trading network i e how firms choose trading partners prices are dispersed and depend on both the concentration of capital and the concentration of sales consistent with some stylized facts on buyer power

the effect of prison population size on crime rates evidence from prison overcrowding litigation simultaneity between prisoner populations and crime rates makes it difficult to isolate the causal effect of changes in prison populations on crime to break that simultaneity this paper uses prison overcrowding litigation in a state as an instrument for changes in the prison population the resulting elasticities are two to three times greater than those of previous studies a one prisoner reduction is associated with an increase of fifteen index i crimes per year while calculations of the costs of crime are inherently uncertain it appears that the social benefits associated with crime reduction equal or exceed the social costs of incarceration for the marginal prisoner

bilateral monopolies and incentives for merger the paper presents a model of duopoly in which firms acquire inputs through bilateral monopoly relations with suppliers it combines a bargaining model with a duopoly model to examine how input pri

dominant root characterization of pareto optimality and the existence of optimal equilibria in stochastic overlapping generations models abstract we characterize pareto optimality of interior stationary allocations in single good overlapping generations models with stochastic aggregate shocks and heterogeneous but recurring generations an interior stationary allocation is pareto optimal if and only if it is an equilibrium allocation and the associated contingent claims price matrix has a dominant root less than or equal to unity we then use this characterization to show that there always exists an optimal equilibrium with or without valued fiat money

the distribution of wealth and welfare in the presence of incomplete annuity markets this paper examines the implications of the absence of complete annuity markets on the distribution of wealth and welfare of agents whose saving decisions are obtained under uncertainty regarding the length of their life the absence of annuities is shown to yield a unique nondegenerate intragenerational distribution of wealth which is fully characterized this characterization is then used to evaluate the pareto desirability of an annuity system alternative welfare criteria that can be used when the proposed change has differential impacts on the initial state of subsequent generations are considered

efficiency in economic growth models under uncertainty abstract we consider an infinite horizon economy with stochastic production and consumption we define efficiency of feasible production consumption programs without referring to a particular utility function using stochastic ordering a complete characterization of inefficiency of type i is obtained equivalence between type ii efficiency and a certain optimality notion when decision makers are risk averse is proved when the number of states of nature is finite at each date

labor contracts and the role of monetary policy in an overlapping generations model abstract this paper characterizes labor contracts in a dynamic economy subject to both real and nominal shocks in this environment we compare alternative means of trading labor services spot markets fixed nominal wage contracts and price contingent contracts the welfare ordering of these market structures is shown to depend on the relative variability of the real and nominal shocks and the costs of contingent contracts the paper also investigates the role of monetary policy and the neutrality of feedback rules finally we demonstrate that the optimal policy is nonstochastic

stochastic inflation and government provision of indexed bonds abstract this paper examines the consequences of using indexed bonds as one of the government financing instruments along with money and taxes it is shown that open market operations between money and indexed bonds do not matter in a real sense despite their different risk characteristics increasing the share of indexed bonds in the government portfolio increases the volatility and the conditional mean of real rates of return on money when provided by means other than open market operations indexed bonds can affect the allocation of resources but these reallocations cannot be pareto improving

on the interaction between risk sharing and capital accumulation in a stochastic olg model with production abstract we analyze the interaction between risk sharing and capital accumulation in a stochastic olg model with production we give a complete characterization of interim pareto optimal competitive equilibrium allocations furthermore we provide tests of pareto optimality suboptimality based on risky rates of return only

uncertain lifetimes and the welfare enhancing properties of annuity markets and social security this paper explores the implications of social security programs and annuity markets through which agents who are characterized by different distributions of length of lifetime share deathrelated risks when annuity markets operate a non discriminatory social security program affects only the intragenerational allocation of resources in the absence of private information regarding individual survival probabilities such a program will lead to a non optimal intragenerational allocation of resources however the presence of adverse selection considerations gives rise to a pareto improving role for a mandatory non discriminatory social security program

countervailing power and consumer prices this paper considers the importance of countervailing power manifested as the effects of increased retail concentration on consumer prices and welfare within a market setting where imperfectly competitive retailers negotiate intermediate prices with a monopoly supplier only when retailer services are regarded as very close substitutes do final prices fall following a reduction in the number of retailers even in these circumstances the social benefits of countervailing power may not be realised as the supplier may seek to protect its profits by using a refusal to supply restraint to engage in exclusive trading

buyer power and mutual dependency in a model of negotiations we study bilateral bargaining between several buyers and sellers in a framework that allows both sides in case of a bilateral disagreement flexibility to adjust trade with each of their other trading partners and receive the gross benefit generated by each adjustment a larger buyer pays a higher per unit price when buyers bargaining power in bilateral negotiations is sufficiently low and a lower price otherwise an analogous result holds for sellers these predictions and the implications of different technologies are explained by the fact that size is a source of mutual dependency and not an unequivocal source of power

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

multiunit bargaining in oligopolistic industries a model of wage determination in unionized oligopolistic industries is developed and used to compare the outcome of collective bargaining under two different bargaining structures one in which the workers of each firm are represented by separate and independent unions local bargaining and one in which a national union represents all workers in the industry in both cases the bargaining problem has a unique outcome with industrywide bargaining resulting in higher wages in addition industrywide unions are inherently stable in that there are no incentives for independent unions to attempt to cheat on the collusive agreement

male incarceration the marriage market and female outcomes abstract this paper studies how rising male incarceration has affected women through its effect on the marriage market variation in marriage market shocks arising from incarceration is isolated using two facts the tendency of people to marry within marriage markets defined by the interaction of race location and age and the fact that increases in incarceration have been very different across these three characteristics using a variety of estimation strategies including difference and fixed effects models and tsls models in which we use policy parameters to instrument for within marriage market changes in incarceration we find evidence that is on the whole consistent with the implications of the standard marriage market model in particular higher male imprisonment appears to have lowered the likelihood that women marry modestly reduced the quality of their spouses when they do marry and shifted the gains from marriage away from women and toward men the evidence suggests that women in affected

intergenerational risk sharing and fiscal policy abstract risk sharing implications of alternative fiscal policies are compared in a stochastic production economy with overlapping generations ex ante efficiency is shown to be achievable with optimal transfers regardless of distributional concerns for crra preferences stylized real world policies notably safe debt and safe pensions are found inefficient in the direction of imposing not enough productivity risk on retirees and too much on future generations safe transfers can be rationalized as efficient if preferences display age increasing risk aversion such as habit formation the ubiquity of safe transfers suggests that governments treat the young as more risk tolerant than older cohorts

conditional pareto optimality of stationary equilibrium in a stochastic overlapping generations model abstract in this paper i describe and analyze a pure exchange overlapping generations model in which endowments and the dividends of an asset in fixed supply are exogeneous and random they follow a finite state markov process it is shown that no stationary allocation is pareto superior to any stationary equilibrium allocation where pareto superiority is defined in terms of the conditional expected utilities agents maximize in the competitive setting the main contribution of the paper is the optimality proof

incarceration and racial inequality in men s employment to estimate employment population ratios for black and white men with an adjustment for incarceration a factor overlooked by most research on employment inequality the authors combine data from sur

optimal monetary policy with missing markets in real business cycle models with spot markets agents respond optimally to fluctuations by varying their labor supply while this is individually optimal the employment volatility that results is efficient the inefficiency is due to the lack of forward markets for labor and the consequent inability of the young to insure against future shocks a real business cycle model is constructed in which an active monetary policy accommodating past price shocks to prevent the expectation of price reversion pareto dominates a stable moeny stock by stabilizing employment over the cycle stable employment approximates the outcome with complete insurance markets the young would like to sell a fixed volume of labor forward allowing less risk averse agents to bear the volatility in the spot labor market these results undermine the use of the full information competitive equilibrium as a benchmark for policy analysis in spot market models copyright 1989 by the london school of economics and political science

longitudinal analyses of the effects of trade unions but union members are different from nonmembers in unobserved ways biasing your estimates y ou should make a selectivity bias correction simultaneously determine union status and economic outcomes develop an unobservables model use longitudinal data archetypical comment on virtually any study of the economic effects of umomsm or suitably modified on any other empirical subject

private saving and public debt a review essay private saving and public debt edited by m j boskin and s gorini basil blackwell oxford u k 1987 and based on the proceedings of a conference held in italy in 1985 is a well documented policy oriented guide to the analysis of recent fiscal developments several strands of research are represented in the volume some contributions provide a description of empirical and institutional facts while others analyze the theoretical foundations of different aspects of the public debt problem its impact on financial markets its connection with private saving behavior its international repercussions its effects on inflation and tax policy a unifying theme in the debate is an attempt to shift the focus of the analysis away from the keynesian emphasis on short run finetuning and towards a long run growth oriented perspective the most important issues addressed in the volume are the sustainability of public debt and the effects of government deficits on private saving

informational diversity over time and the optimality of monetary equilibria abstract the temporal realizations of a random state variable in an overlapping generations model create an informational diversity between members of different generations and require a reexamination of the optimality that competitive equilibria might display in such an environment using an optimality criterion that reflects this informational diversity we prove the optimality of competitive equilibrium in a model with a fixed stock of fiat money a single spot market and good endowments that follow a markov process the need for an optimality criterion that incorporates informational diversity is further motivated by studying the same model with the operation of complete contingent commodities markets

the effect of male wage inequality on female age at first marriage a model in which women search for husbands characterized by their wages predicts increasing within group male wage inequality raises the expected value of continued marital search and so lowers female marriage propensities using 1970 1980 and 1990 census data i test this hypothesis within geographically racially and educationally defined marriage markets the estimates suggest rising male wage inequality accounted for 7 to 18 of the decline in the propensity to marry between 1970 and 1990 for white women and more educated black women growing wage inequality appears to have had little effect on the marriage behavior of less educated black women

rational expectations in the overlapping generations model abstract this paper reports results on the character of the rational expectations equilibria of a stochastic overlapping generations model with heterogenous markets the model considered is a stationary overlapping generations model in which the endowments of young agents are subject to i i d random shocks the main result shown is that if there are l 1 commodities traded in every period then for most preferences the rational expectations equilibrium stochastic process of prices and allocations necessarily exhibits serial correlation this is in marked contrast to the one commodity model in which there always exists an equilibrium which is measure isomorphic to the endowment process

long and short term interest rates in a risky world abstract the paper develops and tests a general equilibrium model in which variability or risk affects the choice of portfolios our measures of variability include only the variability of unanticipated growth in monetary and non monetary aggregates and our tests use data ending with the change in federal reserve procedures in october 1979 we find that increased variability of unanticipated money growth raises demands for debt and money and reduces the demand for real capital interest rates on both short and long term debt rise by a risk premium we estimate the size of the risk premium before and after the october 1979 change and we show that the change in federal reserve procedures moved the economy to a less efficient point

existence and optimality of currency equilibrium in stochastic overlapping generations models the pure endowment case abstract we consider a pure exchange stochastic overlapping generations economy sufficient conditions for the existence of a monetary equilibrium and a characterization of optimality are provided it is shown that in a monetary equilibrium currency provides partial insurance and that the equilibrium allocation is optimal it is also shown that if an allocation is optimal the contingent claim prices associated with it are such that in an average sense the present value of the social endowment is bounded