In this note we apply the notion of absent-mindedness (see Piccione and Rubinstein, 1994), which is a form of imperfect recall, to Rosenthal's (1981) centipede game. We show that for standard versions of the centipede game a subgame perfect equilibrium exists in which play is continued almost to...

The impact of the Central and Eastern European (CEE) economies' trade integration with European markets on CEE trade structures has been studied extensively. These studies frequently observe a quality upgrading of CEE exports. In this paper we consider three dimensions of quality upgrading:...

Starting a firm with expansive potential is an option for educated and high-skilled workers. If there are labor market frictions, this additional option can be seen as reducing the chances of ending up in a low-wage job and hence as increasing the incentives for education. In a matching model,...

Starting a firm with expansive potential is an option for educated and high-skilled workers. This option serves as an insurance against unemployment caused by labor market frictions and hence increases the incentives for education. We show within a matching model that reducing the start-up costs...

This paper studies the incentives for credence goods experts to invest effort in diagnosis if effort is both costly and unobservable, and if they face competition by discounters who are not able to perform a diagnosis. The unobservability of diagnosis effort and the credence characteristic of...

Article VI of the GATT allows counter measures of goods are sold on a foreign market at a price below average production plus transportation costs. The present article analyzes Article VI based on a simple game theoretic model with two countries and economies of scale in the production of one...

Contacts and the way they are organized in di¤erent economic systemsmatter for the economy. In this paper we introduce the notion of Relational Capital to model contacts. Contacts are an input into sold output in our macro model based on matching theory (Pissarides, 1990). We argue that the...

In this article we propose a two stage procedure to model demand decisions by customers who are balancing several dimensions of a product. We then test our procedure by analyzing the behavior of buyers from an Austrian price comparison site. Although in such a market a consumer will typically...

We study all-pay auctions with budget-constrained bidders who have access to fair insurance before bidding simultaneously over a prize. We characterize a unique equilibrium for the special cases of two bidders and one prize, show existence and a heuristic for finding an equilibrium in the case...

A distinction between individual and communal aspects of social capital is introduced, and their roles in production explored. Contacts are required to transact. contact formation and replacement are mediated by either market institutions or, less efficiently, by informal networks. Replacement...