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Another note on deadweight loss
Our defense of these postulates is two-fold. First we compare them with existing alternative theories. Second, we provide an illustrative model which : (a) is consistent with the postulates, (b) implies rate-of-return dominance under suitable legal restrictions, and (c) addresses monetary policy questions with standard welfare economics and, in particular, rationalizes in terms of price discrimination a debt management policy that ?tailors debt issues to the needs of the market.?
Report
Correspondence principles for concave orthogonal games
Silberberg [6] and Pauwels [2] have produced and clarified seminal results in the comparative statics of single-agent classical optimization problems. This paper extends Pauwels? method to derive analogous results for stable Nath equilibria in a subclass of the widely used class of concave orthogonal games defined by Rosen [3]. Application of these results to cost curve shifts in the asymmetric Cournot oligopoly immediately uncovers apparently new comparative statics results.
Report
Chaotic dynamics and bifurcation in a macro model
The qualitative dynamics of a discrete time version of a deterministic, continuous time, nonlinear macro model formulated by Haavelmo are fully characterized. Recently developed methods of symbolic dynamics and ergodic theory are shown to provide a simple, effective means of analyzing the behavior of the resulting one-parameter family of first-order, deterministic, nonlinear difference equations. A complex periodic and random ?aperiodic? orbit structure dependent on a key structural parameter is present, which contrasts with the total absence of such complexity in Haavelmo?s continuous time ...
Report
Time consistency of optimal plans: an elementary primer
Time consistent optimal plans are defined within the context of a simple, discrete time optimal control framework. Three possible sources of inconsistency are identified and discussed with reference to the literature.
Report
Duality and arbitrage with transactions costs: theory and applications
Recent advances in duality theory have made it easier to discover relationships between asset prices and the portfolio choices based on them. But this approach to arbitrage-free securities markets has yet to be extended and applied to economies with transactions costs. This paper does so, within the context of a general state-preference model of securities markets. Several applications are developed to illustrate the nature of the theory and its potential to resolve a host of issues surrounding the effects of transactions costs on securities markets.
Working Paper
The simple analytics of observed discrimination in credit markets
Controversial econometric studies of mortgage data show that mortgage loan applications by minorities are denied more frequently than are applications by whites with similar observable default risk factors. But recent evidence indicates that minority borrowers also default more frequently than whites with similar observable risk. This paper presents a simple equilibrium model of discriminatory credit rationing and finds parametric restrictions consistent with both these empirical findings. But in this model, proposed anti-discrimination policies have surprising side effects. Thus, policy ...