The two-fund separation theorem from static portofolio analysis generalizes to dynamic Lucas-style asset models only whern a consol is present. If all bonds have finite maturity and do not span the consol, then equilibrium will deviate, often significantly, from two-fund separation even with the...

Static oligopoly theories disagree on whether mergers are profitable. The Cournot model says that many potential mergers would be unprofitable whereas the Bertrand model says that all mergers are profitable. We show that, for economically sensible parameter values, mergers are profitable for...