We develop a two-period general equilibrium model of portfolio delegation with competitive, differentially skilled managers and convex compensation contracts. We show that convex incentives lead to significant equilibrium mispricing, but reduce price volatility. In particular, price informativeness and volatility may exhibit opposite behaviour. Investors do not internalize the externality that ...

In an economy with commodity-pairwise trading posts and transaction costs, commodity money is endogenously determined in general equilibrium. Absent double coincidence of wants, the lowtransaction cost commodity (with the narrowest proportional bid/ask price spread) becomes the common medium of exchange. JEL Classification: C62, E40

We study a model of firm price setting with customer markets and empirically evaluate its predictions. Our framework captures the dynamics of customers in response to a change in the price set by firms, describes the behavior of optimal prices in the presence of customer retention concerns, and delivers a general equilibrium model of price and customer dynamics. We exploit micro data on purchas...

Since the mid 1980s, applied general equilibrium (AGE) models have been used to analyze the effects of regional economic policies. Unfortunately, most regional AGE models use assumptions that are too restrictive to yield reliable results. This paper presents an AGE model for regional policy analysis that has four major improvements compared to existing regional AGE models. First, the model is d...

We introduce product differentiation in the model of price competition with strictly convex costs in which firms have to supply all the forthcoming demand. We find that although a continuum of equilibria exists in a homogeneous product market, the competitive price equilibrium is the only robust one. Specifically, as long as the equilibrium correspondence is nonempty, the equilibrium price conv...

This paper provides a dynamic optimization model of durable good inventories to study the interactions between investment demand and production of capital goods. There are three major findings: First, capital suppliers’ inventory behavior makes investment demand more volatile in equilibrium; Second, equilibrium price of capital is characterized by downward stickiness; Third, the responses of th...

providing of food products for increasing population, enhancing food security, increasing of production and foreign incomes are among the major program purposes of each country and monetary policies are one of the methods that immediately affected on food price and on major agriculture variables. time series analysis was used for studying the impacts of monetary policies effect on food price in...

This paper explores how much firm-paid employee benefits and firms’ financial conditions have contributed to delayed employment recoveries relative to output since 1990, using a DSGE model. Empirically, I document the underexplored pro-cyclicality of per worker benefit costs. Post-1990 period differs from before in that: (1) there have been larger increases of such quasifixed employment costs a...

The costs of rent seeking exceed traditional measures when opportunity cost is considered. When the quantity of resources consumed by rent seeking is large, rent seeking draws consumer surplus out of alternative resource employments. The costs of rent seeking differ in partial and general equilibrium frameworks; Tullock (1989) recognizes this but incorrectly argues that rent seeking costs are t...

fluctuation of exchange rate and its deviation from equilibrium path are one of the most important macroeconomic variables that is affected by different side of economical sectors. whereas, the exchange rate fluctuation and its deviation from equilibrium path haven’t the same and similar effects on all of the economical sectors, and considering eminent important of industrial development on the...