This paper argues that the key issue for defining and solving the Eurozone's (EZ) difficulties lies in readjusting the relationship between the centre and the periphery of the EZ. Our argument proceeds in two steps. Firstly, the basic finance problem of a centre-periphery system is captured by a...

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The real option theory provides a useful tool to evaluate an R&D investment under uncertainty because, unlike the NPV (Net Present Value), it considers the managerial flexibility that may be expand the investment opportunity value. However, most R&D investment projects are open to competing...

The Greek bail-out was highly controversial. An oft-heard assessment is that i) the bail-out was a mistake, ii) the political haggling over it was irrational and iii) the bail-out will create a moral hazard problem. Contrary to this view, our analysis suggests that, given EMU's present...

Why does individual performance pay seem to prevail in human capital intensive industries? We present a model that may explain this. In a repeated game model of relational contracting, we analyze the conditions for implementing peer dependent incentive regimes when agents possess indispensable...

This article studies whether people want to control which information on their own past pro-social behavior is revealed to other people. Participants in an experiment are assigned a color which depends on their own past pro-sociality. They can then spend money to increase or decrease the...

Indirect reciprocity is defined as a specific kind of behavior: An agent rewards or penalizes another agent for having behaved kindly or unkindly toward a third party. This paper analyzes the question of what drives indirect reciprocity: Does the agent reward or penalize because she...

The effective number of political parties (ENP) in a single member plurality rule electoral system is analyzed as a dynamic process whereby the tournament nature of the election contest induces excessive entry and sunk entry costs promote persistence even as Duverger-Demsetz type political...

The mathematical framework of psychological game theory is useful for describing many forms of motivation where preferences depend directly on own or others' beliefs. It allows for incorporating, e.g., emotions, reciprocity, image concerns, and self-esteem in economic analysis. We explain how...