Durable‐Goods Monopoly with Privately Known Impatience: A Theoretical and Experimental Study

We analyze a durable‐goods monopoly selling a single unit of a good to a buyer whose value of the good is private information. The discount factors of the buyer and the seller may differ and are also privately known. We derive the closed‐form solution of a two‐period game and compare it to the behavior observed in experiments. The data are to a large extent consistent with the predictions.     

Industrial investment and financial requirements

The present period of slack investment is likely to give way to a fresh investment cycle in the next 5–10 years. Internationally the savings necessary for the provision of capital will be more abundant than ever. However, the structure of savings is changing in favour of risk-averting forms. This is true of savings of private house-holds which benefitting from rising incomes, are increasing in significance. The same applies to the provision of savings, if any, through official insurance schemes, which at least in Europe are found to invest virtually exclusively in fixed-interest securities. The agglomeration of capital in the oil-rich nations, which is also invested with a view to risk aversion, operate in the same direction. By contrast, the capability of firms to generate savings and hence risk-bearing funds is declining. This lack of risk capital threatens to create serious financial obstacles to growth. For risk-bearing corporate capital funds form the yardstick by which the banks, as intermediaries between savers and investors, assess their possibilities to assist enterprises through loans or bond issues. This situation gives rise to political and social problems which must be considered seriously in all long-term policy planning and forecasts.     

Orphan Drug Act on congressional agenda.

In 1983, Congress passed the Orphan Drug Act to encourage development of pharmaceuticals used in the treatment or diagnosis of diseases that occur so rarely that there is no financial incentive for development of these so-called "orphan drugs." The Act established, among other things, exclusive marketing rights on unpatentable orphan drugs for a period of seven years and a tax credit equal to 50 percent of the cost of conducting human clinical trials. It also authorized the Secretary of Health and Human Services (HHS) to make grants and enter into contracts to reduce the costs of clinical testing in orphan drug development.     

Environment and innovation: Introducing cleaner production

The paper reviews some innovative pilot projects for promoting environmental management among small‐ and medium‐size companies. These projects leave much room for optimism insofar as they suggest that ‘cleaner production’ is both ecologically and economically efficient. Significantly they also show that much can be gained through organizational changes.     

Public information and social choice

We examine the value of public information when a society uses a social choice rule to decide among a set of outcomes. We require that a social choice function satisfies unrestricted domain, non-decisiveness and the Pareto principle. We show that there exist payoff structures for every social choice function, such that an arbitrary subset of voters is worse off by public information. We apply the proposition to collective information acquisition and to irreversible investments. Received: 2 June 1997/Accepted: 30 September 1998