These notes provide an intuitive introduction to dynamic programming. The first two Sections, which can be skipped, present the standard deterministic Ramsey model using the Lagrangian approach. Section 3 reformulates the Ramsey problem by means of a Bellman equation, while Section 4 shows how...

How should firms be incentivized to adopt new technologies when the technical merits and spillovers of such technologies are uncertain? We show that, when information is dispersed but exogenous, efficiency can be induced with simple (constant) subsidies. When, instead, firms must also be...

In a setting with dispersed information, monopolistic competition and sticky-prices, a policy authority uncertain about the monetary transmission mechanism reacts prudently to supply shocks. This induces producers to ascribe an excessive importance to their private information when setting...

How should firms be incentivized to adopt new technologies when the technical merits and spillovers of such technologies are uncertain? We show that, when information is dispersed but exogenous, efficiency can be induced with simple (constant) subsidies. When, instead, firms must also be...

In chapter I, we model monopolistic competition in the spirit of Blanchard and Kiyotaki (1987) and we study the implications of this market structure for the existence of dynamically inefficient equilibria. We show that, with free entry, the presence of some pure profit does not rule out dynamic...

We study information acquisition in a flexible framework with strategic complementarity or substitutability in actions and a rich set of externalities that are responsible for possible wedges between the equilibrium and the efficient acquisition of information. First, we relate the...

These notes provide an intuitive introduction to dynamic programming. The first two Sections, which can be skipped, present the standard deterministic Ramsey model using the Lagrangian approach. Section 3 reformulates the Ramsey problem by means of a Bellman equation, while Section 4 shows how...

In a beauty contest framework, we show that a more precise public information is welfare enhancing when increasing the precision of private information is costly. The accuracy of public information is chosen by the public authority taking into account that an increase in the precision of public...

In this paper, we highlight the possibility of dynamically inefficient equilibria in a model with strictly convex production function at the firm’s level. Decreasing returns imply the existence of some pure profit and hence of an asset market. We endogenise the number of firms by introducing a...

In our duopoly, an irreversible investment incorporates a significant amount of R&D, so that the improvement it introduces in production processes generates a spillover lowering the second comer's investment cost. The presence of the inter-firm spillover substantially affects the equilibrium of...