The comparative statics of cumulative distribution function changes for the class of risk averse agents

We examine the connection between Walrasian equilibria of a limit economy (with infinitesimal firms) and the noncooperative (Cournot) equilibria of approximating finite economies (with significant firms). Following earlier work of Novshek and Sonnenschein we allow for set-up cost and permit a minimal form of mixed strategies. We depart from them by requiring that the aggregate production set exhibits some degree (however small) of decreasing returns. Contrasting with their results, it is shown that a (regular) Walrasian equilibrium of a limit economy can always be approximated by a sequence of noncooperative equilibria for the tail of the approximating (finite) economies. Thus, there is a surprising qualitative discontinuity when one passes from the Novshek-Sonnenschein case of aggregate constant returns to scale of the decreasing returns case of this paper.     

A close eye on the invisible hand

The paper shows how, and under what minimal information supply conditions, a market finds its competitive equilibrium price and thus solves the so-called tatonnement process, without sellers and buyers knowing the equilibrium price in advance. The information premises must be understood as a basic first approach, and do not necessarily mimic the real market process. Demonstration of a discovery process under these information handling conditions is an important finding for an evolutionary market theory. Additional information-processing elements should augment the efficiency of the discovery process. The results of the simulated market process set out above raise new questions. The role of institutional elements (such as the relevance of demand flexibility or “certainty” of knowledge in the learning process, etc.) is discussed further outside the context of the simulation model, providing new insight into the market process.     

Einzelbesprechungen

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Einzelbesprechungen

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The pay-for-performance dilemma

To recapitulate briefly, I believe that the basis for most of the problems we have with merit pay plans is the fact that the great majority of people think their own job performance is above average. Even a well-administered merit pay plan cannot give positive feedback to this majority. The consequence is likely to be that the individual's self-esteem is threatened. Too often one copes with such a threat by demeaning the importance of the job or by derogating the source—that is, disparaging the boss or management in general.In addition, merit pay emphasizes the direct relationship between job performance and dollar rewards, thereby detracting from intrinsic motivation in the work itself. A system that would switch the emphasis to rewards for self-development and opportunities for greater responsibility would seem to serve both individual and organizational goals in a more effective manner.