Price Uncertainty and the Heckscher-Ohlin Model

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The Stock Market and the Theory of the Firm Under Price Uncertainty

The purpose of this paper is to reexamine the criterion of value maximization when price uncertainty is present. Whereas we wish to work within a perfectly competitive framework, we will make one alteration to the usual set of competitive assumptions. Since we wish to focus on behavior in an economy where risks may only be shared incompletely, we will restrict certain forms of entry into the capital market. Indeed, if we would allow unrestricted entry, we would expect to find that the market would soon possess the equivalent of a complete set of contingent claim markets. Individuals could easily accomplish this by trading in the separate contingent claim components of any existing stream of returns. To prevent this unpackaging, we will allow only a specific type of entry. Namely, we will allow entering firms to offer return functions from a predetermined set of functions. This set will include only those return functions which are initially present in the economy. This assumption precludes purely financial entry, but makes all existing technologies for the production of returns freely accessible

Collective Choice Mechanisms for Achieving Efficient Stock Market Allocations

This paper examines two collective choice mechanisms for achieving efficient stock market allocations. The first, proposed by Helpman and Razin, is shown to have the property that an equilibrium rarely exists. An alternative mechanism, due to Hurwicz, is examined and it is shown that the resulting equilibria under this mechanism do exist and are efficient

Uncertainty and the Theory of Tax Incidence in a Stock Market Economy

[Introduction] Commencing with Harberger's (1962) classic paper, a number of studies have analyzed the incidence of taxation in the context of a deterministic, two-sector, two-factor general equilibrium model. Recently, R. N. Batra (1975) and R. A. Ratti and P. Shame (1977a, 1977b) have reexamined the robustness of these deterministic results for the case in which production uncertainty is incorporated into the model. By using "entrepreneurial" models in which the firm is assumed to maximize the expected utility of profits, they find that the incidence of taxes depends on the preferences and probability assessments of the entrepreneur, and in general, the deterministic results no longer obtain

Models of the firm and international trade under uncertainty

One of the significant advances in economic theory has been the incorporation of uncertainty into the models used to investigate economic behavior. The explicit treatment of uncertainty has permitted economists to predict the behavior of economic agents operating in an uncertain environment and to explain, for example, the existence of insurance, stock markets, and forward exchange markets that have no necessary role in a deterministic world. One natural application of the economics of uncertainty has been to the study of international trade and exchange in which uncertainty regarding exchange rates and relative prices is a prominent feature of the environment of economic agents. The purpose of this paper is to frame the international trade results developed in the recent works of Wolfgang Mayer and Raveendra Batra in light of the current state of the theory of the firm under uncertainty. Before analyzing the effect of uncertainty on international trade, a perspective on the application of the economics of uncertainty to neoclassical theory will be presented with an emphasis on the theory of the firm

Efficiency, equality and labelling: an experimental investigation of focal points in explicit bargaining

Efficiency, equality and labelling: an experimental investigation of focal points in explicit bargainin

The Transfer Problem under Uncertainty: The Existence of Pareto-Improving Transfers

This paper examines the effect of a unilateral transfer on the welfare of two countries under uncertainty. The traditional welfare effects are summarized and extended for a pure exchange economy with complete contingent claims markets. It is demonstrated that the effects of a transfer in such an economy is isomorphic to the effects in the traditional certainty case where a unilateral transfer always decreases the welfare of the transferor and increases that of the transferee. Further, in the absence of a complete set of markets, examples are exhibited in which a unilateral transfer increases the welfare of both countries

Asset Valuation in an Experimental Market

The time path of asset prices is studied within a stationary experimental environment. After several replications prices converge to a perfect foresight equilibrium. A sequential market having an "informational trap" and a futures market are also studied

Theories and Tests of Blind Bidding in Sealed-bid Auctions

[No abstract