We introduce a simple model of oligopolistic competition where firms first build capacity, and then, after observing the capacity decisions, choose a reservation price at which they are willing to supply their capacities. This model describes many markets more realistically than the model of Kreps and Scheinkman [Kreps, D., Scheinkman, J., 1983. Quantity precommitment and Bertrand competition y...

We build and estimate a recursive utility equilibrium model of the term structure of interest rates that prices consistently all risk factors that affect bonds. We contrast it with an arbitrage-free model, where prices of risk are estimated freely without preference constraints. In both models, nominal bond yields are affine functions of macroeconomic state variables. The equilibrium model acco...

Using a two-period duopoly model with vertical differentiation, we show that there exists a unique subgame perfect equilibrium where the first entrant supplies a lower quality and gains higher profits than the second entrant. We also prove that this entry sequence is also socially efficient. JEL Classification: C73, D43, L13

This paper extends the connections model of network formation by allowing for players who are heterogeneous with respect to values as well as the costs of forming links. Our principal result is that centrality and short average distances between individuals are robust features of equilibrium networks.  2005 Elsevier Inc. All rights reserved. JEL classification: C72

We analyze the interaction between risk sharing and capital accumulation in a stochastic OLG model with production. We give a complete characterization of interim Pareto optimal competitive equilibrium allocations. Furthermore, we provide tests of Pareto optimality/suboptimality based on (risky) rates of return only. © 2007 Elsevier Inc. All rights reserved. JEL classification: D61; D91; E13; E43

This paper sets up a matching (decentralized trade) model with a technology that allows each pair of agents to report the transfer of goods in the end of each pairwise meeting. It examines (a) conditions under which an allocation that can be supported as an equilibrium allocation, and (b) whether the report system can replace money. JEL Classification: E40

The paper surveys recent work on learning in games and delineates the boundary between forms of learning that lead to Nash equilibrium and forms that lead to weaker notions of equilibrium (or none at all). JEL Classification: C7, D83.

Analytical expectational stability results are obtained for both Euler-equation and infinitehorizon adaptive learning in a simple stochastic growth model. The rational expectations equilibrium is stable under both types of learning, though there are differences in the learning dynamics. JEL Classification: E62, D84, E21, E43.

In an asymmetric tournament model with endogenous risk choice by the agents it is shown that equilibrium efforts decrease (increase) with risk if abilities are sufficiently similar (different). Risk also affects winning probabilities. The interaction of both effects is analyzed. JEL classification: D23, J3, M12.

We introduce a small cost of leading in the two-player action commitment game formulated by Hamilton and Slutsky (1990). We investigate a price competition model and find that any randomized strategy equilibria converge to the Bertrand equilibrium. JEL classification numbers: L13, C72