This paper studies the effect of private information on the capital allocation decisions of firms who operate under imperfect competition. I analyze two interactive firms, one with private information and the other without, who must decide when to undertake an irreversible and uncertain...

To examine the cyclical behavior of the skill-premium, this paper introduces implicit labor contracts in a DSGE model where production is characterized by capital-skill complementarity and the utilization of capital is endogenous. It is shown that this model can reproduce the observed cyclical...

To analyze the welfare gain from allowing for differentiated patent protection across sectors, this study develops a two-sector quality-ladder growth model in which patent breadth is a policy variable and derives optimal patent breadth under two patent regimes. We show that (a) uniform optimal...

We study innovation in a dynamic stochastic discrete-time duopoly with endogenous horizontal differentiation. Innovation takes the form of a quality ladder; horizontal differentiation is Hotelling competition. We compute Markov-perfect equilibria and study the effects on long-run innovation of...

We study the exploration and development of oil and gas fields in the U.S. over the period 1955-2002. We make four contributions to explain the economic evolution of the oil and gas industry during this period. First, we derive a testable model of the dynamics of competitive oil and gas field...

We consider a two-player asymmetric differential game of pollution control. One player is non-vulnerable to pollution, or unwilling to consider damages when choosing her production policy in a non-cooperative game. We characterize the feedback-Nash equilibrium and the cooperative solution. We...

We lay out and simulate a multi-agent, multi-period model of an RTGS payment system. At the beginning of the day, banks choose how much costly liquidity to allocate to the settlement process. Then, they use it to execute an exogenous, random stream of payment orders. If a bank's liquidity stock...

In this paper we study the impact of an expansion in public spending in an economy characterized by limited asset market participation and sticky wages. The flexible wage version of the model implies strong expansionary effects on output and consumption but also a counterfactual increase in real...

We develop a DSGE model with firm-specific labor where wage and price setting are subject to Calvo-type staggering. This is in general an intractable problem due to complicated intertemporal dependencies between price and wage decisions. However, the problem is significantly simplified if we, in...