According to standard economic wisdom, fixed costs should not matter for pricing decisions. However, outside economics, it is widely accepted that firms need to increase their prices after a fixed cost rise. In this note, we show that a liquidity-constrained firm that maximizes lifetime profits...

We develop a model of social preferences for network games and study its predictions in a local public goods game with multiple equilibria. The key feature is that players' social preferences are heterogeneous. This gives room for disagreement between players about the "right" payoff ordering....

It is well established that incumbent firms may try to deter market entry by pretending to be stronger than they really are. In this article, we show that in some cases an incumbent may prefer the opposite, namely to encourage entry by signaling weakness. If the incumbent cannot deter entry of a...

Research and development (R&D) partnerships are formed to share the risks and benefits of R&D. At the macro level, they result in a globe-spanning network that can be a valuable source of international knowledge spillovers. This network is the subject of a considerable body of literature....

Empirical work shows that networks of research and development alliances are asymmetric, with a small number of firms involved in the majority of partnerships. This article investigates the welfare-relevant effects of such concentrated networks in a model of network formation in an oligopolistic...

Experimental economics has provided evidence for fairness concerns, but their relative strength and even their stability is still under debate. We reconcile the seemingly inconsistent results by presenting a theory of marginal fairness concerns. The key assumption is that fairness concerns are...

In this paper, we develop a network perspective on the welfare gains from trade in today’s internationally fragmented supply chains. Towards this end, we study a Ricardian trade model featuring trade in final and intermediate products, and introduce a novel comparative statics approach to...