This paper studies a model in which some consumers shop on the basis of price alone, without attention to potential differences in product quality. A firm may offer a low-quality product to exploit these inattentive consumers. In the unique symmetric equilibrium of the model, firms choose prices...

Under continual innovation, greater patent strength expands innovating firms’ profit against imitation, but also shifts profit from current to past innovators. We show how the impact of patents on innovation, as determined by these two opposing effects, varies with industry characteristics....

This paper analyzes the efficiency of team production when agents exhibit other regarding preferences. It is shown that full efficiency can be sustained as an equilibrium through a budget-balancing mechanism that punishes some randomly chosen agents if output falls short of efficient level but...