Working Papers

Is there a limit to trade cooperation that the WTO can facilitate? In this paper I present a theory of the WTO in which the WTO is an equilibrium outcome of multiple bilateral repeated prisoners’ dilemma games among countries. The equilibrium…

This paper addresses the question of how exchange rates affect consumer demand in markets where advertising plays an important role. We identify an effect that has not been emphasized in the existing literature: when foreign exchange rates…

For an all-pay sealed-bid auction of an item for which each bidder’s realized value can depend on every bidder’s privately observed signal, existence of equilibria in behavioral strategies is established using only the assumption that bidders’…

For two symmetric bidders, weak monotonicity conditions are shown to imply existence of an equilibrium in mixed behavioral strategies for a sealed-bid first-price auction of an item for which each bidder’s value depends on every bidder’s observed…

A first-price sealed-bid auction of an item for which bidders are risk-neutral and have privately known values is shown to have an equilibrium in mixed behavioral strategies if the joint distribution of bidders’ values has a continuous density on…

What prevents majorities from extracting surplus from minorities in legislatures? We study an infinite horizon game where a legislative body votes to determine distributive policy each period. Proposals accepted by a simple majority are…

Three axioms from decision theory are applied to refinements that select connected subsets of the Nash equilibria of games with perfect recall. The first axiom requires all equilibria in a selected subset to be admissible, i.e. each player’s…

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…

Efficient allocation of a stochastic stream of financial income is characterized by an explicit stochastic differential equation for the case that each agent has stationary preferences and the probability law of the stochastic process is known.…

This paper studies information aggregation in dynamic markets with a finite number of partially informed strategic traders. It shows that for a broad class of securities, information in such markets always gets aggregated. Trading takes place in…

We study the impact of limited records on reputation dynamics, that is, how the set of equilibria and equilibrium payoffs changes in a model in which one long-lived player faces a sequence of short-lived players who observe only limited…

We analyze the differences between companies owned by private equity (PE) investors and similar public companies. We document that PE-owned companies use much stronger incentives for their top executives and have substantially higher debt levels…

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…