In common value auctions the winning bid often exceeds the value of the good purchased. This "winnerÂ’s curse" is bad for the buyers, but good for the sellers. Given this, people bidding for the right to resell a good might be expected to bid more than the expected value. Furthermore, if...

Available evidence suggests high intergenerational correlation of economic status, and persistent disparities in health status between the rich and the poor. This paper proposes a novel mechanism linking the two. We introduce health human capital into a two-period overlapping generations model....

This paper studies the role of population aging for foreign direct investment and the strategic taxation of capital. Importantly, our theoretical model suggests that the labor market implications of aging differ from the financial market aspects. While population aging may be associated with a...

We examine local strong rationality (LSR) in multivariate models with both forward-looking expectations and predetermined variables. Given hypothetical common knowledge restrictions that the dynamics will be close to those of a specified minimal state variable solution, we obtain eductive...

Prior work suggests coordination failure between labour and education markets leads some workers to have educational qualifications in excess of those specified for the job (overeducation) and others to have less (undereducation). This paper empirically models and tests the hypothesis that...

It is well established that the threat of antidumping duties can help sustain collusion between a foreign firm and its domestic counterpart. However, when the foreign firm is a multinational, its subsidiary will fight against a new duty, potentially making this threat hollow and collusion less...

This paper develops a simple two-country, two-good model of international trade and borrowing that suppresses all previous sources of current account dynamics. Under rational expectations, international debt follows a random walk. Under adaptive learning however, international debt behaves like...

Numerous researchers have incorporated labor or credit market frictions within simple neoclassical models to (i) facilitate quick departures from the Arrow-Debreu world, thereby opening up the role for institutions, (ii) inject some realism into their models, and (iii) explain cross country...

Forward-looking monetary models with Taylor-type interest rate rules are known to generate indeterminacies, with a potential dependence on extraneous "sunspots," for some structural and policy parameters. We investigate the stability of these solutions under adaptive learning, focusing on...

Using New Keynesian models, we compare Friedman's k-percent money supply rule to optimal interest rate setting, with respect to determinacy, stability under learning and optimality. First we review the recent literature: open-loop interest rate rules are subject to indeterminacy and instability...