We develop a model in which the value of a firm's reputation for quality increases gradually over time. In our model, a firm's ability to deliver high quality at any given period depends on how much it invests in quality. This investment is the firm's private information. Also, a firm's current...

We develop a model of firm size in which firms are unable to access as many consumers as they want. Nwely arrived consumers match randomly with firms. Subsequently consumers must pay "search costs"to be able to switch firms.

We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations followed by subsequent embodiments in physical capital. Our model stresses the causal relationship between past Ramp;D expenditures and current investments in machinery and equipment....

In this paper, we model the dynamic portfolio choice problem facing banks, calibrate the model using empirical data from the banking industry for 1984-1993, and assess quantitatively the impact of recent regulatory developments related to bank capital. The model suggests that two aspects of the...

In this paper we model the dynamic portfolio choice problem facing banks, calibrate the model using empirical data from the banking industry for 1984-1993, and assess quantitatively the impact of recent regulatory developments related to bank capital. The model implies a U-shaped relationship...

The increasing dependence of individuals on debt financing raises several welfare considerations that we analyze in this paper. We develop a dynamic, competitive model of relationship banking to determine how regulation influences borrowing and lending behavior, and analyze how it affects...

The authors analyze a search-theoretic framework in which consumers buy the product repeatedly and firms' costs vary over time. They show the cross-sectional correlation between profits and firm size, the persistence of profits over time, and the role of consumers' immobility in determining...