We ask whether there is an efficiency rationale for public intervention in the form of an employment protection policy. Unlike most of the literature supporting current employment protection legislation we allow employers and workers to include severance payments in their private contracts. We...

This paper investigates the impact of asymmetric information on the set of equilibria of a two-period duopoly game with price competition. It turns out that all admissible sequential equilibria of this game share a "collusive" character, i.e., ex ante expected profits for a firm of any type are...

This paper analyzes the macroeconomic implications of asymmetric price adjustment, under alternative assumptions regarding market structure and the nominal rigidity. It is shown that: a) aggregate output does not decreases (and sometimes increases) with the dispersion of shocks; b) with...

The goal of this paper is to study the role of multi-product firms in the market provision of product variety. The analysis is conducted using the spokes model of non-localized competition proposed by Chen and Riordan (2007). Firstly, we show that multi-product firms are at a competitive...

This paper studies the price dynamics induced by strategic firm behavior in the presence of consumer learning about the uncertain quality differential of the products offered by a duopoly. It is found that consumers learn slowly and that prices converge also slowly to full-information levels. A...

This paper considers a model of a monopolistically competitive industry with a large number of firms producing imperfect substitutes. There is an exogenous inflation rate and each firm must pay a fixed cost every time it adjusts its nominal price. It is shown that, under quite general...