In this paper we look at the case for bundling in an oligopolistic environment. We show that bundling is a particularly effective entry-deterrent strategy. A company that has market power in two goods, A and B , can, by bundling them together, make it harder for a rival with only one of these...

In declining industries, capacity must be reduced in order to restore profitability. Who bears this burden? Where production is all or nothing, there is a unique subgame-perfect equilibrium: the largest firms exit first (P. Ghemawat and B. Nalebuff [1985]). In this paper, firms continuously...

We extend expected utility theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty. We show how these anticipatory feelings may result in time inconsistency. We provide an example from portfolio theory to illustrate the potential impact of...

Standard macroeconomic models of price stickiness assume that each firm leaves its price unchanged for a fixed amount of time. The authors present an alternative model in which the pricing decision depends on the state of the economy. They find a method of aggregating individual price changes...

The neurotransmitter dopamine has been found to play a crucial role in choice, learning, and belief formation. The best-developed current theory of dopaminergic function is the "reward prediction error" hypothesis-that dopamine encodes the difference between the experienced and predicted...

Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household's...

The neurotransmitter dopamine is central to the emerging discipline of neuroeconomics; it is hypothesized to encode the difference between expected and realized rewards and thereby to mediate belief formation and choice. We develop the first formal tests of this theory of dopaminergic function,...