We consider a monopolistic supplier’s optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs. Under discriminatory pricing, downstream firms that differ in their ex ante distribution of retail costs are offered different tariffs. Under uniform...

We extend Akerlof ’s (1970) “Market for Lemons” by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is at display for sale. Overconfident buyers do not update according to Bayes’ rule but take the noisy signal at...

We modify the classic single-period inventory management problem by assuming that the newsvendor is expectation-based loss averse according to Koszegi and Rabin (2006, 2007). Expectation-based loss aversion leads to an endogenous psychological cost of leftovers as well as stockouts. If there are...

We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long-term contract that has to be renegotiated after the realization of the state of the world, they take the initial contract as a reference point to which they compare gains and...

This paper is a thoroughly revised and extended version of an article firstly published in the anthology "Moderne Wirtschaftsgeschichte" (München: Oldenbourg) in 1996. This book is an introduction to modern economic history for historians and economists. Accordingly this paper has to two...

This paper analyses a model of vertical product differentiation with one incumbent and one entrant firm. It is shown that if firms can produce only one quality level welfare in this entry game can be lower than in monopoly. This is the case if qualities are strategic complements because the...

The relationship between trust and risk is a topic of enduring interest. Although there are substantial differences between the ideas the terms express, many researchers from different disciplines have pointed out that these two concepts become very closely related in personal exchange contexts....

In health care systems today, including those of Switzerland and the United States, participants do not necessarily see the big picture of lifetime health costs and quality of life, and in many systems consumers and providers lack the incentives to manage preventative and chronic care to...

In this paper we study the influence of economic stability on the level of corruption in a country, where high stability is defined as a low level of variance in economic output growth. We present a political competition model with exogenous shocks to economic output where politicians can decide...

This study analyses the physical stature of runaway apprentices and military deserters based on advertisements collected from 18th-century newspapers, in order to explore the biological welfare of colonial and early-national Americans. The results indicate that heights declined somewhat at...