On the existence of rational expectations equilibrium

We prove a theorem on the existence of rational expectations general economic equilibrium when agents condition on prices as well as on private information, and maximize the expectation of a state-dependent utility function. The key to the result is a new idealization of what it means for a set of empirical distributions to support agents' expectations. This idealization depends on the notion that agents compare their expectations with continuous versions of the random empirical distributions that are generated by the workings of the economy. The existence theorem covers all strictly concave utility functions, arbitrary distributions of the state variable, and situations in which the dimension of the state variable is large relative to the number of commodities.     

Academic Economic Opinion in East Asia

Surveys of economists' opinions have been reported from around the world over the past two decades, but never (as far as we are aware) from a non-Western country. This article presents the results of our survey of academic economists drawn from ten East Asian nations. Respondents gave their views on a number of economic propositions ranging across issues of deregulation, government business enterprises, micro-economic and labour market reform, income distribution, and attitudes to the market. Finally, the article reports the results of multidimensional scaling techniques which were used to compare the attitudes of East Asian academic economists toward the market with those of their international colleagues. Overall, we found that while our colleagues in Asia make some allowances for circumstances unique to fast-growing developing economies, their predilection toward market solutions to economic problems reflects that of their (predominantly) Western training. Economists in the ‘Tiger’ nations (Hong Kong, Singapore, Taiwan and South Korea) more closely reflect the views of colleagues in the market-friendly West (especially North America, Australia and Germany) than do economists in the newly emerging (‘non-Tiger’) nations such as Malaysia, Thailand, Indonesia and the Philippines.     

Market clearing and derivative pricing

Summary. We develop a method of assigning unique prices to derivative securities, including options, in the continuous-time finance model developed in Raimondo (2001). In contrast with the martingale method of valuing options, which cannot distinguish among infinitely many possible option pricing processes for a given underlying securities price process when markets are dynamically incomplete, our option prices are uniquely determined in equilibrium in closed form as a function of the underlying economic data.Received: 14 April 2003, Revised: 7 January 2004, JEL Classification Numbers: G13, D52.This paper is dedicated to Birgit Grodal, whose strength and character we greatly admire. We are very grateful to Darrell Duffie, Steve Evans, Botond Koszegi, Roger Purves, Jacob Sagi, Chris Shannon, Bill Zame and an anonymous refereee for very helpful discussions and comments. The work of both authors was supported by Grant SES-9710424, and Andersons work was supported by Grant SES-0214164, from the National Science Foundation.     

Technical change and the measurement of productivity in an input-output model

This paper examines the relationship between technical change and partial and total factor productivity measurement in an n-sector input-output economy. The level of productivity is shown to increase if there is technical change and constant final demands. However, the aggregate level of productivity can fall if there is technical change and if final demands alter. The relationship between technical change and productivity is complicated and counterintuitive results can occur. When the rate of growth of productivity is analyzed, it is found that productivity growth can decline when there is technical change and accelerating technical change, even if final demands are constant. Implications for intranational and international productivity comparisons are discussed.     

OPPORTUNISTIC MATCHING IN THE HOUSING MARKET*

We construct a model of the housing market in which agents differ in their flow values while searching. Agents enter the market relaxed (with high flow values) but move to a desperate state (low flow values) at a Poisson rate if they have not already transacted. We characterize the equilibrium steady‐state matching pattern and the joint distribution of price and time to sale (for sellers). The expected price conditional on time to sale falls with time spent on the market, whereas the conditional variance of price first rises and then falls with time on the market.     

Buyer and seller perceptions of transportation purchasing variables

The study in this article involved the investigation of 15 carrier selection variables over three dimensions by three groups with high involvement in the purchasing decision—traffic managers, sales representatives, and sales managers. The primary focus of the study was the identification of significant differences in the assessment of importance of the technical abilities of a carrier, the service orientation of a carrier and the image of a carrier as perceived by sales managers and sales representatives representing the selling systems, and traffic managers representing the buying systems.     

The Cost Efficiency of Real Estate Investment Trusts: An Analysis with a Bayesian Stochastic Frontier Model

Using a stochastic frontier methodology that incorporates Bayesian statistics, this paper analyzes the cost efficiency of real estate investment trusts (REITs) by observing the deviations of the measured costs of individual REITs from a defined efficient cost frontier. Using 1995–1997 data, we extend the previous research in this area and measure REIT efficiency more precisely by isolating random measurement error from the overall deviations from the efficient cost frontier. We calculate the magnitude of each REIT's managerial inefficiency, the industry inefficiency, and returns to scale. In addition, we assess specific characteristics of REITs for their contribution to inefficiency by calculating the odds ratio that a REIT with a specific characteristic is more efficient than a REIT with an alternative characteristic. The results show that, for the years studied, REITs are relatively cost efficient with most REITs facing increasing returns to scale. Additionally, the REIT's use of debt and the REIT's management style significantly affect the cost performance of REITs during the aforementioned time period. Finally, diversification across property types, as measured, does not seem to influence REIT cost efficiency.     

Asymmetric Information,Asset Allocation,and Debt Financing

We analyze a signaling game where firms' financing announcements convey private information about their prospects but a moral hazard problem exists in that managers may suboptimally invest. Consequently, the attempt to address an asymmetric information problem exacerbates moral hazard. The equilibrium recognizes both imperfect information problems. Additionally, the firm must determine how to allocate funds between two technologies differing in cash flow timing and managerial accessibility. We define an above-average firm's comparative advantage as that technology which is most dominant relative to a firm with lesser prospects and show that the resultant equilibria follow the lines of the firm's comparative advantage. Finally, we show that separation may be achieved costlessly, i.e., with no explicit signaling cost.     

Agricultural Extension: Good Intentions and Hard Realities

What considerations lead policymakers to invest in agriculturalextension as a key public responsibility, and what factors andagency incentives explain differences in extension system performance?To help answer these questions, this article provides a frameworkoutlining farmers' demand for information, the public goodscharacter of extension services, and the organizational andpolitical attributes affecting the performance of extensionsystems. This conceptual framework is used to analyze severalextension modalities and their likely and actual effectiveness.The analysis highlights the efficiency gains that can come fromlocally decentralized delivery systems with incentive structuresbased on largely private provision, although in most poorercountries extension services will remain publicly funded.