Masahiro Okuno-Fujiwara

Strategic Information Revelation

We analyze the problem in which agents have non-public information and are to play an asymmetric information game. The agents may reveal some or all of their information to other agents prior to playing this game. Revelation is via exogenously specified certifiable statements. The equilibria resulting from various revelation strategies are used to determine equilibrium revelation of information. Sufficient conditions are provided for complete revelation of all private information. A number of examples are provided illustrating when revelation will or will not occur in commonly analyzed games.

Refining Cheap-Talk Equilibria

Several conceptual points are made concerning communication in games of asymmetric information. Equilibrium refinements of Sender-Receiver cheap-talk games that are based on he concept of a putative equilibrium, and which rely on the presence of a rich language with literal meanings, are discussed. Three nested criteria are proposed: strong announcement-proofness, announcement-proofness, and weak announcement-proofness.

Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis

SummaryRecently, Mankiw-Whinston (1986) and Suzumura-Kiyono (1987) have shown that socially excessive firm entry occurs in unregulated oligopoly. This paper extends this “excess entry” results by looking into strategic aspects of costreducing R&D investment that creates incentives towards socially excessive investments. In the first stage, firms decide whether or not to enter the market. In the second stage, firms make a commitment to cost-reducing R&D investment. In the third stage, firms compete in output quantities. It is shown that the excess entry holds even in the presence of strategic commitments.

Oligopolistic competition and economic welfare: A general equilibrium analysis of entry regulation and tax-subsidy schemes

Abstract Two contributions to the general equilibrium analysis of an oligopolistic economy with free entry are intended. First, we generalize the excess entry theorem to the effect that a marginal decrease in the number of oligopolistic firms from the free entry equilibrium level improves economic welfare. Second, we explore the Pareto-improving tax-subsidy schemes in an oligopolistic economy. Several self-financing and Pareto-improving tax-subsidy schemes will be identified. In contrast with the preceding analysis by Atkinson and Stiglitz, which focused on the ‘long-run’ incidence of corporate taxation, we analyse the ‘short-run’ as well as ‘long-run’ welfare implications of various policies under generalized conditions.

Interdependence of industries, coordination failure and strategic promotion of an industry

Abstract This paper analyzes coordination failure that arises from interdependence of industries. Assuming one of these industries is characterized by oligopolistic competition, Marshallian externalities are logically explained. The conditions that create external economies are identified, and policy implications for strategic promotion are discussed.

Monitoring cost, agency relationships, and equilibrium modes of labor contracts

Abstract In this paper, we attempt to give an economic explanation for differences in institutional framework between Japan and Western countries. We propose that the differences may be created because economies sometimes have multiple equilibria, each of which is characterized by a different institutional norm. Thus, differences in institutional framework that exist between different societies may be ascribed neither to the difference in “cultures” nor to underlying behavioral norms or parameters. Particularly, we investigate why and how different modes of economic relations arise in a labor market when work incentive is a crucial factor in labor management. Like many other papers in this field, this paper shows that there may be involuntary unemployment in order to create a threat of dismissal for workers who shirk their duties. One novelty of the current paper lies in the fact that, by introducing an immediate penalty to those workers who are found shirking, equilibrium labor contracts may not be of the form in which contracts are automatically renewed as long as workers are not found shirking. Thus, our economy is found to be characterized either by long-term labor contracts with involuntary unemployment or by short-term labor contracts with no unemployment, depending upon the value of underlying parameters. We identify the factors which make firms choose different labor contracts, and perform comparative statics. Moreover, we show that the economy normally has two equilibria, the one described above and the other characterized by long-term labor contracts with no unemployment. Work incentive is created by the belief that dismissed workers will not find new jobs. The latter type of equilibrium is proved to be Pareto superior. The implications of multiple equilibria in such a framework are discussed.

Domestic and international strategic interactions in environment policy formation

In this paper, we establish the most possilbe general formulation of the technology governing carbon-gas emission, giving rise to global external diseconomies, and ty to explore into the strategic interactions,both domestic and international, when an individual country decides on the environmental policies. Through the comparison among emission taxes, quotas, and standard in the perfectly competitive private economies, we find that the first two policies are equivalent but they are different in effects by virtue of what we may call the tax-exemption effect of emission standards. Such a difference in the policy effect further affects the other countrys welfare through the global externalities, amplified through whether the government can precommit to either the emission tax or the emission standard. Copyright Springer-Verlag Berlin Heidelberg 2003

Social Relations and Endogenous Culture

The current state of economics as a science is critically evaluated in view of its lack of emphasis on sociological and psychological factors. In particular, I argue that humans are embedded in social structures and that they choose actions taking account of the social contexts in which they live and the social interactions to which they belong. Preferences then should be considered not as exogenously given but as endogenously evolved, allowing for bounded rationality and psychological factors. I provide a brief sketch of the possible model formulation for a more desirable theory, invoking network theory and an indirect evolutionary approach.

Evolution of Economic Systems: The Case of Japan

In this paper, we shall provide a theoretical overview of what are the chief implications of fucusing institutions and economic systems, what are the main sources of their evolution, how are their evolutionary paths affected by various economic factors. In the latter half, we shall provide a brief historical account of evolution of an actual economic system using Japanese economic history as an example.

AN INTERVIEW WITH HIROFUMI UZAWA

Hirofumi Uzawa is one of the giants of modern economic theory. Hiro is probably best known to the readers of Macroeconomic Dynamics (MD) for his seminal articles on two-sector economic growth. The two-sector technology is more general than the one-sector technology: it allows a production possibility frontier that is strictly concave to the origin as opposed to being necessarily flat. This generality allows richer and more complex dynamics. This makes it especially useful for the analysis of economic fluctuations. The two-sector model is perfect for dynamic international trade.Hiro is also well known to macroeconomists for his seminal contribution to endogenous growth. In his article in the 1965 IER, productivity permanently increases as the result of permanent accumulation of human capital. Uzawa was thus a first mover in the new growth theory. The symbol H (for Human Capital, or for Hiro?) is today everywhere in models of economic dynamics.On his own and through his many students and mentees, Hiro has been the major inspiration for the modern theory of optimal economic growth. He taught a generation of pure and applied economists how to apply Pontryagins maximum principle in economic dynamics. It seems that Uzawa introduced—or at least pushed the use of—phase diagrams in economic dynamics. Where would we be without this essential tool?Most readers of MD are likely to think first of Uzawas contributions to macro, but Hiro is equally well known for his superb works on mathematical economics, general equilibrium, and demand theory. Hiros mathematics is elegant and often very deep. Like the quality mathematician that he is, he does not apply technique for techniques sake.Hiro has made fundamental contributions to nonlinear programming. For the convex (but not necessarily smooth) case, he employed Slaters condition to obtain Kuhn–Tucker multipliers that satisfy the saddlepoint property necessary for an optimum. For the smooth (but not necessarily convex) case, Arrow, Hurwicz, and Uzawa introduced the current version of the constraint qualification, which ensures that optimality implies the existence of Kuhn–Tucker multipliers satisfying the saddlepoint property.Hiros paper “Walrass Existence Theorem and Brouwers Fixed Point Theorem†in the Economic Studies Quarterly (1962) is a hidden gem on general equilibrium. This paper can be seen as foreshadowing Sonnenscheins result on excess demand functions. Hiro clarified old, important questions about recovering preference maps from demand functions. Hiro was probably the first to convincingly show—in the context of tatonnement adjustment—the important distinction between local stability and global stability in economic dynamics.We have given here only a glimpse into the very large body of beautiful, influential Uzawa papers. Hiros splendid bibliography is given at the end of the interview. Some of the work that Hiro has pursued energetically has yet to be widely recognized. One thinks, for example, of the Penrose Effect, Hiros modeling of the organizational costs incurred in adding capital or making other changes in the way a firm does business.Hiro has had many successful students and mentees. Your MD interviewers are lucky to have been among those whom Hiro has influenced profoundly. A very incomplete list of the others would also include Dave Cass, Steve Goldman, Harl Ryder, Hajime Oniki, Bob Lucas, George Akerlof, Joe Stiglitz, Miguel Sidrauski, Morris Teubal, Assaf Razin, Guillermo Calvo, Bill Ethier, and Lenny Mirman.Hiro is widely recognized and even revered in Japan. He was elected to the very selective Japan Academy in 1989 at a remarkably young age. He was named “A Person of Cultural Merit†in 1983 and elected to the Order of Culture in 1997. Hiro has received significant international recognition. He was President of the Econometric Society. He is a Fellow of the Econometric Society, Member of the American Academy of Arts and Sciences, Foreign Honorary Member of the American Economic Association, and Foreign Associate of the U.S. National Academy of Sciences.This interview took place nearly 10 years ago. We apologize to the readers and to Professor Uzawa for the delay in getting the transcript to the editor. The interview was held at the Research Center on Global Warming of the Development Bank of Japan, at which Hiro plays an important role. Four of us—Uzawa, the two interviewers, and Yumiko Baba, who was then a post-doc in economics at the University of Tokyo, there to operate the tape recorder—were collected at the Meiji Gakuin University in central Tokyo and whisked away in a large black automobile to Hiros home court at the Bank. Hiro is an imposing figure: tall and erect with a very long, pointed white beard. His eyes are very active. He strokes his beard in a soothing manner. It is not difficult to be in awe of him. The interview took an even more formal tack because there were two in the room with the nickname “Hiro.†It was hence efficient to use last names at times.The interviewers had agreed to try to steer Uzawa toward a discussion of his well-known basic technical contributions and away from his less well-known and more political contributions. In the end, we failed to steer Hiro onto any course other than his own. This is mostly as it should be. In this interview, you will hear about some of the technical contributions for which Hiro is widely known. You will also hear about what motivated him to enter economics, his strong social concerns and strong political views, the turbulence of the war years and the postwar years, and his recent work and interests. A few of the paragraphs at the end of the interview were added to bring the record up to date. What comes through is a picture of Hirofumi Uzawa, a truly distinguished scholar and a person dedicated to human betterment.Hiro talked in his usual warm, friendly voice. He peppered the interview with his strong opinions about other major economists, often with lively anecdotes. Of course, Hiros opinions are his own, not those of the interviewers or the editors. We hope that the readers will get as much out of this conversation with Hiro as we did.