We examine the proposition chat competitive firms must behave as if they were maximizing profits; otherwise they would go bankrupt, or even fail to be financed in a competitive capital market. We investigate a model in which an entrepreneur raises funds for a risky enterprise on a competitive...

Restrictions on transaction price changes are a feature of many security markets. This paper analyzes the impact of such price continuity rules on price dynamics and examines possible rationales for their existence. Contrary to popular belief, continuity rules need not reduce price efficiency,...

This paper develops a game-theoretic model to analyze market makers' intertemporal pricing strategies. We show that dealers who adopt non-cooperative pricing strategies may set bid-ask spreads above competitive levels. This form of quot;implicit collusionquot; differs from explicit collusion,...

We study the relationship between rationality and economic survival in a simple dynamic model, where agents from different populations interact repeatedly through random matching. An explicit criterion (quot;bankruptcyquot;) determines whether agents survive each interaction; all agents are...

We model the global warming process as a dynamic commons game in which the players are countries, their actions at each date produce emissions of greenhouse gases, and the state variable is the current stock of greenhouse gases. The theoretical analysis is complemented by a calibration exercise....