The provision of product warranties when the exit of firms is possible is an example of a more general contracting proble m without full commitment. When firms cannot precommit to future mark et participation, they can exit if continued participation is not profitable, thereby avoiding...

While it is generally agreed that markets perform better when information is more complete, little has been said about how the added benefits are dist ributed. This essay explores this question in a model of brand select ion. Buyers select from among that subset of available brands of whic h...

A number of recent Canadian and U.S. antitrust cases have involved allegations that manufacturers of durable products have refused to supply parts to independent service organization, apparently to monopolize the market for repairs of their products. This paper provides a theory of these...

This paper considers the relative efficiency of cash grants and subsidies when society's goal is to raise the welfare of a household. When the head of the household makes all consumption decisions, a principal-agent problem is created: the head acts as the agent of the government in allocating...

This paper studies the interaction of government debt and financial markets. Both markets are fragile: excessively responsive to fundamentals and prone to strategic uncertainty. This interaction, termed a ʽdiabolic loopʼ, is driven by government willingness to bail out banks and the resulting...

Central to ongoing debates over the desirability of monetary unions is a supposed trade-off, outlined by <xref ref-type="bibr" rid="R22">Mundell (1961)</xref>: a monetary union reduces transactions costs but renders stabilization policy less effective. If shocks across countries are sufficiently correlated, then, according to this...