A foundational paradox in social choice theory is that liberalism (freedom of action) and Pareto efficiency, the standard in evaluating economic outcomes, can conflict with each other (Sen 1970). We capture this tension in a series of sequential Battle of the Sexes game experiments. We find that...

We present a variant of a general equilibrium model with group formation to study how changes of non-consumptive beneï¬ts from group formation impact on the well-being of group members. We identify a human relations paradox: Positive externalities increase, but none of the group members gains...

We estimate a monetary policy rule allowing for possible frequency dependence - i.e. allowing the central bank to respond di¤erently to persistent innovations than to transitory innovations, in both the real-time unemployment rate and the real-time inflation rate. The method is flexible, and...

The nominal exchange rate is both a macroeconomic variable equilibrating international markets and a financial asset that embodies expectations and prices risks associated with cross border currency holdings. Recognizing this, we adopt a joint macro-finance strategy to model the exchange rate....

The "home bias" phenomenon states that empirically, economic agents often under- utilize opportunities beyond their country borders, and it is well-documented in various international pricing and purchase patterns. This bias manifests in the forms of fewer exchanges of goods and net...

In this paper we develop a simple model to link anchoring and loss aversion with house price dynamics. We have two testable implications: 1) when both cognitive biases are present, price dispersion and trade volume are pro-cyclical; 2) if anchoring decreases with time, then price dispersion and...

This paper studies the stockpiling issue for an oil importing country that is likely to suffer embargoes, the occurrence and duration of which are uncertain. I show the existence of a decreasing reserves path that the country wants to attain in order to hedge against these disruptions. Allowing...

In this paper we study the effects on the food market of the introduction of biofuels as a substitute for fossil fuel in the energy market. We consider a world economy with an oil cartel and a competitive fringe of farmers producing energy in the form of biofuels. Farmers also produce food and...

The present paper proposes a dynamic framework for the analysis of emissions abatement by different countries. Unlike many related works, it emphasizes the non-cooperative aspects of this issue. We derive the feedback Nash equilibrium as well as the cooperative emissions paths. Under the...

In a model of strategic network formation, the endogenously formed network is built around a pre-existing network. We envisage that the pre-existing or core network is publicly provided. Strategic network formation is decentralized: Players act in their private interest and bear the costs when...