We develop a consistent nonparametric test of common values in first-price auctions and apply it to British Columbia Timber Sales data. The test is based on the behavior of the CDF of bids near the reserve price. We show that the curvature of the CDF is drastically different under private values...

The finite state Markov-Chain approximation method developed by Tauchen (1986) and Tauchen and Hussey (1991) is widely used in economics, finance and econometrics in solving for functional equations where state variables follow an autoregressive process. For highly persistent processes, the...

We study the development of a social norm of trust and reciprocity among strangers in the infinitely repeated binary trust games. Players are anonymous and interact at randomly determined times. Following Kandori (1992), we show that the social norm of trust and reciprocity can be sustained in a...

Tax-based deficit reduction experiments for the U.S.\@ and EMU-12 are conducted using an open economy model. In welfare terms, raising the consumption tax is the least costly, followed by the labor income tax, then the capital income tax. Use of an open economy model means that the incidence of...

Capturing the boom phase of Pigou cycles and resolving the comovement problem requires positive sectoral comovement. This paper addresses these observations using a two sector New Keynesian model. Price rigidities dampen movements in the relative price of durables following a monetary policy...

In a neoclassical growth model with life-cycle households in which money is held to satisfy a cash-in-advance constraint, the optimal steady state inflation rate is not the Friedman rule -- it is in excess of $20\%$. Lump-sum, age-independent money injections twist and flatten the lifetime...

A large group of authors with inspiring credentials recently expressed their belief, in the journal Tobacco Control, that the introduction of graphic label warnings (GLWs)on cigarette packages could reduce smoking prevalence in the US by several percentage points, in view of the evidence...

A "constant" wage is pair-wise inefficient in a standard search model when workers endogenously separate from employment. We derive a pair-wise efficient employment contract that involves workers paying a hiring fee (or bond) upon the formation of a match. We estimate the constant wage and...