We theoretically explore the risk-taking behavior of two unequally-endowed risk-neutral agents who are presented with opportunities to play lotteries. We find that if the agents consider rank in the wealth distribution more important than wealth itself, then their risk preferences are distorted...

An outside inventor of a new production process seeks to license it to Cournot duopolists which have unequal ex ante costs. Distinguishing "leading-edge" innovations (new cost below both firms' costs) from "catch-up" innovations (new cost between the two firms' costs), we compare the equilibria...

We theoretically examine the connection among labor productivity, work time, and housing costs in an economy with households differing in wages and neighborhoods differing in quality. We argue that the location rent component of housing cost is key to explicating the connection. We trace how the...

I model and simulate an increasingly productive labor economy in which heterogeneous agents choose how much to work, how much to consume and where to belong. The agents like to belong to "clubs" (e.g., neighborhoods, schools, workplaces) which are formed, quality-ranked, and priced endogenously....

A meritocracy is modeled as a multiple-prize contest among agents who are heterogeneously endowed with talent and wealth and thus vary in the disutility of exerting effort and spending money to earn credentials. In equilibrium, many richer but less-talented agents obtain better credentials than...