There is general concern that producer subsidies distort competition. We examine a telecommunications subsidy system that transfers money from low cost regions to high cost regions of the U.S. Even though the system is designed to be competitively neutral, we find evidence that the system,...

We model how individuals and firms adapt beliefs, heuristics, mental frameworks and norms to changed circumstances. Adaptation competes with other work for limited mental resources. We apply our model to firms experiencing a technology shock. It is optimal for some firms to disband rather than...