Non-cooperative public-good provision and productivity differentials

Article Abstract:

The generality of a Rotten Spouse Theorem developed by Konrad and Lommerud (1995) was examined. The Rotten Spouse Theorem states that income transfers to the spouse with comparative advantage in the production of the household public good are Pareto improving and that an egoistic spouse with comparative advantage will prefer transferring income to the other spouse, resulting in increased welfare for both spouses. The theorem generalizes to an arbitrary number of agents but does not hold for general technologies for the production of the public good.

Models, Technology, Public goods, Income, Air pollution, Production (Economics)

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Robert Merton, Myron Scholes and the development of derivative pricing

Article Abstract:

The derivative pricing formula developed by Robert Merton, Myron Scholes and Fischer Black stands out from other formulas as it is an effective method for valuing a class of financial instruments that were considered unimportant for a time. The formula shows how risk premiums may be avoided in options pricing by factoring them in the stock price and how to construct such a 'riskless' portfolio.

History, Appreciation, Derivatives (Financial instruments), Economists, Value (Economics)

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Rational choice in strategic environments: further observations

Article Abstract:

An analysis of Bernheim's 1986 paper on the requirements for rational choice in strategic environments reveals that the pair of rationalizable strategies does not belong to axioms 1,2 and 5 and that there is an axiom that is not always admissible. Bernheim points to optimization, consistency, in dependence and common prior as four possible requirements for rational strategic behavior.

Management science, Analysis, Comparative economics

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