We derive a family of probabilistic choice models including the multinomial logit model, from a microeconomic model in which the decision maker has to make some effort in order to avoid mistakes when implementing any desired outcome. The disutility of this effort enters the decision maker's goal...

This is Part II of a study of the axiomatic and its recent applications to game theory and resource allocation. Part I is a user's guide. Part II discusses alternatives to the axiomatic method and answers criticisms often addressed at the axiomatic method.

We develop a simple model to analyse the ‘dual-track’ approach to transition to a market economy as a mechanism for implementing efficient Pareto-improving economic reform, that is, reform achieving efficiency without creating losers. The approach, based on the continued enforcement of the...

We introduce labour market imperfections (i.e. unions and the existence of a wage floor) in a finance-constrained monetary economy with heterogenous agents and increasing returns to scale due to labour and capital productive externalities. We find that indeterminacy emerges for empirically...

I present a simple model in which it is possible that opening a new market makes everybody worse off. Unlike previous examples in the literature, the analysis does not rely on relative price changes of different consumption goods. This is shown in a standard framework in which uninformed traders...

Most studies on the green tax reform issue point out that environmental taxes exacerbate pre-existing tax distortions, thereby increasing the welfare costs associated with the overall tax code. As a result, the optimal environmental tax should lie below the Pigovian level (or marginal social...

After almost three decades of sustained economic growth, Indonesia is currently in the midst of a major economic and financial crisis. This paper seeks to contribute new evidence on three questions: who has been affected most by the crisis, how they have been affected and how they have responded...

Technological progress in the economy has an impact on a monopolist's optimal choice of product quality by shifting either the demand or the cost curves. When quality is reduced in response to new technolgy we have a On the assumption that consumers with higher reservation prices for the good...

Relative income differences are likely to lead to envy within a reference group. Envy in turn influences social behavior and on individual performance. While positional concerns are apparent in daily life, empirical evidence is rare in the economic literature. This paper investigates the impact...