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We construct a model of a firm competing for market share in a customer market and making investments in physical capital. The firm is financially constrained and there are implementation lags in investment. Our model predicts that product prices should depend on costs and competitors' prices but respond weakly to demand shocks. Also, prices should be strongly related to investment. We estimate price and investment equations on panel data for Swedish manufacturing plants and find results that are qualitatively in line with these predictions, though the relation between investment and prices is stronger than predicted by our model. Keywords: price rigidity, price equation, investment equation, credit constraint., 'This seeming inabilility to find a significant (and consistent!) impact of demand is surprising.' (Nordhaus 1972, p. 35) IN CLASSICAL MICROECONOMIC models, product prices move in such a way as [...]

The theory of the firm under uncertainty has been traditionally studied using the expected utility approach. There are very few works done in this field of study using the risk-return approach despite the popularity of this dichotomy in the business world. This paper, therefore, applies various mean-risk models to the output decision making of a competitive firm facing uncertainty in the product price. The risk formulation used in this paper involves a pre-specified target level of profit, similar to those discussed in Fishburn (1977 and 1984). Furthermore, the measure of risk-aversion used in this model indicates the relative weight given by the agent to the risk component of the mean-risk objective function. The results of various mean-risk models are compared to those in the corresponding expected utility literature, and significant differences are found in many cases. One important difference is that whenever expected utility results require decreasing absolute risk aversion as a sufficient condition, the corresponding sufficient condition in the risk-return model of this paper is given by the condition that marginal cost is at least as large as the sum of average cost and average target level of profit. The results of this paper, in our opinion, are intuitively more appealing compared to the relatively abstract concept of decreasing absolute risk aversion., INTRODUCTION Traditionally, risk-return models have been used in portfolio theory. The theory of the firm under uncertainty has not been analyzed with the risk-return approach except for few works such [...]

We present a microeconomic model of the household in which there exists no difference in spousal preferences but childrearing is more time costly for women. Bargaining between the wife and the husband forms the basis of household decisions. Marital bargaining power is determined according to the incomes of the spouses, which in turn help to determine their reservation utility levels outside the marriage. The endogeneity of bargaining power introduces a non-cooperative element to the couples' decision-making problem because both the husbands and the wives take into account how their pre-marital education decisions affect their marital power and the share they extract from household resources in the future. The model predicts that wives invest more than is Pareto efficient in their education in order to increase their bargaining power in marriage. As a consequence, couples have fewer children and consume more when exogenous structural changes lead women to invest more in education. A corollary of the model is that empowering women directly through social reforms such as a lower gender wage gap leads to lower fertility and higher spousal consumption and leisure. JEL classification: J13; O11; 033; 040 Keywords: Fertility; Education; Gender gap; Bargaining

Microeconoimc models, which examine altruistic behavior of humans, are presented.

The impact of financial reforms on claim costs of several benefit and welfare schemes is examined by using microsimulation models on the United Kingdom's pension schemes.

Integrating the conservation laws of mass and energy with microeconomic models of production, consumption and general equilibrium, that have certain consequences, are examined. A method for integrating these laws with static microeconomics models, with minimum changes, is presented.

We present a model in which purely monetary inflation systematically affects efficiency, welfare, and relative prices. The model focuses on the microeconomics of trade in search markets under inflation. Inflation, by increasing the cost of holding money, undermines the market's ability to sustain long-term customer relationships. Because those relationships generate the most efficient transactions patterns, overall welfare unambiguously declines.

Research is presented concerning the development of a model of heterogeneous agents featuring bounded abilities which can be used to analyze their collective and individual performances.

A microeconomic model is presented to assess environmental regulation changes on exports within a sector-specific framework, and to quantify the magnitude of such changes. The model also includes output market price adjustments and firm-level efficiency improvements.

This paper is motivated by empirical observations on popular-economy firms (PEFs) in the informal sector of Santiago de Chile. These are labor-managed firms (LMFs) embedded in a 'popular milieu' where cooperation between their members plays a central role. This paper develops a (partial equilibrium) microeconomic theory of PEFs. Endogeneizing the level of cooperation between the workers, the paper develops a static and a dynamic model to analyze whether embeddedness influences the behavior of the PEF. Embeddedness is assumed to be captured by three different characteristics suggested by the empirical observations. Most of them influence the employment and income levels in the PEF.

The debate over implementation of a minimum wage is framed within arguments on conflicting economic theories. Topics include weighting empirical work as a measure of successful application of theory, determining whether price theory is applicable to labor markets, and deconstructing the overemphasis on employment effects.

The concept proposed by Harrington (1998) regarding the correlation of high regulatory compliance and low penalty rates possess inconsistencies. In his work, firms are assumed to be identical with known compliance costs. Based on these assumptions, Harrington claims that the imposition of low penalty rates for regulatory offenses tends to result in high compliance levels. Such may not be true for all conditions, particularly when compliance costs are unknown and firms are dynamic.

An optimization and mixed-complementarity versions of a nonseparable micro household model with endogenous shifts between buying, selling and self-sufficiency regimes was developed. The mixed-complementarity model was then embedded in a computational general equilibrium model. Results using the model showed the importance of using a nonseparable household specificiation. In addition, the importance of transaction costs was highlighted.

Revenue management is a discipline that combines statistical techniques of forecasting with quantitative optimization techniques that have their origins in Operations Research; however, it is based squarely on the consumer [...]

Byline: N. Basu (1), R. Pryor (2), T. Quint (3) Keywords: agent-based model; microsimulation; genetic algorithm; monetary policy; US economy Abstract: In this report we present ASPEN, a new agent-based microeconomic simulation model of the U.S. economy being developed at Sandia National Laboratories (SNL). The model is notable because it allows a large number of individual economic agents to be modeled at a high level of detail and with a great degree of freedom. Some of the features of ASPEN are (a) a sophisticated message-passing system which allows individual pairs of agents to communicate with one another, (b) the use of genetic algorithms to simulate certain agents' learning, and (c) a detailed financial sector which includes a banking system and a bond market. Results from runs of the model are also presented. Author Affiliation: (1) AT&amp T Customer Sciences, 295 North Maple Avenue, Basking Ridge, NJ, 07920, USA (2) Sandia National Laboratories, Mailstop 1109, P.O. Box 5800, Albuquerque, NM, 87185, USA (3) Department of Mathematics, University of Nevada, Reno, NV, 89557, USA Article History: Registration Date: 29/09/2004

A study reveals that an analysis of the choice of destination by individual tourists can be done at low regional aggregation levels through the sequential use of the equality specification test of Cramer and Ridder for multinomial logit models' alternative-specific parameters. The parameters for tourists' set of destination preferences are apparently dependent on the site's distance from their homes, topographical characteristics, language borders and climate. Models of multinomial logit are flexible and sufficient tools for conducting a determinant analysis for spatial data based on microdata.

Quarterly employment data from US manufacturing corporations was applied to study microeconomic employment adjustment and its aggregate implications. The data was used to retrace the path of cross-sectional distribution of deviations between actual and desired employment. Results show that only a limited number of fluctuations in cross-sectional distributions presented in average employment growth fluctuations can be related to reallocation shocks. Moreover, the findings support the premise that microeconomic heterogeneity is relevant for microeconomic as well as macroeconomic issues.

This paper develops Bayesian tools for making inferences about firm-specific inefficiencies in panel data models. We begin by establishing a Bayesian setting in which fixed and random effects models are defined. What distinguishes these classes of models is the marginal prior independence of the effects. We show how such models can be analyzed using Monte Carlo integration or Gibbs sampling. These techniques are applied to a panel of U.S. hospitals. Our empirical findings illustrate the different characteristics of both types of models, as well as the influence of the particular priors used on the firm effects. Key words: Stochastic frontier models; Panel data; Fixed effects; Random effects; Gibbs sampler; Hospital cost function

The analysis of both stylized and general social and economic network models shows that productive efficiency and stability do not necessarily go together. The two desirable characteristics can coincide after an allocation of resources to certain segments that are generally nonproductive. Such allocation follows either of two rules: the equal split and one that is a result of bargaining among participants. The models assume that participants are free to form new relationships or get out of existing ones.

We present a new methodology for studying the problem of intra-firm bargaining, based on the notion that contracts cannot commit the firm and its agents to wages and employment. We develop and analyse a general non-cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party. Equilibrium firm profits are characterizable as both a weighted average of a neo-classical (non-bargaining) firm's profits and a generalization of Shapley value for a corresponding cooperative game. Furthermore, the resulting payoffs induce economically significant distortions in the firm's input and organizational-design decisions.

Research indicates that the public is more receptive to the construction of a nuclear waste storage facility provided the construction is directed by acceptable siting rules. Economic criteria such as risk estimates are also significant determinants of public receptiveness.

Much research has been done on the economic concept of convexity. P. Newman's findings that a firm may produce more than one output can be applied to the study of multioutput production. Research on the relationship between convexity and homogeneity shows that Newman's theories are applicable to multiproduct technologies in a set-theoretic approach. Moreover, convex individual technology sets can be made from aggregate technology.

A simple mathematical formulation for distinguishing the distribution of individual-agent dynamic behavior from aggregate dynamics is presented. This koyck or geometric lag model is popular in microeconomic theory. US consumption data has shown that aggregate behavior will generally not coincide with the behavior of individual agents. The data likewise indicate that some consumers have random-walk consumption habits.

Microeconomic reform is equivalent to technological change aimed at increasing productivity and services for a given amount of limited resources. Simulations using an applied general equilibrium model showed that microeconomic reform can lead to a reduction in usage of productive resources such as labor, in the short term. However, this reduction can be offset if workers agree to the introduction of microeconomic reforms without demanding higher wages.

A microeconomic model explaining the effects of social norms on labor supply behavior was developed based on Akerlof's theory of social custom. According to the basic short-run model, individual labor supply can be influenced by the disutility of reputation loss and cognitive dissonance resulting from the violation of social constraints. Using this extended rationality model, comparative statics of male and female labor supply were obtained for selected social norms and an additive quadratic extension of the linear utility function.

The representative-agent model increases the difficulty of differentiating between statements that are true at the individual level and statements that are valid at the aggregate level. The nature of fallacies of composition depends on the fact that microeconomics does not take the restrictions of probability theory into consideration. Probability theory imposes restrictions on the joint behavior of multiple units that are not totally synchronized.

. We extend Deaton's atemporal optimal commodity tax model to a life-cycle environment in which the individual may choose to work in many periods. We are able to confirm the Corlett-Hague intuition - goods that are more complementary with leisure should be taxed at higher rates. In addition, we prove that, in the microeconomic framework underlying some popular general-equilibrium models, if real wage and interest rates are constant over the life cycle, the addition of some interest taxation to a consumption tax regime would be welfare improving and that optimal labour tax rates decline with age. Fiscalite optimale dans un modele de cycle de vie. Les auteurs generalisent le modele atemporel de Deaton de fiscalite optimale sur les marchandises a un environment tenant compte du cycle de vie et dans lequel l'individu peut choisir de travailler dans plusieurs periodes. On est en mesure de confirmer 1'intuition de Corlett-Hague a savior que les biens qui sont davantage complementaires aux loisirs devraient etre taxes a des taux plus eleves. De plus, les auters prouvent que, dans le cadre microeconomique qui soustend des modeles d'equilibre general en vogue, si les salaires et les taux d'interet reels sont constants tout au long du cycle de vie, l'ajout d'une fiscalite sur les paiements d'interests a un regime de fiscalite sur les depenses de consommation augmenterait le niveau de bien-etre et que la fiscalite optimale sur les revenus du travail decline avec l'age.

Four models of price theory are presented in notated form with analytic comments. They are K. Cantillon's, Adam Smith's, Karl Marx's, and Neoclassical. All models are seen to be inadequate for explaining the relationship between factor prices and goods prices. Land, labor and capital are seen to determine goods prices in a general equilibrium model that encompasses technological, legal and preference factors also.

In this paper we provide a framework to study the aggregate dynamic behavior of an economy where individual units follow (S, s) policies. We characterize structural and stochastic heterogeneities that ensure convergence of the economy's aggregate to that of its frictionless counterpart, determine the speed at which convergence takes place, and describe the transitional dynamics of this economy.

Higher relative risk aversion (RRA) is associated with higher risk premiums only if the riskiness of output is exogenous. When consumers can affect the variability of output, the market risk premium may well decrease as the RRA increases. With constant relative risk aversion and linear production functions, the ratio of the market risk premium to the standard deviation of the market is constant and independent of the RRA. (JEL D20, D80)