We investigate the welfare effect of increasing competition in an anonymous two-sided matching market, where matched pairs play an infinitely repeated Prisoner's Dilemma. Higher matching efficiency is usually considered detrimental as it creates stronger incentives for defection. We point out,...

We investigate the welfare effect of increasing competition in an anonymous two-sided matching market, where matched pairs play an infinitely repeated Prisoner's Dilemma. Higher matching efficiency is usually considered detrimental as it creates stronger incentives for defection. We point out,...

Consider a population of farmers who live around a lake. Each farmer engages in trade with his two adjacent neighbors. The trade is governed by a prisoner's dilemma "rule of engagement". A farmer's payoff is the sum of the payoffs from the two prisoner's dilemma games played with his two...

We study the impact of a fully-funded social security system in an economy with heterogeneous consumers. The unobservability of individual health conditions leads to adverse selection in the private annuity market. Introducing social security - which is immune to adverse selection - affects...

The number of firm bankruptcies is surprisingly low in economies with poor institutions. We study a model of bank-firm relationship and show that the bank's decision to liquidate bad firms has two opposing effects. First, the bank gets a payoff if a firm is liquidated. Second, it loses the rent...