As crime becomes increasingly widespread it may be optimal not to lower but to increase the standard of evidence. Even though a higher standard of evidence results in a lower expected penalty for all levels of crime, it increases the expected penalty for high levels of crime relative to the...

We seek to explain why TV advertising is dominated by a few product categories. We apply a model of the TV industry that encompasses both the product markets and the market for TV viewers to discuss who will advertise on TV. Under the assumption that viewers dislike advertising, entailing a...

We study an international climate agreement that assigns emission quotas to each participating country. Unlike the simplest models in the literature, we assume that abatement costs are affected by R&D activities undertaken in all firms in all countries, i.e. abatement technologies are...

Most wage-contracting models with rational expectations fail to replicate the persistence in inflation observed in the data. We argue that coordination problems and multiple equilibria are the keys to explaining inflation persistence. We develop a wage-contracting model in which workers are...

We provide a new explanation for why firms pay for general training in a competitive labor market. If firms are unable to tailor individual wages to ability, for informational or institutional reasons, they will pay for general training in order to attract better quality workers. The market...

The clean development mechanism (CDM) under the Kyoto Protocol may induce a technological change in developing countries. As an alternative to the CDM-regime, developing countries may accept a (generous) cap on their own emissions, let domestic producers invest in new efficient technologies, and...

The concepts of sequential and quasi-perfect rationalizability are defined in an epistemic model by means of lexicographic probabilities. These are non-equilibrium analogs to sequential and quasi-perfect equilibrium, for which epistemic characterizations are provided. The defined...