We study two parties who desire a smooth trading relationship under conditions of value and cost uncertainty. A rigid contract fixing price works well in normal times since there is nothing to argue about. However, when value or cost is exceptional, one party will hold up the other , damaging...

Risk adjustment of payments to health plans is fundamental to regulated competition among private insurers, which serves as the basis of national health policy in many countries. To date, estimation and evaluation of a risk adjustment model has been a two-step process. In a first step, the...

We show that deviations from long-run stability of product prices are optimal in the presence of endogenous producer entry and product variety in a sticky-price model with monopolistic competition in which price stability would be optimal in the absence of entry. Specifically, a long-run...

This paper examines how to evaluate consumer welfare when consumers face nonlinear prices. This problem arises in many settings, such as devising optimal pricing strategies for firms, assessing how price discrimination affects consumers, and evaluating the efficiency costs of many transfer...

This article evaluates two different remedies for consumers who have been injured by a price overcharge on the sale of a good. Under a coupon remedy, injured consumers are awarded coupons that can be used for a limited period of time to purchase the good at a price below that which prevails...

Modern trade models attribute the dispersion of international prices to physical and man-made barriers to trade, to the pricing-to-market by heterogeneous producers and to differences in the quality of output offered by firms. This paper presents a tractable general equilibrium model that...