Standard methods in the U.S. for calculating antitrust damages in price-fixing cases is shown to create a strategic incentive for firms to price above the non-collusive price after the cartel has dissolved. This results in an overestimate of the but for price and an underestimate of the level of...

We explore the role of real wage dynamics in a New Keynesian business cycle model with search and matching frictions in the labor market. Both job creation and destruction are endogenous. We show that the model generates counterfactual inflation and labor market dynamics. In particular, it fails...

We specify and estimate an equilibrium job search model with productivity differences across labor market segments The model allows for two types of unemployment: frictional unemployment due to search frictions and structural unemployment due to wage floors Wage floors exist because of high...

We provide a detailed portfolio analysis for a financial market with an atomless continuum of assets. In the context of an exact arbitrage pricing theory (EAPT), we go beyond the characterization of the existence of important portfolios (normalized riskless, mean, cost, factor and mean-variance...

This paper explores whether habit formation in the representative agent’s preferences can explain two failures of the standard permanent income model with intertemporally separable utility: the sensitivity of consumption to lagged consumer sentiment and to predictable changes in current income...

In standard New Keynesian models, the size of the output expansion generated by aggregate demand shocks depends crucially on the elasticity of labor supply which is empirically quite small. In principle, this link can be broken in a multisectoral economy with differing degrees of price...

This paper examines the optimal allocation of risk in an overlapping-generations economy It compares the allocation of risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian 'veil of ignorance' could share risk with one another through...

We demonstrate the possibility of indeterminacy and non-existence of equilibrium dynamics in a standard business cycle model with search and matching frictions in the labor market. Our results arise for empirically plausible parametrizations and do not rely upon a mechanism such as increasing...

While consumption models with multiplicative habits are becoming increasingly popular, some important theoretical questions about these models have not yet been addressed. This paper fills three such gaps: Existence of an optimal consumption path; satisfaction, by that path, of the consumption...