The manager of a firm that is selling an illiquid asset has discretion as to the sale price: if he chooses a high (low) selling price, early sale is unlikely (likely). If the manager has the option to default on the debt that is collaterized by the illiquid asset, the optimal selling price...

Social facilitation describes the effect on performance due to the mere presence of others. Here we study the effect of the mere presence of an audience on the behavior of people involved in a strategic interaction and on the performance of institutions. In our laboratory experiment, two active...

Two types of statistical models are empirically applied to test the pattern of volatility in the exchange rate markets. One considers the autoregressive models and tests the random walk hypothesis. The other considers the conditional variance process and tests the hypothesis of chaotic dynamics....

This paper quantifies the change in the causal effect of education on labor market earnings in the United States between 1979 and 2000. In absence of valid instrumental variables for schooling, a causal model for earnings and schooling that incorporates heterogeneity in absolute and comparative...

The institutional level at which policies should be determined is an important issue that has been extensively treated in the economics literature. In particular, the literature has discussed to what extent decentralization of policy decisions give an inefficient outcome. With a homogeneous...

The economic and legal view of vertical integration has varied over time. But, a constant source of concern is the fear that the integrated firm will foreclose competitors from intermediate markets. At the same time, most commentators have considered the economics of vertical contracts,...

This paper presents a simple model of auction equilibrium. The distinctive feature of the model is that each bidder may discover the value that the item represents for herself, provided she spends some amount in order to be well informed. For each agent, the decision of whether or not to acquire...

Traffic congestion is a substantial time cost for many urban commuters. This paper studies the response of subjects in an experimental setting in which subjects choose between a short direct route that becomes increasingly congested as more people travel on it and a more indirect route that does...

The Bush Administration followed its withdrawal from the Kyoto Protocol in March, 2001, by a February, 2002 proposal for unilateral action to reduce US greenhouse gas emissions. The February proposal has been widely criticized for having little content and no teeth. The lack of teeth is clearly...

We measure the return to capital directly from the NIPA and BEA data and examine the return implications of the real business cycle model. We construct a quarterly time series of the after-tax return to business capital. Its volatility is considerably smaller than that of S&P 500 returns. The...