Volume 23, Issue 3 (September 2012) Cover pages Abstract | PDF (170 kilobytes) No abstract is available for this article. Indeterminacy under Social Constant Returns and Costs of Adjusting Capital, Pages 187–200 Jinill Kim Abstract | PDF (159 kilobytes) It has been shown that, in a small open economy with traded and nontraded goods, indeterminacy occurs under constant returns to scale for the social technology with an arbitrarily small degree of externalities. This paper claims that costs of adjusting capital increase the required degree of externalities for indeterminacy to arise. Under empirically plausible levels of adjustment costs and externalities, indeterminacy does not arise in a model with social constant returns.t arise in a model with social constant returns. Semiparametric Estimation of Dynamic Discrete Choice Models of Optimal Stopping with Unobserved Heterogeneity, Pages 201–212 Minki Hong Abstract | PDF (118 kilobytes) This paper derives a multinomial logit form for dynamic discrete choice models of optimal stopping and suggests a two-step estimator. The first stage estimates nonparametrically the choice probability of terminal state next period. The second stage is an implementation of modified multinomial logit estimation. This paper also suggests semiparametric conditional choice probability (CCP) estimators for discrete choice dynamic models allowing for unobserved individual heterogeneity. I describe a modified Expectation-Maximization (EM) algorithm that involves nonparametric first stage estimation. Optimal Feasible Tax Mechanism for a Heterogeneous Economy, Pages 213–236 Byungchae Rhee Abstract | PDF (279 kilobytes) The main goal of this paper is to extend the model of optimal feasible tax mechanism developed in Rhee (2008) to a heterogeneous economy in which agents have different characteristics related to their income or wealth. We provide a full characterization of optimal feasible tax mechanism for such a heterogeneous economy and find that if the level of low endowment is relatively low, only the incentive compatibility constraint of a rich minority agent will be binding. We also present some interesting comparative statics analyses as to how the optimal mechanism will respond to a change in the primitives of the economy. These analyses explain how the incentive problem of a heterogeneous economy will be resolved efficiently under feasibility constraint. Under What Conditions Do the Poor Hold Cash in Pairwise-Trade Models?, Pages 237–252 Ohik Kwon, Manjong Lee Abstract | PDF (177 kilobytes) Most existing pairwise-trade models of money predict that the poor may not hold any money in the presence of interest-bearing liquid assets. We resolve this seemingly implausible prediction by incorporating cash and interestbearing checking account into a standard search-theoretic model. If the transaction cost of a debit card is neither too small nor too large, there is a coexistence equilibrium in which the poor hold cash for their small transactions, whereas the rich hold interest-bearing deposits and use a debit card for their large transactions. A Patent Race for a Drastic Innovation with Large Set-Up Cost, Pages 253–260 Hyung Bae Abstract | PDF (103 kilobytes) We analyze a situation in which a monopolist incumbent and a potential entrant compete for the patent of a new technology, the owner of which can monopolize the market. If the set-up cost for the new technology is so large that the incumbent would let the patent sleep, the incumbent's preemptive incentive is greater while its stand-alone incentive is smaller than the entrant's. We find that for a drastic innovation, the incumbent invests more in R&D than the entrant if the market is highly profitable under the current technology and the new technology incurs large set-up cost.