We develop a model of favor exchange in a network setting where the cost of performing favors is stochastic. For any given favor exchange norm, we allow for the endogenous determination of the network structure via a link deletion game. We characterize the set of stable as well as equilibrium...

The aim of this paper is to find approximate log-transition density functions for multivariate time-inhomogeneous diffusions in closed form. There are many empirical evidences supporting that the data generating process governing dynamics of many economics variables might vary over time because...

This article proposes a general regime-switching univariate diffusion model to describe the dynamics of the short-term interest rate. The maximum likelihood estimates are obtained using the weekly series of U.S. three-month treasury bill rates. The estimation results reveal that there are strong...

The Zollverein, a customs union, of 1834 was the outcome of sequential accession negotiations between Prussia and other German states. This paper applies a bargaining model to analyse the choices of negotiation structure and institutional form of a customs union. The existence of negative...

If either property rights or institutions are weak, agents who create wealth by cooperating will later have an incentive to fight over the distribution of it. In this paper we investigate theoretically and experimentally the circumstances under which welfare losses from investment in...

This paper sheds new light on subset hypothesis testing in linear structural models in which instrumental variables (IVs) can be arbitrarily weak. For the first time, we investigate the validity of the bootstrap for Anderson-Rubin (AR) type tests of hypotheses specified on a subset of structural...

This paper presents a theoretical model and empirical evidence to explain the occurrence of tax amnesties. We treat amnesties as endogenous, resulting from a strategic game between many taxpayers discounting future payments from punishment and a government that balances costs and benefits of...