We explore the implications of models with increasing returns, endogenous variety and firm-level heterogeneity for the quantification of the gains from trade. We first focus on the impact of trade liberalization on imported variety by analyzing the experience of Costa Rica from 1986 to 1992. We...

A recent literature has advanced the use of Engel curves to estimate overall CPI bias. In this paper, I show that the methodology is sensitive to the modeling of household demography. Existing estimates of CPI bias do not account for the changing effect of household size on budget shares, and...

Rational models of risk-averse consumers have difficulty explaining limited annuity demand. We posit that consumers evaluate annuity products using a narrow "investment frame" that focuses on risk and return, rather than a "consumption frame" that considers the consequences for lifelong...

The supply chain of a retailer selling a perishable product with a shelf life of two periods is modeled over an infinite horizon. In each period, the retailer has the option to sell old (leftover inventory from previous period) and new (produced fresh at the beginning of the period) products....

We report results of an experiment on prices and demand in a fantasy-based virtual world. A virtual world is a persistent, synthetic, online environment that can be accessed by many users at the same time. Because most virtual worlds are built around a fantasy theme, complete with magic,...

Economists emphasize two channels through which import liberalization affects productivity, one operating between and the other within firms. According to the former, import competition triggers market share reallocations between domestic firms with different technological capabilities...

This paper studies the consumption-savings behavior of households who have risk-sensitive preferences and suffer from limited information-processing capacity (rational inattention or RI). We first solve the model explicitly and show that RI increases precautionary savings by interacting with...

We study two governments, each considering whether or not to compete to attract a foreign monopoly firm into its own domestic market. The competition, should it occur, would involve offering incentives to the firm. The incentives, which are costly for the governments to provide, lower the firm...

We study two governments, each considering whether or not to compete to attract a foreign monopoly firm into its own domestic market. The competition, should it occur, would involve offering incentives to the firm. The incentives, which are costly for the governments to provide, lower the firm...

We propose an Exact Affine Stone Index (EASI) demand system, which delivers the convenient properties of Hicksian demands in an empirically simple framework. Like the Almost Ideal Demand (AID) system, EASI budget shares are linear in parameters given real expenditures. However, unlike AID, EASI...