We investigate the outcomes of simultaneous price competition in the presence of private information on the demand side. Each of two sellers offers a different variety of a good to a buyer endowed with a private binary signal on their relative quality. We analyze how the unique equilibrium of...

Friedman identified his "natural rate" as Walrasian equilibrium. Keynes's "full employment" is also classical equilibrium: labor markets are clearing at existing real wages. Why is equilibrium unemployment not zero? Keynes and Friedman cite, but do not explain, "frictional" unemployment. They...

Recently Perron (1989) has carried out tests of the unit root hypothesis against the alternative hypothesis of trend stationarity with a break in the trend occurring at the Great Crash of 1929 or at the 1973 oil price shock. His analysis covers the Nelson-Plosser macroeconomic data series as...

Real stock prices seem to overreact to changes in long-term interest rates. That is, real stock prices drop when long-term interest rates rise (and rise when they fall) more than would be implied by a rational expectationspresent value model where expectations are based on a vector...

This paper investigates the Harsanyi-purifiability of mixed strategies in the repeated prisoners' dilemma with perfect monitoring. We perturb the game so that in each period, a player receives a private payoff shock which is independently and identically distributed across players and periods....

Fully modified least squares (FM-OLS) regression was originally designed in work by Phillips and Hansen (1990) to provide optimal estimates of cointegrating regressions. The method modifies least squares to account for serial correlation effects and for the endogeneity in the regressors that...

The swiftness and devastating impact of recent financial crises have taken many market participants by surprise, and pose challenges for economists seeking a theory of the onset of a crisis. We propose such a theory based on two features. The actions of diverse economic actors which undermine...

The subject of this paper is modelling, estimation, inference and prediction for economic time series. Bayesian and classical approaches are considered. The paper has three main parts. The first is concerned with Bayesian model determination, forecast evaluation and the construction of evolving...

The pricing tests for optimality in a convex programming problem are not available when the production possibility set displays economies of scale. The paper argues that indivisibilities in production are one of the major causes of such economies. The constrained optimization problems arising in...

This paper provides detailed responses to the following 8 discussants of my paper "To Criticize the Critics: An Objective Bayesian Analysis of Stochastic Trends": Gary Koop and Mark Steel; Edward Leamer; In-Moo Kim and G.S. Maddala Dale J. Poirier; Peter C. Schotman and Herman K. van Dijk; James...