Empirical data suggests that the relative price of goods and services may play a role in individual labor supply decisions. Data shows that individuals spend a significant amount of their time at home engaged in activities such as child care, education, and elderly care, among others, which are...

We characterize the long run outcome of a dynamic private information economy with public capital accumulation. The economy is typical of those assumed in the new dynamic public finance literature. We establish that almost all agents converge to misery or luxury and bound the fraction who are...

Models of dynastic households have been traditionally used to analyze persistence in earnings and wealth across generations, more recently to study patterns of wealth and fertility, transfers to children and education choices. Using data of two generations from the PSID, this paper develops and...

We consider the role of product market competition in disciplining managers in a moral hazard setting. Competition has two effects on a firm. First, the expected revenue or the marginal benefit of effort declines, leading to weakly lower effort. Second, the cost of inducing high effort increases...

Predatory pricing - a deliberate strategy of pricing aggressively in order to eliminate competitors - is one of the more contentious areas of antitrust policy and its existence and efficacy are widely debated. The purpose of this paper is to formally characterizes predatory pricing in a modern...

Predatory pricing . a deliberate strategy of pricing aggressively in order to eliminate competitors . is one of the more contentious areas of antitrust policy. This paper uses a modern industry dynamics framework to characterize predatory pricing by isolating a Firm’s equilibrium predatory...

We bring together the theories of duality and dynamic programming. We show that the dual of an additively separable dynamic optimization problem can be recursively decomposed using summaries of past Lagrange multipliers as state variables. Analogous to the Bellman decomposition of the primal...