Working Papers

Three axioms from decision theory select sets of Nash equilibria of signaling games in extensive form with generic payoffs. The axioms require undominated strategies (admissibility), inclusion of a sequential equilibrium (backward induction), and…

For three years after the typical developing country opens its stock market to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of seven. No such increase occurs in a…

From a variant of Kuhn’s triangulation we derive a discrete version of the Global Newton Method that yields an epsilon-equilibrium of an N-player game and then sequentially reduces epsilon toward zero to obtain any desired precision or the best…

A player’s pure strategy is called relevant for an outcome of a game in extensive form with perfect recall if there exists a weakly sequential equilibrium with that outcome for which the strategy is an optimal reply at every information set it…

The Global Newton Method for games in normal form and in extensive form is shown to have a natural extension to computing Markov-perfect equilibria of stochastic games.

Recent work emphasizes the primacy of differences in countries colonially-bequeathed property rights and legal systems for explaining differences in their subsequent economic development. Barbados and Jamaica provide a striking counter example to…

This paper investigates the extent to which the economic challenges faced by symphony orchestras in the United States reflect collectively bargained wage increases and work rules. Since the late 1960s, collective bargaining agreements have…

We consider a cross-calibration test of predictions by multiple potential experts in a stochastic environment. This test checks whether each expert is calibrated conditional on the predictions made by other experts. We show that this test is good…

We propose a model in which an optimal dynamic financing contract for a cash-constrained entrepreneur is a credit line with a growing credit limit. This simple contract, which resembles those used in practice, presents a good benchmark to…

This paper develops a new nonparametric series estimator for the average treatment effect for the case with unconfounded treatment assignment, that is, where selection for treatment is on observables. The new estimator is efficient. In addition…

I study the human capital development and firm-worker matching processes for PhD economists. This group is useful for this purpose because the types of jobs they hold can be easily categorized and they have an observable productivity measure (…

Oblivious equilibrium is a new solution concept for approximating Markov perfect equilibrium in dynamic models of imperfect competition among heterogeneous firms and has recently been used in multiple economic studies. In this paper, we present…

An N-player game can be approximated by adding a coordinator who interacts bilaterally with each player. The coordinator proposes strategies to the players, and his payoff is maximized when each player’s optimal reply agrees with his proposal.…

We describe a two-step algorithm for estimating dynamic games under the assumption that behavior is consistent with Markov perfect equilibrium. In the first step, the policy functions and the law of motion for the state variables are estimated.…

This paper explores information disclosure in matching markets, e.g., the informativeness of transcripts given out by universities. We show that the same, benchmark, amount of information is disclosed in essentially all equilibria. We then…

We propose an approximation method for analyzing Ericson and Pakes (1995)-style dynamic models of imperfect competition. We develop a simple algorithm for computing an oblivious equilibrium, in which each firm is assumed to make decisions based…

We define a refinement of Nash equilibria called metastability. This refinement supposes that the given game might be embedded within any global game that leaves its local best reply correspondence unaffected. A selected set of equilibria is…

We examine Hillas and Kohlberg’s conjecture that invariance to the addition of payoff-redundant strategies implies that a backward induction outcome survives deletion of strategies that are inferior replies to all equilibria with the same outcome…

This article characterizes a supply function equilibrium in an auction market constrained by limited capacities of links in a transportation network and limited input/output capacities of participants. The formulation is adapted to a wholesale…

We compare the two most common bidding processes for selling a company or other asset when participation is costly to buyers. In an auction all entry decisions are made prior to any bidding. In a sequential bidding process earlier entrants can…