This paper studies a decentralized, dynamic matching and bargaining market: buyers and sellers are matched into pairs. Traders exit the market at a constant rate, inducing search costs (frictions). All price offers are made by sellers. Despite the fact that sellers have all the bargaining power...

Classic behavioral decision research has intensively explored deliberate processes in decision making. Accordingly, individuals are viewed as bounded rational actors who, because of cognitive limitations, use simple heuristics that are successful in certain environments. In this chapter, it is...

We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on...

In a market environment with random detection of product quality, a firm can employ umbrella branding as a strategy to convince consumers of the high quality of its products. Alternatively, a firm can rely on external certification of the quality of one or both of its products. We characterize...

There is much evidence against the so-called too big to fail hypothesis in the case of bailouts to subnational governments. We look at a model where districts of different size provide local public goods with positive spillovers. Matching grants of a central government can induce...

We study tax evasion and decentralized tax enforcement in a federal economy with mobile capital and the endogenous formation of multiregional companies. Regions use their enforcement policy as a strategic instrument to engage in fiscal competition. Within this framework, we analyze the...

This article tests experimentally whether a high degree of collusion on advertisement expenditures facilitate tacit price collusion in duopoly markets. Two environments are tested, in which the size of the spillover between advertising expenditures is varied. The results show that the...

This paper deals with different concepts of income elasticities of demand for a heterogenous population and the relationship between individual and aggregate elasticities is analyzed. In general, the aggregate elasticity is not equal to the mean of individual elasticities. The difference depends...

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifi- able performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties...