Do individuals use all information at their disposal when forming expectations about future events? In this paper we present an econometric framework to answer this question. We show how individual information sets can be characterized by simple nonparametric exclusion restrictions and provide a...

The recent work on misallocation argues that aggregate productivity in poor countries is low because various market frictions prevent marginal products from being equalized. By focusing on such allocative inefficiencies, misallocation is construed as a purely static phenomenon. This paper argues...

Income differences across countries are to a large degree driven by differences in aggregate TFP. Recently it has been argued that part of these differences are due to misallocation of factor across firms. In this paper we propose a structural model of this degree of misallocation. Our model is...

Why are resources misallocated across firms? I study an economy where misallocation stems from firms charging heterogeneous mark-ups. The distribution of mark-ups affects both aggregate TFP as well as equilibrium factor prices. While TFP is solely affected by the cross-sectional dispersion of...

We study a mechanism design problem in which players can take part in a mechanism to coordinate their actions in a default game. By refusing to participate in the mechanism, a player can revert to playing the default game non-cooperatively. We show with an example that some allocation rules are...

This paper studies Bayesian equilibrium in a worker firm matching problem in which workers choose their human capi- tal investment and firms choose wages before the matching process occurs. Symmetric equilibrium exists, and supports assortative matching. However, when the number of traders is...

Two sides of a finite marriage market engage in costly investment and are then matched assortatively. The purpose of the investment is solely to improve the quality of the match that trader can attain in the second stage. The paper studies the limits of equilibrium of these finite matching games...

The paper proves existence of equilibrium in a fairly general version of the pre-marital investment game. The game has discontinuous payoffs, so the method of Reny (1999) is used. Three assumptions are imposed on the matching process that occurs after investments are realized. It must be...

This paper studies an internet trading mechanism similar to the one described in Peters and Severinov (2000) in a market where traders values are interdependent. Conditions are given for which this mechanism has a perfect Bayesian equilibrium which supports allocations that are the same as the...