Large and growing levels of public debt in the United States, United Kingdom, Japan and the Euro Area raise new interest in the cross-country effects of a large open economy's deficits. We consider a dynamic optimising model with costly tax collection and exogenously given public spending and...

In many markets, firms make their products complex through add-on features, thus making them difficult to evaluate and compare. Does this product obfuscation lure buyers into buying overpriced products, and if so, why does competition not eliminate this practice? More generally, under which...

We review the vast literature on social preferences by assessing what is known about their fundamental properties, their distribution in the broader population, and their consequences for important economic and political behaviors. We provide, in particular, an overview of the empirically...

Are initial competitive advantages self-reinforcing, so that markets exhibit an endogenous tendency to be dominated by only a few firms? Although this question is of great economic importance, no systematic empirical study has yet addressed it. Therefore, we examine experimentally whether firms...

Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)'s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and expost renegotiation....

Economists have traditionally treated preferences as exogenously given. Preferences are assumed to be influenced by neither beliefs nor the constraints people face. As a consequence, changes in behaviour are explained exclusively in terms of changes in the set of feasible alternatives. Here we...

In many markets, firms make their products complex through add-ons, thus making them difficult to evaluate and compare. How does this product obfuscation affect competition, sellers' profits, and buyers' welfare? We study these questions in a competitive experimental market in which sellers have...

We show experimentally that fairness concerns may have a decisive impact on both the actual and the optimal choice of contracts in a moral hazard context. Explicit incentive contracts that are optimal according to self-interest theory become inferior when some agents value fairness. Conversely,...

The widespread use of markets leads to unprecedented material well-being in many societies. We study whether market interaction, as a side effect, erodes moral values. An encompassing understanding of the virtues and vices of markets, including their possible impact on moral values, is necessary...