We study team formation in real-effort experiments in which participants bargain over a jointly produced outcome depending both on effort and ability. Participants decide between undertaking a task alone or with another participant by releasing the minimum share of the future team outcome that...

The model of Morris and Shin [2002] shows that imprecise public announcements can coordinate the actions of speculators far from the fundamental because of over-reaction to announcements. The strong focal potential of common knowledge is welfare damaging when it induces over-reaction to an...

The accommodating monetary policy of the 70s is usually rationalized within the Barro-Gordon framework. By contrast, this article shows that, even in the absence of inflationary bias, a credible central bank finds it optimal to accommodate monetary policy in response to cost-push shocks whenever...