Showing 1 - 10 of 45
Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent pay-offs in nominal terms, choices converge to the Pareto inefficient equilibrium; however, if we lift the veil of money...
Persistent link: https://www.econbiz.de/10005791766
Collusive agreements and relational contracts are commonly modeled as equilibria of dynamic games with the strategic features of the repeated Prisoner's Dilemma. The pay-offs agents obtain when being ‘cheated upon’ by other agents play no role in these models. We propose a way to take these...
Persistent link: https://www.econbiz.de/10005666887
We enrich workhorse macroeconomic models with a mechanism that proxies strategic uncertainty and that manifests itself as waves of optimism and pessimism about the short-term economic outlook. We interpret this mechanism as variation in "confidence" and show that it helps account for many...
Persistent link: https://www.econbiz.de/10011186619
there exists a common pool problem. An agenda setter can provide the necessary coordination to force politicians to consider …
Persistent link: https://www.econbiz.de/10005123816
In this Paper, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings can serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a ‘focal point’ for firms and their investors. We...
Persistent link: https://www.econbiz.de/10005504472
This paper endogenizes coordination problems in organizations by allowing for both ex ante coordination of activities …, using rules and task guidelines, and ex post coordination, using communication and broad job assignments. It shows that: (i … coordination. In particular, specialization is often non-monotonic in the importance of coordination. (ii) Organizations exhibit …
Persistent link: https://www.econbiz.de/10005497860
This paper reports results from an experiment studying how fines, leniency programs and reward schemes for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation, but increases cartel prices: subjects use costly fines as (altruistic) punishments....
Persistent link: https://www.econbiz.de/10004976790
The seminal work by Grossman and Hart (1986) made the study of firm boundaries susceptible to formal economic analysis, and illuminated an important role for markets in providing incentives. In this essay, I discuss some new directions that the literature has taken since. As a central challenge,...
Persistent link: https://www.econbiz.de/10011083406
, which must be adapted to a privately observed shock and coordinated with other tasks. Coordination requires that agents pay … leadership naturally arise as a response to organizational trade-offs between coordination and adaptation. At the optimum, all …
Persistent link: https://www.econbiz.de/10011084079
This paper proposes a simple macroeconomic model with staggered investment decisions. The expected return from investing depends on demand expectations, which are pinned down by fundamentals and history. Owing to an aggregate demand externality, investment subsidies can improve welfare in this...
Persistent link: https://www.econbiz.de/10011084252