Mordecai Kurz

Bio: Mordecai Kurz is an academic researcher from Stanford University. The author has contributed to research in topics: Rational expectations & Equity premium puzzle. The author has an hindex of 32, co-authored 85 publications receiving 4993 citations. Previous affiliations of Mordecai Kurz include University of California & Hebrew University of Jerusalem.

Public Investment, the Rate of Return, and Optimal Fiscal Policy

Abstract: This book, co-authored by the Nobel-prized economist, Kenneth Arrow, considers public expenditures in the context of modern growth theory. It analyzes optimal growth with public capital. A theory of 'controllability' is developed and injected into public economics and growth models. Originally published in 1970

Endogenous formation of coalitions

Abstract: THE FORMATION OF COALITIONS is a fundamental problem in game theory. By a "coalition" is meant a group of "players" (e.g., economic or political agents) which decide to act together, as one unit, relative to the rest of the players. This includes the instances of syndicates, unions, cartels, blocks, political parties, parliamentary coalitions, etc. We would like to emphasize that forming a coalition does not eliminate the individual players as decision makers. In all interactions with the other players, coalition members act as one unit (it may be useful to think of a "representative agent" taking their place);2 however, this arrangement will continue only as long as each player finds it desirable to act this way. Further bargaining occurs among the members of each coalition on how to divide what they obtained together. Thus, the existence of coalitions implies that the interactions among the players will be conducted on two levels: first, among the coalitions, and second, within each coalition. Most of the existing models in economics and game theory assume that the coalition structure is given exogenously; instead, we try here to obtain it as an endogenous outcome of our model. Namely, we want to be able to predict which coalitions will in fact form in each given situation.3 Our theory combines two kinds of game theoretic concepts: value and stability. The basic idea is, first, to evaluate the players' prospects in the various coalition structures, and then, based on these "values," to find which ones are stable. We will call this value "coalition structure value," or "CS-value" for short. The reason we are considering "coalition structures" (i.e., partitions of the set of players into disjoint coalitions) rather than just "coalitions" is that, in general, players may find it to their advantage to join forces in some situations, and to act separately in others-all depending on the way the other participants are organized. This implies that both the value and the stability concepts should depend on the entire coalition structure. The CS-value we analyze in this paper was first developed by Owen [7].

On the endogenous formation of coalitions

Abstract: THE FORMATION OF COALITIONS is a fundamental problem in game theory. By a "coalition" is meant a group of "players" (e.g., economic or political agents) which decide to act together, as one unit, relative to the rest of the players. This includes the instances of syndicates, unions, cartels, blocks, political parties, parliamentary coalitions, etc. We would like to emphasize that forming a coalition does not eliminate the individual players as decision makers. In all interactions with the other players, coalition members act as one unit (it may be useful to think of a "representative agent" taking their place);2 however, this arrangement will continue only as long as each player finds it desirable to act this way. Further bargaining occurs among the members of each coalition on how to divide what they obtained together. Thus, the existence of coalitions implies that the interactions among the players will be conducted on two levels: first, among the coalitions, and second, within each coalition. Most of the existing models in economics and game theory assume that the coalition structure is given exogenously; instead, we try here to obtain it as an endogenous outcome of our model. Namely, we want to be able to predict which coalitions will in fact form in each given situation.3 Our theory combines two kinds of game theoretic concepts: value and stability. The basic idea is, first, to evaluate the players' prospects in the various coalition structures, and then, based on these "values," to find which ones are stable. We will call this value "coalition structure value," or "CS-value" for short. The reason we are considering "coalition structures" (i.e., partitions of the set of players into disjoint coalitions) rather than just "coalitions" is that, in general, players may find it to their advantage to join forces in some situations, and to act separately in others-all depending on the way the other participants are organized. This implies that both the value and the stability concepts should depend on the entire coalition structure. The CS-value we analyze in this paper was first developed by Owen [7].

On the structure and diversity of rational beliefs

Abstract: The paper proposes that the theory of expectations be reformulated under the assumption that agents do not know the structural relations (such as equilibrium prices) of the economy. Instead, we postulate that they can observe past data of the economy and form probability beliefs based on the data generated by the economy. Using past data agents can compute relative frequencies and the basic assumption of the theory is that the system which generates the data is stable in the sense that the empirically computed relative frequencies converge. It is then shown that the limit of these relative frequencies induce a probability on the space of infinite sequences of the observables in the economy. This probability is stationary. Abelief of an agent is a probability on the space of infinite sequences of the observable variables in the economy. Such a probability represents the “theory” or ∌ypothesis” of the agent about the mechanism which generates the data. A belief is said to becompatible with the data if under the proposed probability belief the economy would generate the same limit of the relative frequencies as computed from the real data. A theory which is “compatible with the data” is a theory which cannot be rejected by the data. A belief is said to be aRational Belief if it is (i) compatible with the data and (ii) satisfies a certain technical condition. The Main Theorem provides a characterization of all Rational Beliefs.

Convergence of Probability Measures

Abstract: Convergence of Probability Measures. By P. Billingsley. Chichester, Sussex, Wiley, 1968. xii, 253 p. 9 1/4“. 117s.

Property Rights and the Nature of the Firm

Abstract: This paper provides a framework for addressing the question of when transactions should be carried out within a firm and when through the market. Following Grossman and Hart, we identify a firm with the assets that its owners control. We argue that the crucial difference for party 1 between owning a firm (integration) and contracting for a service from another party 2 who owns this firm (nonintegration) is that, under integration, party 1 can selectively fire the workers of the firm (including party 2), whereas under nonintegration he can "fire" (i.e., stop dealing with) only the entire firm: the combination of party 2, the workers, and the firm's assets. We use this idea to study how changes in ownership affect the incentives of employees as well as those of owner-managers. Our framework is broad enough to encompass more general control structures than simple ownership: for example, partnerships and worker and consumer cooperatives all emerge as special cases.