Interactions between Preemptive Competition and a Financing Constraint

We develop an investment and financing model in which two identical firms compete for first‐mover advantage in an opportunity to invest. We investigate the interactions between preemptive competition and a financing constraint. We show that a medium‐intensity financing constraint can play a positive role in mitigating the preemptive competition and improving firm value in equilibrium. This positive effect is in sharp contrast with the conventional negative effects of the financing constraint. The positive effect is strong, especially for IT venture businesses because of the following characteristics: severe preemptive competition, a lack of internal funds, high uncertainty regarding future project value, and high bankruptcy costs.     

Necessity of transversality conditions for stochastic problems

This paper shows stochastic versions of (i) Michel's (Econometrica 58 (1990) 705, Theorem 1) necessity result, (ii) a generalization of the TVC results of Weitzman (Management Sci. 19 (1973) 783) and Ekeland and Scheinkman (Math. Oper. Res. 11 (1986) 216), and (iii) Kamihigashi's (Econometrica 69 (2001) 995, Theorem 3.4) result, which is useful particularly in the case of homogeneous returns. These stochastic extensions are established for an extremely general stochastic reduced-form model that assumes neither differentiability nor continuity.     

Agreeable bets with multiple priors

This paper considers a two-agent model of trade with multiple priors. Firstly, we characterize the existence of an agreeable bet on some event in terms of the set of priors. It is then shown that the existence of an agreeable bet on some event is a strictly stronger condition than the existence of an agreeable trade, whereas the two conditions are equivalent in the standard Bayesian framework. Secondly, we show that the two conditions are equivalent when the set of priors is the core of a convex capacity. These results are also related to the no trade theorems under asymmetric information.     

Equilibrium Price Dispersion in a Matching Model with Divisible Money*

The main purpose of this article is to show that, for any given parameter value, an equilibrium with dispersed prices (two‐price equilibrium) exists in Green and Zhou's matching model with divisible money. The welfare effect of price dispersion is also analyzed.     

On the existence of single-price equilibria in a matching model with divisible money and production cost

The present paper investigates Zhou's (1999) money search model, where money is divisible, agents can hold any amount of money and production of goods is costly, and presents a sufficient condition, expressed in terms of exogenously given parameters, for the existence of single-price equilibria.     

Elementary results on solutions to the bellman equation of dynamic programming: existence,uniqueness, and convergence

We establish some elementary results on solutions to the Bellman equation without introducing any topological assumption. Under a small number of conditions, we show that the Bellman equation has a unique solution in a certain set, that this solution is the value function, and that the value function can be computed by value iteration with an appropriate initial condition. In addition, we show that the value function can be computed by the same procedure under alternative conditions. We apply our results to two optimal growth models: one with a discontinuous production function and the other with “roughly increasing” returns.     

Stationary monetary equilibria with strictly increasing value functions and non-discrete money holdings distributions: An indeterminacy result

In this paper, we present a search model with divisible money in which there exists a continuum of monetary equilibria with strictly increasing continuous value functions and with non-discrete money holdings distributions.     

Demographic Change and Asian Dynamics: Social and Political Implications

This article describes the demographic change and its social and political implications in East and South-East Asia with a trajectory up to 2050. It selectively touches on inequalities, migration, social policy, and international security. In the course of this exercise, I present two hypotheses: one relating to the formation of the new middle class, and the other relating to the geriatric peace argument. The first hypothesis posits that when the growing inequalities in terms of per capita income aggravate the sense of happiness among the low- and middle-income strata as contrasted to high-income strata, the formation of a new middle class becomes more difficult. The second hypothesis posits that when the aging population carries a large demographic weight, it tends to be transformed into strong political voice, which is, in turn, translated into larger government spending on social policy items often accompanied by a likely decline in the defense expenditure budget. These hypotheses paint a provocative picture of East and South-East Asia in the next four decades, especially in the wake of the deepening economic difficulties prevailing over the entire globe. I present these hypotheses for further conceptual elaboration and empirical analysis.