What discount rate should be applied to social investments? It is standard to use the market interest rate, thereby respecting private preferences. We show that application of this “revealed preference” criterion rests on faith, not logic. It is justified only if preferences over all choices, including past choices, are time invariant. The conditions for this to be true are stringent. Under mor...

This paper considers a “war of attrition” game in which agents learn about an uncertain state of the world through private signals and from their peers. I provide existence and uniqueness results for a class of equilibria that satisfy a “full-participation” condition, and show that asymmetries in the distribution of information can lead to excessive stopping and an oversupply of information rel...

We introduce knowledge spillovers as an externality in the production function of competitive firms operating in a finite spatial domain under adjustment costs. Spillovers are spatial as productive knowledge flows more easily among firms located nearby. When knowledge spillovers are not internalized by firms spatial agglomerations may emerge endogenously in a competitive equilibrium, however, t...

<p style='text-indent:20px;'>In this paper, we develop a dynamic control model to investigate monopolist's investment strategies in product innovation, process innovation and advertising-based goodwill. The significant features of our study are: (ⅰ) considering the effect quality on goodwill; (ⅱ) instantaneous cost producing using machinery and/or skilled labour; (ⅲ) customers' demand fun...

Conditional cash transfer programs pay recipients in exchange for an action that brings private behavior closer to the social optimum. We analyze one such program in Mexico, Progresa, that pays four million poor mothers to send their children to school and health visits. We show that these programs are effective, but that they can be made more efficient by following simple rules in selecting be...

An infinite-horizon, stochastic model of entry and exit with sunk costs and imperfect competition is constructed. A subgame perfect Nash equilibrium for the general dynamic stochastic game is shown to exist as a limit of finite-horizon equilibria. This equilibrium has a relatively simple structure characterized by two numbers per finite history. Under very general conditions, it tends to exhibi...

We design a global refunding scheme as a new international approach to address climate change. A global refunding system allows each country to set its carbon emission tax, while aggregate tax revenues are partially refunded to member countries in proportion to the relative emission reductions they achieve within a given period. In a simple model we show that a suitably designed global refundin...

We describe a Bayesian model for social learning of a random variable in which agents might observe each other over a directed network. The outcomes produced are compared to those from a model in which observations occur randomly over a complete graph. In both cases we observe a nontrivial level of observation which maximizes learning, though individuals have strong incentive to defect from the...