We show that credit crises can be Self-Confirming Equilibria (SCE), which provides a new rationale for policy interventions like, for example, the FRB's TALF credit-easing program in 2009. We introduce SCE in competitive credit markets with directed search. These markets are efficient when...

We provide a potential explanation for the absence of, and unwillingness to create, centralized power in the hands of a national state based on the political agenda effect. State centralization induces citizens of different backgrounds, interests, regions or ethnicities to coordinate their...

What does economics have to say about the design of international trade agreements? We review a literature on this question, providing detailed coverage on three key design features of the GATT/WTO: reciprocity, nondiscrimination as embodied in the MFN principle, and tariff bindings and binding...

We present an equilibrium search model that parsimoniously rationalizes the use of auctions as a sales mechanism for new-in-box goods--a frequent occurrence in online retail markets--and analyze whether the existence of these auctions is welfare enhancing relative to a market consisting only of...

A large body of recent empirical work on inflation dynamics documents that current real variables (like unemployment or output gaps) have little explanatory power for future inflation. Motivated by these findings, I explore the properties of a wide class of models in which inflation expectations...

We study a flexible dynamic savings game in continuous time, where decision makers rotate in and out of power. These agents value spending more highly while in power creating a time-inconsistency problem. We provide a sharp characterization of Markov equilibria. Our analysis proceeds by...

We design a laboratory experiment to investigate bilateral link formation in a setting where payoffs are pair-specific. Our link formation rule is decentralized and players can make link offers and counter-offers, as in a Beckerian marriage market. The game is designed in such a way that a...

The paper revisits the problem of wage bargaining between a firm and multiple workers. We show that the Subgame Perfect Equilibrium of the extensive-form game proposed by Stole and Zwiebel (1996a) does not imply a profile of wages and profits that coincides with the Shapley values as claimed in...

We develop and estimate a model of student study time on a social network. The model is designed to exploit unique data collected in the Berea Panel Study. Study time data allow us to quantify an intuitive mechanism for academic social interactions: own study time may depend on friend study time...

We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter- and intra-generational redistribution of a typical welfare system is captured with a...