This paper analyzes the role of financial development as a source of endogenous instability in small open economies. By assuming that firms face credit constraints, our model displays a complex dynamic behavior for intermediate values of the parameter representing the level of financial development of the economy. The basic implication of our model is that economies experiencing a process of fi...

The present paper thoroughly explores second-best efficient allocations in an adverse selection insurance economy. We start from a natural extension of the classical model, assuming less than perfect risk perceptions. We propose first and second welfare theorems, by means of which we describe efficiencyenhancing policies. Notions of weak and strong adverse selection are promising for interpreti...

Existence and efficiency of general equilibrium with commodity money is investigated in an economy where N commodities are traded at N(N − 1)/2 commodity-pairwise trading posts. Trade is a resource-using activity recovering transaction costs through the spread between bid (wholesale) and ask (retail) prices. Budget constraints, enforced at each trading post separately, imply demand for a carrie...

Strategy-proof implementation is one of the many elements that have contributed to the successful application of matching theory in real life. However, in many-to-one matching markets without transfers (e.g., doctors to hospitals with fixed salaries) there is no stable mechanism which is strategy-proof for hospitals. Furthermore, strategy-proofness and stability cannot be achieved for both hosp...

This paper presents a survey of the use of homotopy methods in game theory. Homotopies allow for a robust computation of game-theoretic equilibria and their refinements. Homotopies are also suitable to compute equilibria that are selected by various selection theories. We present the relevant techniques underlying homotopy algorithms. We give detailed expositions of the Lemke-Howson algorithm a...

This paper is concerned with casting o! the standard assumption } the production function displays socially constant returns to scale } in a simple growth model with public inputs. In the model, public services work as a source of utility and as an input to production. Making use of the global bifurcation technique, we show that the model can generate a whole spectrum of interesting dynamics, w...

This paper extends to incomplete preferences the formulation of strategic complementarity in Milgrom and Shannon (1994). It is shown, by example, that quasi-supermodularity and single-crossing no longer su¢ce to guarantee monotone comparative statics with incomplete preferences. However, when incomplete preferences satisfy monotone closure in addition to quasi-supermodularity and single-crossin...

In this paper the problem of optimal derivative design, profit maximization and risk minimization under adverse selection when multiple agencies compete for the business of a continuum of heterogenous agents is studied. In contrast with the principal–agent models that are extended within, here the presence of ties in the agents’ best–response correspondences yields discontinuous payoff function...

Rational expectations models have increasingly been replaced by models with various forms of learning. This paper studies the global dynamics of a model of renewable resource markets due to Hommes and Rosser [Macroecon. Dyn. 5 (2001) 180] under adaptive and statistical learning systems. The statistical learning system is seen to generate greater complexity of the structures of the basins of att...

We study a continuous-time problem of optimal public good contribution under uncertainty for an economy with a finite number of agents. Each agent can allocate his wealth between private consumption and repeated but irreversible contributions to increase the stock of some public good. We study the corresponding social planner problem and the case of strategic interaction between the agents and ...