Abstract | PDF (640 kilobytes)

This paper provides a theoretical account for the fundamental defects of commodity money as an imperfectlyrecognizable medium of exchange. We incorporate the recognizability of silver as a medium of exchange explicitly into the search-based model where silver can be either used as a medium of exchange or invested in the world market for a given rate of return. When the recognizability of silver becomes severe, both the real balance of silver as a medium of exchange and the quantity traded decrease substantially. The declining real balance of silver is due to either a decrease in the nominal balance of silver when silver is abundant or a decrease in the price of silver when silver is scarce. The variability of silver demand and price also affects relative prices as long as silver coin is used as an imperfectly-recognizable medium of exchange. An increase in the recognizability of silver improves welfare through its effects on extensive and intensive margins, net of opportunity cost of holding nominal balance of silver for a trade. This implies the superiority of fiat money which is almost perfectly recognizable.

Abstract | PDF (847 kilobytes)

In this research, we derive the sufficient conditions and types of market failures due to the discrepancies between private and social incentive in the entry decisions of firms. The main results of this paper are as follows. First, for the case where there is only one potential firm, market failure does not occur in the entry decision. Second, when there are two potential firms, there occurs too 'little entry' for the small technological progress, and 'excess entry' for the large one, which is irrespective of the social optimum standard. Third, when there are three potential firms, there occurs only 'excess entry' for the case where social optimum standard is 'social welfare' (or 'producer surplus'). And there occur both 'little entry' and 'excess entry' when social optimum standard is 'consumer surplus'. Fourth, for the case where the number of potential firms are 4 and 5, only 'excess entry' can occur for the 'social welfare' (or 'producer surplus') criterion case, and only 'little entry' can occur for the 'consumer surplus' standard case. Thus the market failure types are affected by the number of potential firms, the size of technological progress, and the social optimum standard. Therefore, it is necessary to decide the policy direction by considering these factors comprehensively.

Abstract | PDF (741 kilobytes)

We study the properties of the likelihood-ratio test for unobserved heterogeneity in duration models using mixtures of exponential and Weibull distributions proposed by Cho and White (2010). As they note, this involves a nuisance parameter identified only under the alternative. We apply the asymptotic critical values in Cho and White (2010) and compare these with Hansen's (1996) weighted bootstrap. Our Monte Carlo experiments show that the weighted bootstrap provides superior asymptotic critical values.

Abstract | PDF (675 kilobytes)

This paper considers incentive-constrained efficient contractual matching of individuals in the presence of moral hazard. By considering an economy with finite number of individuals, this paper shows what were assumed away in continuum models. Contract arbitrageurs specializing in writing (randomized) contracts, insurers, a market for lotteries on contracts, Lindahl-like prices for the lotteries, and a public randomization device are required for the incentive-constrained efficiency. The public randomization device needs to coordinate the matchings of individuals, and each team's contract is dependent on other firms' outputs. Insurers are committed to avoid cream-skimming, and essentially cross-subsidize across teams. This unrealistic role of the insurers shows the impossibility of decentralization in a reasonable sense (even when economics agents are price takers). Applications in Labor economics and Theory of merger are discussed. Technical contribution is to formulate a finite economy by linear programming.