We apply the dynamic stochastic framework proposed by recent evolutionary literature to the class of strict supermodular games when two simple behavior rules coexist in the population, imitation and myopic optimization.

I study an evolutionary model of equilibrium selection in supermodular games where players are involved in simultaneous play. This is taken to refer to a context, in contrast with most evolutionary literature, where players' objective is to have their actions match a certain statistic of the...

Since the 1950's economists applied game theoretical concepts to a wide variety of economic problems. The Nash equilibrium concept has proven to be a powerful instrument in analyzing the outcome of economic processes. Since the late 1980's economists also show a growing interest in the...

Under the new Basle Capital Accords, regulation takes the form of a contingency rule prescribing a certain level of bank capital contingent on the bank's risk taking behaviour in choosing its asset portfolio. In a simple dynamic model of banking with binding regulation we show that such Basle II...

This report reviews Thomas J. Sargents essay 'The Conquest of American Inflation' (1999). Sargent searches for a model which can explain postwar US inflation and which may shed light on the dynamic forces which drive this pattern. Following Sargent, the conquest of US inflation is due to a...

In this paper we present a theoretic framework to analyse pricing structures in debit card schemes. Card-holders value debit cards only to the extent that these are accepted by retailers, while retailers in turn benefit from a widespread usage of cards. This points to the two-sided nature of the...

We provide a framework for analysing the choice between optimal and robust rules in the presence of paradigm uncertainty in monetary policy. We thus provide two issues: first, we discuss the conditions of uncertainty that render a robust rule a preferable substitute to optimal rules and second,...

Correlation between the risks of portfolios of different commercial banks leads to too much risk taking from a social planner's perspective. The presence of a regulator omproves this risk-benefit allocation of the financial system. In this paper I show that first-best regulation also leads to...

Using a multi-tier model of the housing market, we show that both starters and movers benefit from mortgage interest deduction for higher income groups. However, such tax favouring also tends to facilitate house price explosions, especially when interest rates are low and LTV-ratios are high....