The prospect of capital obsolescence inhibits investment. Investors thus become more optimistic when the obsolescence of their capital slows down. We propose a model with no fixed costs of investment, and random technological progress that induces obsolescence of capital in place. Spikes occur...

For many new products or products with multiple attributes, learning the price is often easier than learning one's willingness to pay. We model a market in which consumers face a transportation cost to discover a seller's price, and then have the option to pay a learning cost to discover the...

We present a model in which an imperfectly informed politician chooses between appointing an independent expert, whose advice is revealed to voters, and a loyal expert whose advice can be concealed from voters and who can therefore be blamed for a bad outcome. The politician is privately...

In many markets consumers form long-term relationships with firms. In such settings, a firm's existing customers are valuable assets whose 'loyalty' must be maintained through continued investment. In this paper we assume that consumer loyalty is strengthened by repeated buying but may erode if...

One striking development associated with the explosion of e-commerce is the increased transparency of sellers' quality. In this paper we analyze how this affects firms' incentives to invest in quality when the outcome of investment is uncertain. We identify two conflicting effects. On the one...

We present a model that links the division of labor and economic growth with the division of wealth in society. When capital market imperfections restrict the access of poor households to capital, the division of wealth affects individual incentives to invest in specialization. In turn, the...