Economic Inquiry

Articles from Vol. 32, No. 4, October

A Long-Run View of German Dominance and the Degree of Policy Convergence in the EMS
I. INTRODUCTION When the European Monetary System (EMS) was established in March 1979, the member countries agreed to gradually move to a European Monetary Union (EMU). At the Maastricht summit on December 9-10, 1991, the member nations$signed an agreement...
Alternative Collective-Goods Models of Military Alliances: Theory and Empirics
I. INTRODUCTION In a seminal article, Mancur Olson and Richard Zeckhauser [1966] characterized the North Atlantic Treaty Organization (NATO) in the mid-1960s as a group of allies who shared a pure public good in the form of deterrence. To qualify as...
Campaign War Chests as a Barrier to Entry in Congressional Races
I. INTRODUCTION Issues surrounding the nature and degree of competition in political races have been examined extensively in both the economic and political science literature, with most attention focused on the interplay between incumbent and challenger...
Do Unionized Firms Hire Better Workers?
I. INTRODUCTION Many economists firmly believe that union firms offset higher union wages by hiring better workers. The contrasting view--that union employers react to higher union wages by hiring poorer-quality workers--is regarded as impossible.(1)...
Evaluating Changes in the Distribution of Capital Wealth
I. INTRODUCTION Over the last several years, increasing concern has been expressed about wealth and income inequality.(1) While most of the concern centers on the deteriorating economic condition of the poor, some of it is directed against the very...
How Many Paychecks? an Example of a Self-Imposed Constraint
I. INTRODUCTION The case of Ulysses and the sirens is one of the most interesting puzzles for the model of rational behavior.(1) Ulysses knew enough about himself to know that he would not be able to control his behavior when under the spell of the...
Incomplete Ownership, Rent Dissipation, and the Return to Related Investments
I. INTRODUCTION When ownership rights to a resource are costless to enforce, trades occur and an equilibrium price emerges. In such cases it is a price and a transfer of wealth from one agent to another that rations use of the resource. Absent ownership...
On the Infrequent Adjustment of Price by Firms
I. INTRODUCTION Recent research by Blinder [1991] indicates that as many as 75 percent of all firms change price no more than twice a year. According to the Wall Street Journal these findings seem to have caused considerable surprise.(1) There is, however,...
Optimal Monetary Policy in a Cash-In Advance Economy
I. INTRODUCTION This paper addresses the issue of optimal monetary policy within a particular general equilibrium model of the monetary transmission mechanism. The model analyzed is a member of the recent class of "liquidity models" of the monetary...
The 1985-86 Oil Price Collapse and Afterwards: What Does Game Theory Add?
I. INTRODUCTION Between August 1985 and August 1986, crude oil prices plummeted from $28 per barrel to $8 per barrel before stabilizing at $18 per barrel in the fall of 1986. Traditional oligopoly theory explanations point to the inherent fragility...
Why Do Firms Contrive Shortages? the Economics of Intentional Mispricing
Economists typically inveigh against government-imposed price controls, finding them and the shortages they create to be Kaldor-Hicks inefficient.(1) But not all observed shortages result from government price controls. When firms experience sudden changes...