We examine a Stackelberg game where a financially constrainedleader faces competition from a ‘deep pocket’ follower. We analyzethe consequences of this trade-off between a financial and a strategicadvantage for both the design of financial contracts and market structure.We derive conditions...

If households and firms face different interest rates, there may be mutual gains in forming seniority wage contracts, which facilitate implicit saving by younger workers, who might otherwise save either little or nothing at all at low interest rates. A three-period OLG model is presented with...

We consider the effects of an imperfectly competitive banking sector on the capital stock in a version of the two-period Diamond OLG model, focusing on how profits are returned. There are two broad alternatives: profits may be taxed and returned to households exogenously as fiscal transfers or...