In this paper, we study a monetary random-matching model where both goods and money are perfectly divisible, production is costly, and there is no exogenous upper bound on agents' money holdings, information on which is private to the agent. We show that there is a continuum of stationary...

Results from paired comparison experiments suggest that as respondents progress through a sequence of binary choices they become more consistent, apparently fine-tuning their preferences. Consistency may be indicated by the variance of the estimated valuation distribution measured by the error...

This paper looks into the search behavior of consumers in the market for health insurance contracts. We consider the recent health insurance reform in The Netherlands, where a private-public mix of insurance provision was replaced by a system based on managed competition. Although all insurers...

A principal chooses one of n=2 projects or an outside option. An agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that strategic communication is characterized by pandering: the...

We study a general static noisy rational expectations model, where investors have private information about asset payo¤s, with common and private components, and about their own exposure to an aggregate risk factor, and derive conditions for existence and uniqueness (or multiplicity) of...

This paper analyses the impact of inequality on growth when technical progress is driven by innovations. It is assumed that consumers have hierarchic preferences. As a result inequality affects demand and therefore the incentive to innovate. Whether more inequality is harmful or beneficial for...

This Paper presents a model in which boundedly rational members of an administrative staff calculate resource allocations in real time. We consider a class of hierarchical procedures in which information about payoff functions flows up and is aggregated by a hierarchy, while allocations flow...

We analyze a two-player game of strategic experimentation with two-armed bandits. Each player has to decide in continuous time whether to use a safe arm with a known payoff or a risky arm whose likelihood of delivering payoffs is initially unknown. The quality of the risky arms is perfectly...

This paper offers a model of the interaction between composition of jobs and labour market regulation. Ex-post rent-sharing due to search frictions implies that ‘good’ jobs which have higher creation costs must pay higher wages. This wage differential distorts the composition of jobs, and in...

This Paper analyses the welfare effects of price restrictions on private contracting in a world where agents have a limited cognitive ability. People compute the costs and benefits of entering a transaction with an error. The government knows the distribution of true costs and benefits as well...