In this paper we set out the welfare economics based case for imposing cartel penalties on the cartel overcharge rather than on the more conventional bases of revenue or profits (illegal gains). To do this we undertake a systematic comparison of a penalty based on the cartel overcharge with...

We explore evolutionary dynamics for repeated games with small, but positive complexity costs. To understand the dynamics, we extend a folk theorem result by Cooper (1996) to continuation probabilities, or discount rates, smaller than 1. While this result delineates which payoffs can be...

In repeated games there is in general a large set of equilibria. We also know that in the repeated prisoners dilemma there is a profusion of neutrally stable strategies, but no strategy that is evolutionarily stable. This paper investigates whether and how neutrally stable strategies can be...

Repeated games tend to have large sets of equilibria. We also know that in the repeated prisoners dilemma there is a profusion of neutrally stable strategies, but no strategy that is evolutionarily stable. This paper shows that for all of these neutrally stable strategies there is a stepping...

A fundamental question in social sciences is how trust emerges. We provide an answer which relies on the formation of social and economic relationships. We argue that behind trust lies the fact that individuals invest in connections taking into account the potential externalities networks...

Firms signal high quality through high prices even if the market structure is highly competitive and price competition is severe. In a symmetric Bertrand oligopoly where products may differ only in their quality, production cost is increasing in quality and the quality of each firm’s product...

Firms hiring fresh graduates face uncertainty on the future productivity of workers. Theory suggests that starting wages reflect this, with lower pay for greater uncertainty. We use the dispersion of exam grades within a field of education as an indicator of the unobserved heterogeneity that...

This discussion paper resulted in a publication in the <A href="http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12074/abstract;jsessionid=368B56AE8F9F0C1A8F686B9FB93B1CCC.f01t02">'Economic Journal'</A>, 2014, 124(579), 1086-1105.<P> We examine the causal effect of commuting distance on workers' wages in a quasi-natural experiments setting using information on all workers in Denmark. We account for endogeneity of distance by...</p></a>

We consider price-fee competition in bilateral oligopolies with perfectly-divisible goods, non-expandable infrastructures, concentrated agents on both sides, and constant marginal costs. We define and characterize stable market outcomes. Buyers exclusively trade with the supplier with whom they...

This discussion paper resulted in a publication in <I>Strategic Behavior and the Environment</I>, 2014, 4, 321-360.<P> We study multiple agents along a general river structure that is expressed by a geography matrix and who have access to limited local resources, quasi-linear preferences over water and...</p></i>