We incorporate reference-dependent worker behavior into a search-matching model of the labor market, in which firms have all the bargaining power and productivity follows a log-linear AR(1) process. Motivated by Akerlof (1982) and Bewley (1999), we assume that existing workers’ output falls stochastically from its normal level when their wage falls below a "reference point", which (following Kő...

This paper presents a principal-agent model where the agent has multiple, or imprecise, beliefs. We model this situation formally by assuming the agent’s preferences are incomplete. One can interpret this multiplicity as limited knowledge of the surrounding environment. In this setting, incentives need to be robust to the agent’s beliefs. We study whether robustness implies simplicity. Under mi...

We analyze a Bewley-Huggett-Aiyagari incomplete-markets model with labor-market frictions. Consumers are subject to idiosyncratic employment shocks against which they cannot insure directly. The labor market has a Diamond-Mortensen-Pissarides structure: firms enter by posting vacancies and match with workers bilaterally, with match probabilities given by an aggregate matching function. Wages ar...

One of the most provocative findings in experimental economics is that many individuals seem to be willing to spend considerable resources to reward (punish) fair (unfair) behavior by others even though no direct material gain derives from such action. In Fehr and Falk (1999), individuals are either assigned the role of a worker or a firm manager.1 Even though competitive bidding should push th...

In this paper, we stabilize the parabolic equilibrium profile in a two-dimensional (2-D) channel flow using actuators and sensors only at the wall. The control of channel flow was previously considered by Speyer and coworkers, and Bewley and coworkers, who derived feedback laws based on linear optimal control, and implemented by wall-normal actuation. With an objective to achieve global Lyapuno...

The cross-section distribution of U.S. wealth is more skewed than the labor earnings. Stachurski and Toda (2019) explain how plain vanilla Bewley-Aiyagari-Huggett (BAH) models with infinitely lived agents can't generate that pattern because an equilibrium risk-free rate lower time preference each person's process stationary. We provide two modifications a BAH model this pattern: (1) overlapping...