We use a quantitative model of the US economy to analyse the response of long-term interest rates to monetary policy, and compare the model results with empirical evidence. We find that the model can explain the strong and time-varying yield curve response to monetary policy innovations found in...

Guilt averse individuals experience a utility loss if they believe they let someone down. For example, generosity depends on what the donor believes that the recipient expects to receive. We measure guilt aversion in three separate experiments: a dictator game experiment, a complete information...

We find that the actual willingness to pay for various consumer goods can be manipulated by an uninformative anchor, replicating Ariely et al. (2003). We furthermore demonstrate that the anchoring effect decreases but does not vanish with higher cognitive ability.

Casual observation suggests that people are more generous with their time than with their money. In this paper we present experimental evidence supporting the hypothesis. A third of our subjects demand no compensation for non-monetary investments, whereas almost all subjects demand compensation...

We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of pre-play communication in symmetric 2×2 games. One-way communication weakly increases coordination...

The shirking model of efficiency wages has been thought to imply that monitoring and pay are substitute instruments for motivating workers. We demonstrate that this result is not generally true. As monitoring becomes cheaper, a given effort level will be implemented with more monitoring and less...

In an ultimatum bargaining experiment, we study how subjects bargain over the returns to their investments of money and time. The most notable finding is that a third of the subjects demand no compensation for their time investments, whereas almost all subjects demand compensation for equally...

The paper discusses the reasons for supporting international trade finance during a liquidity crisis. Targeted interventions are justified when prices are rigid and sellers insist on immediate payment due to fears of strategic default. In this case, buyers who reject the seller's offer fail to...

Why do people work? Economic theory generally, and the principal-agent model specifically, emphasize the role of material incentives. But many academics, for example, work diligently year after year for a nearly fixed real salary, continuing to work hard as they approach retirement, although...

We study optimal price setting by a monopolist in an infinite horizon model with stochastic costs, moderate inflation, and costly price adjustment. For realistic parameters, chosen to replicate observed frequencies of price changes, the model fits numerically several empirical regularities. In...