Unexpected variation in emissions can have an enormous impact on the prices of emission permits and the efficiency achieved in tradable permit markets. Shocks to emission levels can be correlated across firms; for example, most firms require more emission permits than planned for following a...

This paper studies oligopolistic firms’ exploitation of a renewable natural resource in a differential game. It is well known that finding Markov perfect equilibrium in differential games is extremely difficult except for games that are linear-quadratic. In this paper, we develop a...

This paper develops a model in which a continuum of consumers choose from a continuum of locations indexed by school quality. It computes equilibria that are sustained by an equilibrium price function that matches consumers to different locations based on their willingness to pay for school...

In most of the recent macroeconomics literature, the sticky reaction of prices in response to changes in aggregate conditions has been modelled following the highly influential contribution of Calvo (1983). However, this approach has difficulties in accounting for some well-established stylized...

What brings persistence into the macroeconomy? This is one of the big unresolved issues in current macroeconomic theory. Economic models, in fact, typically struggle to imply levels of persistence comparable to those observed in the data. Most of the persistence is therefore introduced by highly...

We study the loan contracing problem of Gale and Hellwig (1985) under general assumptions of risk aversion and possibly diverse subjective beliefs of the borrower and lender about the income of the investment. We characterize the optimal contract and show that (i) the contractual payoff in...

The no trade principle asserts that risk-neutral agents are not prepared to trade if and only if a common prior exists. The purpose of this article is to provide general versions of this principle. We first study the case when no topological assumption is made on the state space. Bets are...

By using data from surveys of expectations, it is shown that macroeconomic uncertainty, measured by the standard deviation of the expected output growth, the expected unemployment rate, and the expected inflation rate, is negatively related to the expected performance of the economy, proxied by...