We analyse a simple model of dynamic moral hazard in which there is a clear and tractable trade-off between static and dynamic incentives. In our model, a principal wants an agent to complete a project. The agent undertakes unobservable effort, which affects in each period the probability that...

This paper analyses a two-player game of strategic experimentation with two-armed bandits.At least one of the arms is risky in the sense that it may not yield a lumpsum payoff. There is payoff externality between the players and they differ in their ability to learn across the risky arm. Either...

A stylized macroeconomic model is developed with an indebted, heterogeneous Investment Banking Sector funded by borrowing from a retail banking sector. The government guarantees retail deposits. Investment banks choose how risky their activities should be. We find that the financial sector can...

We consider a model of financial intermediation with a monopolistic competition market structure. A non-monotonic relationship between the risk measured as a probability of default and the degree of competition is established.

In this paper I make use of Bayesian methods to estimate a firm-specific capital DSGE model with Calvo price and wage setting. This approach allows me to firmly conclude that firm-specific capital is highly relevant in improving the fit of New Keynesian models to the data as shown by a large...

This paper investigates the transmission from UK policy and a range of wholesale money market rates to retail mortgage rates using the long-run estimator proposed by Phillips and Loretan (1991), with a single-equation error correction model (SEECM) framework, from 1995 to 2009. I document the...

By using data on cross-border acquisitions (CBAs), this paper explores the distribution of the strategies pursued when multinational enterprises integrate a foreign subsidiary into their organizational structure. Based on a measure of vertical relatedness, each of the 165,000 acquisitions in our...

Raiffa (1961) has suggested that ambiguity aversion will cause a strict preference for randomization. We show that dynamic consistency implies that individuals will be indifferent to ex ante randomizations. On the other hand, it is possible for a dynamically-consistent ambiguity averse...

We investigate whether subjects’ behavior in the Arad and Rubinstein (2012) "11-20" game could be well explained by the k-level process described by the authors. We replicated their game in our baseline experiment and provided two other variations that retained the same mixed-strategy...

We report an experimental test of the influence of ambiguity on behaviour in a coordination game. We study the behaviour of subjects in the presence of ambiguity and attempt to determine whether they prefer to choose an ambiguity safe option. We fi?nd that this strategy, which is not played in...