UNIQUENESS OF EQUILIBRIUM PAYOFFS IN FINITELY REPEATED GAMES WITH IMPERFECT MONITORING*

This paper examines when a finitely repeated game with imperfect monitoring has a unique equilibrium payoff vector. This problem is nontrivial under imperfect monitoring, because uniqueness of equilibrium (outcome) in the stage game does not extend to finitely repeated games. A (correlated) equilibrium is equilibrium minimaxing if any player's equilibrium payoff is her minimax value when the other players choose a correlated action profile from the actions played in the equilibrium. The uniqueness result holds if all stage game correlated equilibria are equilibrium minimaxing and have the same payoffs. The uniqueness result does not hold under weaker conditions.     

Condorcet Jury Theorem or Rational Ignorance

We analyze a symmetric model of an election in which voters are uncertain about which of two alternatives is desirable for them. Each voter must incur some cost to acquire information about the alternatives. We show that by focusing on unbiased voting strategies, general symmetric signal structures can be degenerated to a two‐signal model. In addition, we show that for any sequence of unbiased voting equilibria, if the second‐order derivative of the information cost function at no information is zero, then the probability of electing the desirable alternative converges to one, that is, the Condorcet Jury Theorem is valid. Otherwise, this probability converges to some value less than one; that is, the “rational ignorance” hypothesis is valid.     

EC INTEGRATION AND JAPANESE FOREIGN DIRECT INVESTMENT IN THE EC

This study proposes two hypotheses to identify the cause(s) behind the short-term cyclical Japanese manufacturing foreign direct investment in the European Community (EC) in the late 1980s and early 1990s: (i) a catch-up process of Japanese firms in anticipation of EC single market integration in 1993 and (ii) the so-called bubble economic phenomenon caused by the overheated economy following expansionary monetary policy in Japan in the late 1980s. Applying multinomial logit models to the data on parent firms of 283 Japanese manufacturing subsidiaries established in the EC from 1988 to 1992 reveals strong support for the bubble economy hypothesis but not for the catch-up hypothesis. Results also show that under a bubble economy situation, tax-related incentive policies in host countries—e.g., an investment tax allowance for foreign direct investment—are quite important in attracting Japanese firms.     

PARENTS’ EDUCATIONAL BACKGROUND,SUBJECTS “GOOD‐AT” IN SCHOOL AND INCOME: AN EMPIRICAL STUDY*

We analyze the effects of studying mathematics and of parents’ academic profile on the annual labour income of their children in later life. Data was obtained from graduates of departments of economics at major private universities in Japan. They show that respondents who are good at mathematics (and English) have a higher average income, and that the more educated the parents, the more children tend to excel in mathematics.     

OPTIMAL FOREIGN BORROWING REVISITED

Foreign capital has become increasingly important in financing investment and growth in developing countries. Foreign capital flows, however, can be volatile as is evident from the recent financial crises. It has also recently been noted by researchers that there is little systematic empirical evidence that foreign capital contributes to the economic growth of developing countries. In this context, this paper attempts to theoretically reevaluate the borrowing behaviour of a developing economy that relies on foreign borrowing for its capital formation. In particular, this paper investigates the implications of different lending policies of international financial institutions. It is found that no matter whether the borrowing interest rate increases with the level of foreign debt per capita or with the foreign‐capital/total‐capital ratio, the economy always moves toward the stationary state. The result holds even when the representative agent regards the interest rate given as constant. This implies that foreign borrowing does help economic growth, irrespective of lending policies of international financial institutions.