This paper is motivated by the empirical regularity that industries differ greatly in the level of firm turnover, and that entry and exit rates are positively correlated across industries. Our objective is to investigate the effect of sunk costs and, in particular, market size on entry and exit...

This Paper provides an empirical examination of third-degree price discrimination in the Swedish newspaper industry. The results show that price discrimination is more prevalent in competitive markets and among newspapers with low market shares. This supports predictions from recent theoretical...

This paper aims at testing the maintained assumption that firms' objective is to maximize the expected net present value (ENPV) of profits. The idea is to examine pricing behaviour of a monopolist facing a dynamic demand where current sales influence future demand. Empirically, I estimate an...

Domestic products have a disproportionately high market share on many goods markets. We examine the contribution of preferences to such "home bias", using detailed data on wine sales in New Hampshire (weekly sales by brand by store for one year). In counterfactual simulations, where we use the...

We study optimal price setting by a monopolist in an infinite horizon model with stochastic costs, moderate inflation, and costly price adjustment. For realistic parameters, chosen to replicate observed frequencies of price changes, the model fits numerically several empirical regularities. In...

Two-way trade in (almost) homogenous products has ambiguous welfare effects if entry is restricted. We examine Swedish imports of bottled water to investigate whether transport cost losses from trade outweigh the partial equilibrium gains from trade (stronger competition and more brands to...

This article introduces a method to quantify the effect of a firm’s strategic choices on the risk profile of its profits at different horizons. We combine a demand system for differentiated products with counterfactual paths of risk factors. Prices, costs and quantities respond endogenously to...

This paper examines if international trade can reduce total welfare in an international oligopoly with differentiated goods. We show that welfare is a U-shaped function in the transport cost as long as trade occurs in equilibrium. With a Cournot duopoly trade can reduce welfare compared to...

We propose a new theory of systemic risk based on Knightian uncertainty (or "ambiguity"). We show that, due to uncertainty aversion, beliefs on future asset returns are endogenous, and bad news on one asset class induces investors to be more pessimistic about other asset classes as well. This...

Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a...