The standard algebra of experessing knowledge and common knowledge in game theory is critically examines. It is argued that this algebra is flawed because it assumes implicitly that information partitions of individuals are common knowledge, and that all individuals know all the truths of...

This paper studies optimal experimentation by a monopolist who faces an unknown demand curve subject to random changes, and who maximises profits over an infinite horizon in continuous time. We show that there are two qualitatively very different regimes, determined by the discount rate and the...

We propose a new bankruptcy procedure that makes use of multiple auctions. The procedure is designed to work even when capital markets do not function well (for example, in developing economies, or in economies in transition) - although it can be used in all economies.

This paper analyses optimal irreversible investment policy when profits are subject to a multiplicative geometric Brownian motion shock. The marginal product of capital is increasing initially and decreasing thereafter. In the latter range, optimal policy is familiar: capacity is added gradually...

This paper studies the impact of lobbying on political competition and policy outcomes in a framework which integrates the citizen-candidate model of representative democracy with the menu-auction model of lobbying. Positive and normative issues are analysed. On the positive side, lobbying need...

A partial competitive equilibrium model is set up for the determination of profit-maximising investment in a production technique which has constant returns to scale itself, but at least one of its inputs has an increasing price schedule, so that its price is determined in equilibrium....

We analyse the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them. In the first part of the paper we study the optimal debt contract - specifically, the trade-off between the size of the loan and the repayment - under the assumption that some debt...

We examine local stability under learning of stationary Markov sunspot equilibria (SSEs) in a simply dynamic nonlinear model. Necessary and sufficient conditions for local convergence of a recursive learning algorithm to SSEs are shown to be given (generically) by expectational stability...

This paper examines justifications of the rational expectations hypothesis that rely on the analysis of the agents' mental forecasting ("educing") activity which involves "forecasting the forecasts" of others etc. The corresponding eductive learning stability concept, based on the game...