We consider equilibrium selection in 2x2 bimatrix games with two strict Nash equilibria in a random matching framework. The players seek to maximize the discounted payoffs, but are restricted to make a short run commitment. Modeling the friction this way yields equilibrium dynamics of the...

We consider equilibrium selection in 2x2 bimatrix (both symmetric and asymmetric) games with two strict Nash equilibria by embedding it in a dynamic random matching game played by a continuum of anonymous agents. Unlike in the evolutionary game literature, we assume that the players are...

This paper presents a model of random matching between individuals chosen from large populations. We assume that the populations and the set of encounters are infinite but countable and that the encounters are i.i.d. random variables. Furthermore, the probability distribution on individuals...

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities, explicitly incorporating the zero bound on the short-term nominal interest rate. Within this framework, we ask: Can a shock to the liquidity of private paper lead to a collapse in short-term...

This paper studies theoretically how the cross-country differences in the institutional quality (IQ) of the domestic credit markets shape the patterns of international capital flows when such IQ differences cause productivity differences across countries. IQ affects productivity by changing...

This paper builds models of nonlinear dynamics in the aggregate investment and borrower net worth to study the causes and nature of endogenous credit cycles. The basic model has two types of projects: the Good and the Bad. The Good projects rely on the inputs supplied by others who could...

We propose a new approach to model costly international trade, which includes the standard approach, the iceberg" transport cost, as a special case. The key idea is to make the technologies of supplying the good depend on the destination of the good. To demonstrate our approach, we extend the...