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When an auditor's effort is not observable, auditor liability becomes an important mechanism for motivating the auditor to exert an appropriate level of audit effort. However, although the presence of legal liability helps to preserve the value of an audit to investors, some aspects of the liability system may motivate suboptimal behavior and perhaps, ultimately, detract from investors' welfare. This paper seeks to contribute to the analysis of litigation-related issues by examining the effects of alternative legal cost allocation systems -- the so-called American versus British rules -- on the value of audits. Using a game theoretic model, the paper characterizes investors' and an auditor's equilibrium strategies in pretrial negotiation and the auditor's effort decisions. The paper finds that the American system (where the parties pay their own litigation costs) provides a higher audit value than the British system (where the loser of a case pays the winner's litigation costs), although the auditor's total expected costs are higher in the American system than in the British system. [ABSTRACT FROM AUTHOR]

In this paper, we employ Punctuated Equilibrium Theory to consider institutions' shifting goals, priorities, and constraints, and to explore the nature of change at colleges and universities in the United States. By exploiting annual changes in institutional budget decisions over a 29-year period, we seek to understand the extent to which institutions exhibit patterns of punctuated equilibrium, which are characterized by long periods of relative equilibrium (stasis) and of occasional extreme changes (punctuations). Broadly, we find that institutions of higher education allocate funds in a pattern characteristic of Punctuated Equilibrium, and that certain types of institutions are more likely than others to exhibit this pattern. Taken in whole, this paper calls into question a prevailing perspective on change in higher education — that change is slow-moving, moderate, and incremental. Instead, we posit that a framework of Punctuated Equilibrium may better describe how researchers and practitioners should consider institutional change within higher education. [ABSTRACT FROM AUTHOR]

The article expands upon the results derived in a paper by Patric Hendershott, "The Structure of International Interest Rates: The U.S. Treasury Bill Rate and the Eurodollar Deposit Rate," which appeared in the September, 1967 edition of the "Journal of Finance." In that paper Hendershott contended that the equilibrium Eurodollar rate is determined primarily by the three-month U.S. Treasury bill rate. The author of the current paper extends Hendershott's work by examining the impact on the Eurodollar rate of both foreign and short-term U.S. rates. His results are in agreement with Hendershott's.

Problem definition: We consider the quality competition between two hospitals under the plan of one insurer. The insurer aims to maximize the overall achievable quality in the system by selecting either the fee-for-service (FFS) or the bundled payment (BP) scheme to compensate each hospital. The demand, the costs, and the probability of successfully treating patients depend on a hospital's chosen quality. Under such a setting, we use game theoretic models to study the choice of insurer and the impact of payment schemes on the equilibrium qualities of hospitals. Our models seek answers to the following questions. Is BP (FFS) payment scheme always associated with high (low) equilibrium quality? What factors affect the equilibrium qualities of competing hospitals and the choice of the insurer and how? Academic/practical relevance: Competing hospitals under same or different payment models from an insurer is rather common for healthcare delivery in the United States. However, there is a lack of understanding about the impact of payment schemes on quality outcomes from both the hospital's and the insurer's perspective. To the best of our knowledge, ours is the first paper to incorporate competition and the insurer's perspective to study the impact of different payment models on quality. Methodology: Game theory, equilibrium analysis. Results: We show that BP (FFS) is not always associated with high (low) equilibrium quality and that the equilibrium qualities of the two hospitals are strategic complements. We characterize when the insurer might assign the BP to both hospitals, the FFS to both hospitals, or the BP to one and the FFS to the other hospital. Managerial implications: Our findings provide prescriptive guidelines to an insurer choosing payment models. We also show that a specific quality outcome is achievable not by choosing any payment model but by a careful design of its parameters. Our numerical studies show that hospital readmission reduction initiatives are most effective when run in conjunction with cost reduction initiatives. [ABSTRACT FROM AUTHOR]

The article comments on studies performed about determinate and indeterminate equilibria. A study performed by Richard Clarida, Jordi Gali, and Mark Gertler argues that U.S. monetary policy led to an indeterminate equilibrium from 1950 to 1979, and to a determinate equilibrium from 1980 to present. These statements have been criticized by Thomas Lubik and Frank Schorfheide, and by preforming tests on past data, they were able to confirm the findings of the original study. This paper points out, however, that it is not possible to decide whether real world data are generated by a determinate or an indeterminate process, without making untestable assumptions about the dynamic structure of the underlying model.

This paper estimates regime-switching rules for monetary policy and tax policy over the post-war period in the United States and imposes the estimated policy process on a calibrated dynamic stochastic general equilibrium model with nominal rigidities. Decision rules are locally unique and produce a rational expectations equilibrium in which (lump-sum) tax shocks always affect output and inflation. Tax non-neutralities in the model arise solely through the mechanism articulated by the fiscal theory of the price level. The paper quantifies that mechanism and finds it to be important in U.S. data, reconciling a popular class of monetary models with the evidence that tax shocks have substantial impacts. Because long-run policy behavior determines the qualitative nature of equilibrium, in a regime-switching environment more accurate qualitative inferences can be gleaned from full-sample information than by conditioning on policy regime. [ABSTRACT FROM AUTHOR]

In this paper, we investigate existence of long-run equilibrium relationships among the aggregate stock price, industrial production, real exchange rate, interest rate, and inflation in the United States. Applying Johansen''s cointegration analysis to monthly data for the 1974:01–1998:12 period, we find that the S&P 500 stock price is positively related to the industrial production but negatively to the real exchange rate, interest rate, and inflation. Analysis of error correction mechanism reveals that the stock price, industrial production, and inflation adjust to correct disequilibrium among the five variables, while variance decompositions indicate that the stock price is driven to a considerable extent by innovations in the interest rate. Structural stability tests show that the parameters of the cointegrating system and the error correction term are stationary. [Copyright &y& Elsevier]

This paper is concerned with how retailers, supermarkets in particular, communicate price discounts and use unadvertised specials. A common practice for supermarkets is to communicate price deals on some products through newspaper advertisements, while communicating discounts on other products through in-store mechanisms such as shelf-talkers. This raises the question: So far as store choice is concerned, how might consumers take into account not only advertised prices at competing stores, but also expected prices of unadvertised goods? It also begs the question of why stores have unadvertised specials since their effect on store choice is not quite the same as the advertised discounts. Further, competing supermarkets advertise the same products part of the time, and different products at other times. They also tend to sometimes advertise a product in consecutive weeks, but sometimes not. Can these actions be part of a strategy? We formulate a game-theoretic model of retail competition by first extending the work of Lal and Matutes (1994) and then developing an alternative framework to answer these questions. Our model has two retailers, each of whom carries two goods. To simplify exposition, we assume that the stores are symmetric, the two goods are symmetric in their reservation prices, and are neither substitutes nor complements. Consumers are identical in their preferences and consumer heterogeneity is in the convenience that each store presents to a representative consumer The stores may advertise the price of one good, reflecting the reality that stores do not advertise theft whole assortment. They compete through advertising and prices to maximize profits. We thus recognize the strategic role of advertised prices and furthermore, we investigate the strategic role of unadvertised prices in retail competition. for this model, we derive a Rational Expectations Nash equilibrium in which each store randomly advertises the price of one good following a mixed strategy. Consumer expectations of the prices of the unadvertised goods are rational. We obtain three kinds of results. First, unadvertised specials occur in equilibrium, and induce temporal and cross-sectional variation in the identity of advertised goods, consistent with casual observation. In this equilibrium, the two stores advertise the same good part of the time and different goods at other times. When they advertise the same good they do not offer any unadvertised discount on the other good. However, when they advertise different goods, they offer an unadvertised discount on the good that they do not advertise. Intuitively, unadvertised discounts come about because stores randomize the identity of the advertised good in the mixed strategy equilibrium. If retailers were to advertise the same good at all times, they would have to compete intensely for store traffic and therefore discount the advertised good very deeply. And, having done so, they would find it optimal to set the unadvertised good at the reservation price and offer no discount on it. However, if stores randomize the advertised good as shown in this paper, both stores advertise the same good some of the time and at other times they advertise different goods. Because they advertise different goods some of the time, they do not fight intensely for store traffic on just one good, but rather they find it optimal to offer a discount on the unadvertised good also. As a result, an implication of our equilibrium for consumer choice is that unadvertised discounts affect store choice, and in equilibrium some consumers may shop around. Second, we obtain managerial insights into the role of unadvertised specials. They affect store choice, prevent consumer shopping around either fully or partly, and reduce head-to-head competition on the price of the advertised good. The most salient strategic implication of retailers' offering unadvertised discounts is to reduce competition among stores, and this is again due to the randomization strategy of the stores. In fact, stores can reduce head-to-head competition further by increasing the number of products in their assortment and randomizing on the advertised good from this assortment. Third, we provide a resolution of the Diamond (1971) paradox, which says that prices at competing stores approach the monopoly price. In our equilibrium, expected prices of both advertised and unadvertised goods are always below the monopoly price. [ABSTRACT FROM AUTHOR]

This paper presents a dynamic general equilibrium model of R&D-based trade between two structurally identical countries in which both innovation and skill acquisition rates are endogenously determined. Trade liberalization increases R&D investment and the rate of technological change. It also reduces the relative wage of unskilled workers and results in skill upgrading within each industry when R&D is the skilled-labor intensive activity relative to manufacturing of final products. Time-series evidence from the United States and simulation analysis support the empirical relevance of the model, which offers a North-North trade explanation for increasing wage inequality. [ABSTRACT FROM AUTHOR]

Economic disruptions generally create winners and losers. The compensation problem consists of designing a reform of the existing income tax system that offsets the welfare losses of the latter by redistributing the gains of the former. We derive a formula for the compensating tax reform and its impact on the government budget when only distortionary tax instruments are available and wages are determined endogenously in general equilibrium. We apply this result to the compensation of robotization in the United States. [ABSTRACT FROM AUTHOR]

This paper examines the long-term as well as short-term equilibrium relationships between the major stock indices and selected macroeconomic variables (such as money supply and interest rate) of Singapore and the United States by employing the advanced time series analysis techniques that include cointegration, Johansen multivariate cointegrated system, fractional cointegration and Granger causality. The cointegration results based on data covering the period January 1982 to December 2002 suggest that Singapore's stock prices generally display a long-run equilibrium relationship with interest rate and money supply (M1) but a similar relationship does not hold for the United States. To capture the short-run dynamics of the relationship, we replicate the same experiments with different subsets of data representing shorter time periods. It is evident that stock markets in Singapore moved in tandem with interest rate and money supply before the Asian Crisis of 1997, but this pattern was not observed after the crisis. In the United States, stock prices were strongly cointegrated with macroeconomic variables before the 1987 equity crisis but the relationships gradually weakened and totally disappeared with the emergence of Asian Crisis that also indirectly affected the United States. The results of fractional cointegration and the Johansen multivariate system are consistent with the earlier cointegration results that both Singapore and US stock markets did possess equilibrium relationships with M1 and interest rate at the early days. However, the stability of the systems was disturbed by a series of well-known financial turbulence in the past two decades and eventually weakened for Singapore and completely disappeared for the US. This may imply that monetary authority may take action to respond to the asset price turbulence in order to maintain the stability of monetary economy and thus break the existing equilibrium between stock markets and macroeconomic variables like interest rate and M1. Another possible explanation is that the market became more efficient after 1997 Asian crisis. Finally, the results of Granger causality tests uncover some systematic causal relationships, implying that stock market performance might be a good gauge for Central Bank's monetary policy adjustment. [ABSTRACT FROM AUTHOR]

In this paper, we use principles from game theory, computer gaming, and evolutionary computation to produce framework for investigating one of the great mysteries of the ancient Americas: why did the pre-Hispanic Pueblo (Anasazi) peoples leave large portions of their territories in the late A.D. 1200s? The gaming concept is overlaid on a large-scale agent-based simulation of the Anasazi. Agents in this game use a cultural algorithm framework to modify their finite-state automata (FSA) controllers following the work of Fogel (1966). In the game, there can be two kinds of active agents: scripted and unscripted. Unscripted agents attempt to maximize their survivability, whereas scripted agents can be used to test the impact that various pure and compound strategies for cooperation and defection have on the social structures produced by the overall system. The goal of our experiments here is to determine the extent to which cooperation and competition need to be present among the agent households in order to produce a population structure and spatial distribution similar to what has been observed archaeologically. We do this by embedding a "trust in networks" game within the simulation. In this game, agents can choose from three pure strategies: defect, trust, and inspect. This game does not have a pure Nash equilibrium but instead has a mixed strategy Nash equilibrium such that a certain proportion of the population uses each at every time step, where the proportion relates to the quality of the signal used by the inspectors to predict defection. We use the cultural algorithm to help us determine what the mix of strategies might have been like in the prehistoric population. The simulation results indeed suggest a mixed strategy consisting of defectors, inspectors, and trustors was necessary to produce results compatible with the archaeological data. It is suggested that the presence of defectors derives from the unreliability of the signal which increases under drought conditions and produced increased stress on Anasazi communities and may have contributed to their departure. [ABSTRACT FROM AUTHOR]

The dynamics of house pricing has been of constant interest in real estate literature. Significant effort has been devoted to testing the efficiency of the housing market. Three types of efficiency based on the information content have been defined. What is relevant to this article is the weak efficiency. In a weakly efficient market, the excess return is zero when past prices and returns are available. Previous research, in general, rejected the weakly efficient hypothesis. Both house prices and excess returns exhibit serial correlation, which makes it possible to predict future prices and excess returns using historical prices and returns. In this paper, the factors that have an impact on the weak efficiency have also been studied. Instead of directly modeling those factors, a special market for the study has been chosen. This market lacks some of the attributes that were cited by researchers in explaining market inefficiency. The logic behind the methodology is that, if the weakly efficient hypothesis is rejected in this market, then attributes that have been cited in previous studies but do not present in this market may not be as important as those presented in this market.

This article comments on a research which examined the stabilization policy and theory against the background of the economic performance of the U.S. during the 1970s. Few can have confidence in the analysis of the research, at least as it applies to a policy horizon of five to ten years. It may well be that the economy can adjust to any stable long-run rate of inflation, generating a real equilibrium that is largely independent of the rate, but such a textbook view is surely not the environment in which macro policy decisions must be made over the relevant policy horizon. For reasons that are not well understood, it appears that higher average inflation rates are associated with less stable inflation and, therefore, larger errors in expectations. Moreover, it is now clear that institutional adjustments to inflation are slow; even after fifteen years of inflation the economy has not produced all the institutional adjustments necessary to permit an unchanged real equilibrium. Hence, one of the most significant problems is surely the nonneutrality of the tax system. As well, inflation was discussed in terms of simple models in which the real equilibrium would be largely unaffected by inflation.

Recently, scholars identify the significance of accurately capturing what it means to be resilient and its implications for firms and supply chains. This research advances the understanding of resilience and empirically identifies its influence towards 'bouncing back' to the firms' previous supply chain state or 'bouncing forward' through an evolution during and post-disruption. This research develops a theoretical resilience model grounded in TCE and Panarchy theory and tests its application through survey research and structural equation modelling across a mix of 15 industries with 298 supply chain professionals in the United States. This study finds that resilience leads to firms 'bouncing back' or returning to their pre-disruption state after a disruption has occurred. Consequently, managers can focus their cognitive capacity towards 'bouncing back' to the firm's previous state following a disruption and not misappropriating resources towards long-term supply chain reconfiguration heroics. [ABSTRACT FROM AUTHOR]

We develop a game-theoretical framework to examine the implications of the introduction of a nonprofit 'public option' in the U.S. health insurance market. In this model, heterogeneous consumers have to choose between two competing insurance plans. One plan is offered by a profit-maximizing private insurer; the other by social-welfare-maximizing public option. In equilibrium, the distinct objectives of the two insurers induce adverse selection in consumer choice: the public option covers the less healthy consumers, yielding the more profitable segment of market to the private insurer. However, our empirical results suggest that both insurers will capture significant parts of the health insurance market. ( JEL I11, L10, L21, L32) [ABSTRACT FROM AUTHOR]

The article presents a study that investigates the impact of ambiguity aversions in asset pricing of two-person and pure-exchange economy through the adoption of equilibrium general setting in the U.S. The continuous-time and pure-exchange competitive economy are mentioned. Moreover, ways on how to do financial analysis for uncertainty and ambiguity models are also stated.

In monetary models where M0 has no social costs and a positive demand for cash and deposits is taken as a primitive, we show that the compensating variation in endowment is the exact general equilibrium measure of welfare costs of perfectly anticipated inflation. As a consequence, we show that a good approximation to the welfare costs of inflation is given by the area under the compensated demand for M0, a result that brings us back to Bailey (J Polit Econ 64:93–110, 1956). The estimated welfare costs of inflation are bounded at less than a quarter of a percent of the GDP for the U.S. economy. [ABSTRACT FROM AUTHOR]

This paper describes a dynamic computable general equilibrium model developed to examine the value of wildlife recreation in the state of Florida. Growth and volatility in wildlife watching, fishing and hunting are simulated and used to determine the impact on gross state product. A scenario replicating the impact of the terrorist attacks of 11 September 2001 is examined. Results estimate the present value of losses from 2001 to 2010 could be between US$10 and US$80 billion. [ABSTRACT FROM AUTHOR]

NASA's effort to develop a large payload, high altitude, long-duration balloon, the ultralong duration balloon, focuses on a pumpkin shape superpressure design. It has been observed that a pumpkin balloon may be unable to pressurize into the desired cyclically symmetric equilibrium configuration, settling into a distorted, undesired state instead. Hoop stress considerations in the pumpkin design lead to choosing the lowest possible bulge radius, whereas robust deployment is favored by a large bulge radius. Mechanical locking may be a contributing factor in the formation of undesired equilibria. Long term success of the pumpkin balloon for NASA requires a thorough understanding of the phenomenon of multiple stable equilibria. This paper uses the notion of stability to classify balloon designs. When we applied our finite element model to a balloon based on the NASA Phase IV-A pumpkin design, we found the fully inflated/fully deployed strained equilibrium float configuration was unstable. To demonstrate our approach for exploring the stability of constant bulge radius designs and their sensitivity to parameter changes we carry out a number of parametric studies. We focus on analytical studies, but we also compare our results with flight data whenever possible. [ABSTRACT FROM AUTHOR]

This article comments on a paper by Catherine Elgin of the University of Virginia regarding the reconciliation of the dualism in philosophy using an epistemology grounded in the concept of reflective equilibrium. Logical positivists divided philosophy into two realms which are the cognitive and everything else. Elgin introduces two criteria for reasonableness of a given system of thought. A system of thought is in reflective equilibrium when the components of that system support and reinforce other components of that system. Elgin emphasizes that the composition of a category scheme, an object's place within it, the judgments that place one within the other and the ends to which the system is directed should be as fallible as those initial commitments.

We study the existence of Stochastic Consistent Expectations Equilibria (SCEE) in linear Markov regime switching models. An SCEE exists when the model‐implied mean and first‐order autocorrelation coincide with those predicted by the agents via misspecified forecasting rules. For a simple regime‐switching monetary policy model, the parametric space where at least one SCEE exists is rather wide, and may extend well beyond the rational expectations equilibrium determinacy frontier. Misspecified expectations combined with regime switching yield a strong endogenous amplification mechanism that help generate the near unit root dynamics for inflation observed in the United States before the Great Moderation. [ABSTRACT FROM AUTHOR]

We develop a theoretical and an empirical spatial equilibrium model (SEM) to analyse the effects of the 25% Chinese cotton tariff on United States, Chinese and world markets. The tariff causes US cotton price, production and exports to decrease, while simultaneously increasing China's price and production. The SEM determines the trade reallocations caused by the Chinese tariff. The United States diverts some of its exports to other importing countries, which allows the United States to mitigate some of its losses. Other cotton exporters increase their exports to China at the expense of the United States. [ABSTRACT FROM AUTHOR]

Because of the existence of transmission costs and significant scale economies in power production, deregulation of electricity generation would lead to spatial oligopolistic markets. This paper uses linear programs to obtain short-run spatial price equilibria for a deregulated bulk power market in upstate New York. These models, unlike most previous models of imperfect competition, capture spatial variations in production costs and demand functions. We present two models. One calculates a Nash-Bertrand equilibrium, in which each firm believes that rivals will not react to price changes. This equilibrium represents the most intense level of competition to be expected. The other model yields limit prices that are designed to discourage new firms from entering the market. [ABSTRACT FROM AUTHOR]

The purpose of the paper is to analyze the shifting, incidence, and inter-state exportation of state and local government production taxes on four primary energy resources in the U.S. — coal, uranium, oil, and natural gas — and to compare the results of the analysis with those obtained from a standard partial-equilibrium incidence model. Although a limited literature in this area does exist, the discussion presented in the article focuses more directly on ways general incidence models must be modified to be appropriately applied to these natural resources, from both a short-run and a long-run perspective. State and local production taxes are prevalent in the energy-producing states, and production tax revenues have increased rapidly during the 1970's, as production tax rates have increased as well as the real prices and output of primary energy resources. More important politically is the fact that production taxes impose differential burdens on various income groups and geographic regions. Inter-state exportation of production taxes, real or alleged, has become a national issue and has resulted in court cases contending interstate tax discrimination and restraint of trade.

This paper supplies equations for partial-equilibrium calculations of the welfare effects of tariffs and quotas when the imported good and the competing domestic good are imperfect substitutes in demand. The equations take into account the response of the price of the domestic substitute. Although other studies have acknowledged this response, they have failed to account for it in their welfare calculations. To demonstrate the importance of this response, it is shown how it affects the calculations for the welfare costs of tariffs and quotas on US imports of footwear. It is shown that ignoring the response of domestic prices leads to significant overstatement of the welfare costs of tariffs and significant understatement of the welfare costs of quotas for the industry. [ABSTRACT FROM AUTHOR]

The current state of research dealing with the relationship between the unemployment rate and the imprisonment rate is assessed, and directions for further research are suggested. [ABSTRACT FROM AUTHOR]

Addresses the question of how cooperative equilibria of a "minimal government" would compare with social states which are Pareto efficient for its citizens. Formal theory of entitlement systems; Definition of a cooperative equilibrium concept for pure entitlement systems; Examples of unbiased entitlement systems; Conditions for an entitlement system to be unbiased regardless of the technology available to society; Implications for political theory.

We aim to determine whether a game-theoretic model between an insurer and a healthcare practice yields a predictive equilibrium that incentivizes either player to deviate from a fee-for-service to capitation payment system. Using United States data from various primary care surveys, we find that non-extreme equilibria (i.e., shares of patients, or shares of patient visits, seen under a fee-for-service payment system) can be derived from a Stackelberg game if insurers award a non-linear bonus to practices based on performance. Overall, both insurers and practices can be incentivized to embrace capitation payments somewhat, but potentially at the expense of practice performance. [ABSTRACT FROM AUTHOR]

In many countries settlements take place a fixed number of business days after the transaction (U.S., Japan). In other countries settlements take place periodically on a fixed date when all transactions performed before this date are settled (U.K., France, Italy). In both cases settlement procedures should cause returns not to be identically distributed over all days. The effect is likely to be the largest on markets where all trades are settled only once a month. An empirical investigation of the largest of those markets, the Paris Bourse, demonstrates the importance of the settlement procedure on the distribution of daily returns. [ABSTRACT FROM AUTHOR]

We propose and implement a direct test of the hypothesis of oligopolistic competition in the U.S. underwriting market against the alternative of implicit collusion among underwriters. We construct a simple model of interaction between heterogeneous underwriters and heterogeneous firms and solve it under two alternative assumptions: oligopolistic competition among underwriters and implicit collusion among them. The two solutions lead to different equilibrium relations between the compensation of underwriters of different quality on one hand and the time-varying demand for public incorporation on the other hand. Our empirical results, obtained using 39 years of initial public offering (IPO) data, are generally consistent with the implicit collusion hypothesis that banks, especially larger ones, seem to internalize the effects of their underwriting fees and IPO pricing on their rivals. [ABSTRACT FROM AUTHOR]

This study investigates the impact of past performance evaluations on future decisions involving judgment. I analyze the decisions of highly skilled and highly monitored referees regarding offensive fouls and violations in the National Basketball Association. After testing for equilibrium adjustments in player behavior, findings support a hypothesis of increased referee scrutiny on one team following a potentially questionable call on the opposing team. Results are inconclusive for subsequent changes in scrutiny toward the original violating team. The analysis provides a nonexperimental test of sequential bias on elite employees working under strict performance standards, and suggests a likely role for sequential judgment effects in other areas of economic activity. ( JEL D03, L83, J44, M59) [ABSTRACT FROM AUTHOR]

In a recent paper, Harvey Rosen and Richard Quandt present and estimate a disequilibrium model of the aggregate labor market in the U.S. Their parameter estimates are generally plausible, but one of their results is extremely anomalous: the fitted values of labor supply and demand given by the model imply high negative unemployment rates throughout the 1930's. The figure presented in the article compares the unemployment rates generated by the model with the official unemployment rates. Even though the two series are not attempting to measure precisely the same thing, one should expect them to follow similar general patterns. Rosen and Quandt's estimation does in fact yield a large positive income elasticity of labor supply. The model is thus fitting changes in hours of work through changes in assets, with labor supply as the intermediary. Problems that arise from the inclusion of unearned income in the equation for labor supply also arise in other models of the labor market. Rosen and Quandt note that others have found positive coefficients for nonlabor income in both time-series and cross-section studies.

We develop a general theory of budgetary politics and examine its implications on a new data set on U.S. government expenditures from 1791 to 2010. We draw on three major approaches to budgeting: decision-making theories, primarily incrementalism and serial processing; policy process models; and path dependency. We show that the incrementalist budget model is recursive and that its solution is exponential growth, and isolate three periods in which it operates in pure form. The equilibrium periods are separated by critical junctures, associated with wars or economic collapse. We assess policy process dynamics by examining the deviations within equilibrium periods. We offer three takeaways: (1) exponential incrementalism is fundamental to a theory of budgeting; (2) disjoint shifts in the level of exponential incrementalism are caused only by critical moments; (3) temporally localized dynamics cause bends in the exponential path, longer returns to the path within budgetary eras, and annual punctuations in budget changes. [ABSTRACT FROM AUTHOR]

There exists a widely held belief that informed investors manipulate stock prices prior to seasoned equity offerings (SEO). Contrary to this assertion, a model is developed, which demonstrates there is significant evidence that informed investors not to manipulate trading prior to a SEO. Furthermore, there is an arguement that informed investors to trade the stock in the same direction indicated by their private information. In addition, the model is consistent with previous empirical evidence. Previous literature heavily relies on the Gerard and Nanda (1993) model. The model allows for more than one informed investors, whereas Gerard and Nanda de facto allows for only one. This model setting is not only more realistic to the real world, but also dramatically reverses its conclusion that there exists manipulative trading. It also indicated that following Securities and Exchange Commission (SEC) Rule 10b-21 and Rule 105, whose intention is to curb this manipulation, the SEO discount will change in either direction. Thus previous literature delineating methodology of utilizing the SEO discount change to test for the existence of manipulative trading is not well grounded. The model also predicts that undervalued firms tend to disclose more information in order to improve the stock price informativeness, whereas overvalued firms tend to do the contrary. [ABSTRACT FROM AUTHOR]

We construct an equilibrium model of party competition, in which parties are especially concerned with their core and swing voters, concerns which political scientists have focused upon in their attempts to understand party behavior in general elections. Parties compete on an inifinite-dimensional space of possible income-tax policies. A policy is a function that maps pre-fisc income into post-fisc income. Only a fraction of each voter type will vote for each party, perhaps because of issues not modeled here or voter misperceptions of policies. Each party's policy makers comprise two factions, one concerned with maximizing the welfare of its constituency, or its core, and the other with winning over swing voters. An equilibrium is a pair of parties (endogenously determined), and a pair of policies, one for each party, in which no deviation to another policy will be assented to both its core and swing factions. We characterize the equilibria: they have the property that both parties propose identical treatment of a possibly large interval of middle-income voters, while the 'left' party gives more to the poor and the 'right' party more to the rich. An empirical section uses the data of Piketty and Saez on taxation in the US to assess the model's predictions. We argue that the model is roughly confirmed. [ABSTRACT FROM AUTHOR]

I demonstrate that econometric estimations of nominal interest rate rules may tell little, if anything, about an economy's determinacy properties. In particular, correct inference about the interest-rate response to inflation provides no information about determinacy. Instead, it could reveal whether optimal monetary policymaking is performed under discretion or commitment. [ABSTRACT FROM AUTHOR]

The article offers information on the study related to determine the requirement of equilibrium numbers of police officers and their real salay, with the increase in total crimes in the U.S. It mentions that the increase in per capita income and improved standard of living, lead to the growth in crime rate. It states that an equilibrium should be maintained for supply and demand of police services and public safety.

The spatiotemporal behaviour of earthquakes within continental plate interiors is different from that at plate boundaries. At plate margins, tectonic motions quickly reload earthquake ruptures, making the location of recent earthquakes and the average time between them consistent with the faults’ geological, palaeoseismic and seismic histories. In contrast, what determines the activation of a particular mid-continental fault and controls the duration of its seismic activity remains poorly understood. Here we argue that the concentration of magnitude-7 or larger earthquakes in the New Madrid seismic zone of the central United States since the end of the last ice age results from the recent, climate-controlled, erosional history of the northern Mississippi embayment. We show that the upward flexure of the lithosphere caused by unloading from river incision between 16,000 and 10,000 years ago caused a reduction of normal stresses in the upper crust sufficient to unclamp pre-existing faults close to failure equilibrium. Models indicate that fault segments that have already ruptured are unlikely to fail again soon, but stress changes from sediment unloading and previous earthquakes may eventually be sufficient to bring to failure other nearby segments that have not yet ruptured. [ABSTRACT FROM AUTHOR]

Risk managers operate in the space of risk and returns, constrained by financial market regulations. How can risk managers assess risk associated with changing regulatory structures, given that theories about the relationship between risk and return are much more developed than theories about the determinants of regulatory constraints? To help risk managers develop insight and predictive ability about the evolution of financial market regulations, the authors present a systematic framework to analyse how financial market regulation in the USA has developed in response to the global financial crisis. The framework combines elements from game theory, political science, the economics of regulation and behavioral finance. Notably, the model's prediction for the legislation that came to be named the Dodd-Frank Act turned out to be highly accurate. [ABSTRACT FROM AUTHOR]

Increased fresh tomato trade has prompted a number of trade disputes between the United States, Canada, and Mexico. One precondition of an antidumping dispute is meeting the “likeness of product” criterion. However, fresh tomato shipments and imports are highly seasonal, suggesting that the degree of substitutability (or product likeness) may depend fundamentally on whether fresh tomato varieties are in- or out-of-season. We develop a seasonally adjusted inverse demand system using Canadian and Mexican monthly import data along with U.S. state shipping data to address both seasonality and product substitutability in the fresh tomato market. We find that market equilibrium and the degree of product substitution are affected by seasonality and product availability in the consumer choice set. Le commerce accru de la tomate fraîche suscite des différends commerciaux entre les États-Unis, le Canada et le Mexique. L'une des préconditions d'un différend en matière d'antidumping est liée au respect du critère de la « similarité du produit ». Toutefois, les expéditions et les importations de tomate fraîche sont très saisonnières, ce qui laisse supposer que le degré de substituabilité (ou de similarité du produit) puisse reposer fondamentalement sur le fait qu'il s'agisse ou non de variétés de tomate fraîche pleine saison ou hors-saison. Nous avons mis au point un système désaisonnalisé de la demande inverse utilisant des données mensuelles sur les importations canadiennes et mexicaines et des données sur les expéditions des États-Unis pour étudier la saisonnalité et la substituabilité dans le marché de la tomate fraîche. Nous sommes arrivés à la conclusion que la saisonnalité et la disponibilité des produits offerts au consommateur influent sur l'équilibre du marché et le degré de substitution du produit. [ABSTRACT FROM AUTHOR]

Competitive balance in sport has been identified as a predictor of demand for sporting events, and leagues. Conferences frequently seek to maximize outcome uncertainty as a means of increasing demand. While competitive balance was not initially a goal of the Bowl Championship Series (BCS), competitive balance in American college football has generally been regarded as improved since the implementation of the BCS. The present study confirms empirically that within-season competitive balance inside all six founding BCS conferences has improved since its creation. However, only three of the six conferences exhibited improved between-season competitive balance, meaning frequent turnover of championship teams was not observed in all conferences. Potential implications for these findings and their impact on college football are discussed. [ABSTRACT FROM AUTHOR]

The theoretical literature on two candidate elections is dominated by symmetric contests and vote-maximizing candidates. These models fail to capture two important features of real elections. First, most elections pit a stronger candidate against a weaker one. Second, candidates care not only about holding office, but also about policy outcomes. Ignoring any one of these features means we will fail to capture an important dynamic—strong candidates must balance their desire to change policy with their need to win the election. We provide conditions for the existence of an equilibrium in the spatial model with non-policy factors, when candidates are policy motivated. We provide a characterization of ‘regular’ equilibria and show that there exists at most one regular equilibrium. We provide conditions that guarantee that all equilibria are regular. We derive comparative statics for the model and show that increasing a candidate’s non-policy advantage causes that candidate to move towards his ideal point. [ABSTRACT FROM AUTHOR]

There is substantial evidence that parental bequests to children are typically equal in the US—a regularity inconsistent with the predictions of standard bequest models. The prior explanation for this puzzle is parents’ desire to signal equal affection given children’s incomplete information of parental preferences. However, parents also have incomplete information regarding children preferences—which has not been considered. Using a strategic bequest framework, we show that when parents have sufficient uncertainty regarding children’s relocation returns, a separating equilibrium where parents reward attentive heirs with larger bequests is precluded. Such uncertainty appears consistent with conditions in the contemporary USA. [ABSTRACT FROM AUTHOR]

The article presents a study which examines the short-run dynamics and long-run relationship between the long-bond yields and inflation rate in the U.S. from June 1954 to August 2002. The study uses co-integration and vector error correction (VEC) estimation, as well as the longer sample period to revisit the empirical question to compare empirical results with the earlier studies. The result shows that the rates of bond and consumer inflation are co-integrated.

The US population has been migrating to places with high perceived quality of life. Theoretically, such migration can follow from the increasing demand for amenities that accompanies increasing wealth. Under the baseline calibration of a general equilibrium model, a place with amenities for which individuals would initially pay 5% of their income grows slightly faster than an otherwise identical place. As local quality of life becomes more important in determining relative population density, local productivity independently becomes less important. Together these two trends cause local amenities to eventually become the sole determinant of relative local density. From a quantitative perspective, high quality of life together with low relative productivity can boost metropolitan population growth by several percentage points. [ABSTRACT FROM PUBLISHER]