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...

This paper presents a one-sided incomplete (asymmetric) information bargaining game between a firm and a worker embedded in a general equilibrium framework. The model predicts business cycle fluctuations in the economy in response to changes in aggregate productivity. The employment level in the...

We identify and investigate the basic ?hold-up? problem which arises whenever each party to a contingent contract has to pay some ex-ante cost for the contract to become feasible. We then proceed to show that, under plausible circumstances, a ?contractual solution? to this hold-up problem is not...

We consider the problem of bargaining over the disclosure of interim research knowledge, between two participants in a R & D race or contest, for an ultimate, patentable invention. Licensing fee schedules, as functions of the "amount of knowledge" disclosed by the leading to the lagging agent,...

We show that, in games of complete information, the Aumann-Brandenburger (1995) sufficient conditions for Nash equilibrium in beliefs also imply common knowledge of rationality. We then consider beliefs held in games of incomplete information, especially beliefs the players hold, conditioning on...