This paper studies the aggregate economic effects of diversity policies such as affirmative action in college admission. If agents are constrained in the side payments they can make, the free market allocation displays excessive segregation relative to the first-best. Affirmative action policies...

We analyse the impact of increased outside opportunities brought to consumers by access to a global market on local market performance under monopoly versus oligopoly. If consumers have to choose once where to shop we show that under all forms of organizing the local market, increased...

We study the effects of improvements in eBay's rating mechanism on seller exit and continuing sellers' behavior. Following a large sample of sellers over time, we exploit the fact that the rating mechanism was changed to reduce strategic bias in buyer rating. That improvement did not lead to...

Feedback mechanisms that allow partners to rate each other after a transaction are considered crucial for the success of anonymous internet trading platforms. We document an asymmetry in the feedback behaviour on eBay, propose an explanation based on the micro structure of the feedback mechanism...

Who does, and who should initiate costly certification by a third party under asymmetric quality information, the buyer or the seller? Our answer --- the seller --- follows from a non--trivial analysis revealing a clear intuition. Buyer--induced certification acts as an inspection device, whence...

We present a perfectly-competitive model of firm boundary decisions and study their interplay with product demand, technology, and welfare. Integration is pri- vately costly but is effective at coordinating production decisions; non-integration is less costly, but coordinates relatively poorly....

We consider an endogenous growth model in which appropriate organization fosters innovation, but because of contractibility problems, this benefit cannot be internalized. The organizational design element we focus on is the division of labour, which as Adam Smith argued, facilitates invention by...

We investigate firms' incentives to locate in the same region to gain access to a large pool of skilled labour. Firms engage in risky R&D activities and thus create stochastic product and implied labour demand. Agglomeration in a cluster is more likely in situations where the innovation step is...

We endogenize the market risk (at given technical risk) in firms’ R&D decisions by introducing stochastic R&D in the Hotelling model. It is shown that if the technical risk is sufficiently high, the market risk remains low even if firms pursue similar projects. This leads firms to focus on the...