In this paper we examine the relationship between sunk costs, market structure and welfare in a dynamic duopoly model. We consider a model in which two firms make sequential capacity choices and then play a continuous time game in outputs. It is assumed that the equilibria in the quantity choice...

This paper studies the implications of our recent work on two labour market imperfections for the cyclical properties of wages and employment. One of these imperfections is turnover costs. We explore the implications of the interaction of turnover costs with investment decisions for the form of...

This paper presents results from a 1971 natural experiment carried out by the Canadian government on the unemployment insurance system. At that time they dramatically increased the generosity of the system. We find that the propensity to collect UI increases with a first time exposure to the...

This essay illustrates that if Savage's small world assumption is relaxed, one can construct a theory of bounded rationality that incorporates some of the insights from recent work in cognitive psychology. The theory can be used to explain why contracts are incomplete and the existence of...

In standard shirking models of efficiency wages, workers are motivated only by high wages. Yet 23% of young US workers report receiving some form of performance pay. This paper extends the efficiency wage framework using the theory of self-enforcing agreements to allow for performance pay in the...

This paper introduces a model of contract incompleteness and bounded rationality based on the multi-tasking model of Holmstrom and Milgrom (1991). It is shown that the trade-off between the use of an employment relationship versus and explicit state contingent contract depends on number of tasks...

We examine the impact of tort reforms using U.S. birth records for 1989-2001. We make four contributions: First, we develop a model that analyzes the incentives created by specific tort reforms. Second, we assemble new data on tort reform. Third, we examine a range of outcomes. Finally, we allow...

This paper discusses some recent evidence exploring job characteristics and labor market conditions upon contract form. We find that there is a great deal of heterogeneity in observed employment contracts in the US, some of which may be explained by firms Nous analysons, dans cet article, le...

In this paper we introduce a way to systematically organize the choice between different forms of compensation based upon observable job characteristics. Secondly, we explore the determinants of compensation based upon questionnaire responses concerning job characteristics and methods of pay...