We study a market where identical capacity-constrained sellers compete to attract identical buyers, via price advertisements. Once buyers reach a store, prices might be renegotiable in a manner that is responsive to excess demand. We focus strongly symmetric equilibria, proving their existence...

We study equilibrium prices and trade volume with n identical buyers and a seller who initially commits to some capacity. Sales are sequential and each price is determined by strategic bargaining. A unique sub-game perfect equilibrium exists. It is characterized by absence of costly bargaining...

We endogenize the trade mechanism in a search economy with many homogenous sellers and many heterogeneous buyers of unobservable type. We study how heterogeneity and the traders’ continuation values which are endogenous influence the sellers’ choice of trade mechanism. Sellers trade off the...

We study an infinite-horizon economy with two basic frictions that are typical in monetary models. First, agents’ trading paths cross at most once due to pairwise trade and other meeting obstacles. Second, actions must be compatible with individual incentives due to commitment and enforcement...

We study cooperation in four-person economies of indefinite duration. Subjects interact anonymously playing a prisoner’s dilemma. We identify and characterize the strategies employed at the aggregate and at the individual level. We find that (i) grim trigger well describes aggregate play, but...

The welfare cost of anticipated inflation is quantified in a calibrated model of the U.S. economy that exhibits tractable equilibrium dispersion in wealth and earnings. Inflation does not generate large losses in societal welfare, yet its impact varies noticeably across segments of society...

We construct a monetary economy with heterogeneity in discounting and consumption risk. Agents can insure against this risk with both money and nominal government bonds, but all trades must be monetized. We demonstrate that a deflationary policy a la Friedman cannot sustain the efficient...

We study the emergence of norms of cooperation in experimental economies populated by strangers interacting indefinitely and lacking formal enforcement institutions. In all treatments the efficient outcome is sustainable as an equilibrium. We address the following questions: can these economies...

Social norms of cooperation are studied under several forms of communication. In an experiment, strangers could make public statements before playing a prisoner’s dilemma. The interaction was repeated indefinitely, which generated multiple equilibria. Communication could be used as a tool to...

A new behavioral foundation is uncovered for why money promotes impersonal exchange. In an experiment, subjects could cooperate by intertemporally exchanging goods with anonymous opponents met at random. Indefinite repetition supported multiple equilibria, from full defection to the efficient...