Jacques H. Dreze

Cooperative games with coalition structures

Many game-theoretic solution notions have been defined or can be defined not only with reference to the all-player coalition, but also with reference to an arbitrary coalition structure. In this paper, theorems are established that connect a given solution notion, defined for a coalition structure ℬ with the same solution notion applied to appropriately defined games on each of the coalitions in ℬ. This is done for the kernel, nucleolus, bargaining set, value, core, and thevon Neumann-Morgenstern solution. It turns out that there is a single function that plays the central role in five out of the six solution notions in question, though each of these five notions is entirely different. This is an unusual instance of a game theoretic phenomenon that does not depend on a particular solution notion but holds across a wide class of such notions.

Consumption decisions under uncertainty

Publisher Summary This chapter discusses three issues related to consumption decisions under uncertainty, namely, the determinants of risk aversion for future consumption, the impact of uncertainty about future resources on current consumption, and the separability of consumption decisions and portfolio choices. These issues are discussed in the context of a simple model introduced, together with the assumptions, in the chapter. The chapter presents a derivation of a (local) measure of risk aversion for delayed risks which, like the Pratt measure in the timeless context, represents twice the risk premium per unit of variance for infinitesimal risks. The aversion for delayed risks grows as curvature of the indifference loci increases, or consumers who would respond strongly to a (compensated) change in the rate of interest are relatively better suited to carry delayed risks.

Investment Under Private Ownership: Optimality, Equilibrium and Stability

The theory of equilibrium and efficiency of resource allocation, initially developed for a world of certainty, has been reinterpreted for a world of uncertainty, thanks to a suggestion made by Arrow [1] and pursued further by Debreu [7].2

Europe's Unemployment Problem

Since 1974 Europe has been burdened with steadily persistent and increasing unemployment. This book, prepared under the auspices of the European Unemployment Program, uses a compact econometric model to identify the sources of the unemployment problem and to suggest remedies. Focusing on ten European countries, with a chapter on the United States for comparative perspective, the studies are unique in adopting a single theoretical model to guide empirical research. The common framework allows for sharply focused investigation and produces findings whose significance does not end at national boundaries. The indepth country studies are preceded by an overview that includes a detailed description of the theoretical model, a summary of findings, and policy recommendations and a chapter by Olivier Blanchard that discusses different approaches to the analysis of the unemployment problem and relates this work to earlier efforts.

A Discussion of Belgian Unemployment, Combining Traditional Concepts and Disequilibrium Econometrics

With a GDP of less than

Growth and employment: The scope of a European initiative

100 billion and exports of more than

BAYESIAN ANALYSIS OF SIMULTANEOUS EQUATION SYSTEMS

60 billion, Belgium comes perhaps closer than any other country to being a ‘small open economy’. Consequently, trends in world trade and export performance have a major impact on domestic activity, whereas the impact of domestic fiscal policy is damped by import leakages. Table 1 presents a few figures confirming these observations.

Generic inefficiency of stock market equilibrium when markets are incomplete

This paper is an abridged version of a policy initiative paper, prepared with a dozen colleagues in Louvain-la-Neuve and Paris. We propose a set of policies to cope with Europes persistent unemployment, including two medium-term programs: a drastic reduction of the indirect cost of unskilled labour and an ambitious stimulation of targeted investments. The bottom line is that policies addressing meaninfully Europes unemployment problem must be pursued on a bolder scale than currently contemplated.

Bayesian regression analysis using poly-t densities

Publisher Summary This chapter discusses the Bayesian inference and identification. A Bayesian analysis of the scanning electron microscope (SEM) proceeds along the same lines as any other Bayesian analysis. Thus, if the analyst has chosen to work in a given parameter space, a prior density on that space is defined and Bayes theorem is applied to revise this prior density in the light of available data. The resulting posterior density is then used to solve problems of decision and inference. Predictive densities for future observations can also be derived. The chapter discusses numerical methods for evaluating key characteristics of posterior and predictive density functions. For models with many parameters, such as most simultaneous equation models, analytical methods remain indispensable to evaluate these densities—either fully, or conditionally on a few parameters amenable to numerical treatment, or approximately to construct importance functions for Monte Carlo integration. The classes of prior densities permitting analytical evaluation of the posterior density are limited. In most Bayesian analyses they comprise essentially the so-called noninformative and natural-conjugate families.

Market allocation under uncertainty

A stock market is a mechanism by which the ownership and control of firms is determined through the trading of securities. It is on this market that many of the major risks faced by society are shared through the exchange of securities and the production decisions that influence the present and future supply of resources are determined. If the overall structure of markets is incomplete can the stock market be expected to perform its role of exchanging risks and allocating investment efficiently? It is this question that we seek to answer.