We present a model of fixing or patching a software problem after the product has been released in the market. Specifically, we model a software firm’s trade-off in releasing a buggy product early and investments in fixing it later. Just as the marginal cost of producing software can be effectively zero, so can be the marginal cost of repairing multiple copies of defective software by issuing p...

Buyers are typically unaware of the full set of offers when making a purchase. This paper examines how international trade interacts with this problem of incomplete information. Sellers must communicate their offers through costly price posting, but cannot reach all buyers. Consequently, no market clearing price exists, and sellers randomize over an equilibrium price distribution. Letting selle...

A segmented markets model is constructed with payments systems credit and a rich array of monetary policy instruments. Goods market segmentation plays an important role, in addition to the role played by conventional segmentation of asset markets. The diffusion of a money injection by the central bank depends on the interaction of agents in exchanging money for goods, and on the arrangements fo...

Author: Stephen D. Williamson1 Affiliations: Department of Economics, Washington University in St. Louis; Richmond Federal Reserve Bank; St. Louis Federal Reserve Bank Correspondence: Department of Economics, Washington University in St. Louis, Campus Box 1208, St. Louis, MO 63130; [email protected]; Phone 314-935-9283; Fax 314-935-4156 Abstract:A segmented markets model is constructed ...

Adverse selection induces economic limits to market substitution. If quality uncertainty persists in both internet and traditional marketplaces, a second-best equilibrium with parallel market segments may arise. Positive trade in parallel segments implies that the information cost advantage of one marketplace is exactly offset by a more severe adverse selection problem associated with non-obser...

In this paper we consider modeling of credit risk within the Libor market models. We extend the classical definition of the defaultfree forward Libor rate to defaultable bonds with credit ratings and develop the rating based Libor market model. As driving processes for the dynamics of the default-free and the pre-default term structure of Libor rates time-inhomogeneous Lévy processes are used. ...

Organized trading for electricity includes both the pool and the futures market. Pool prices are volatile while the prices of the futures-market products are comparatively more stable. Thus, futures-market products constitute hedging instruments to reduce the risk suffered by any market agent. Electricity market agents engage in both pool and futures market transactions seeking to maximize thei...

Market Imperfections and Firm-Sponsored Training Recent human capital theories predict that labor market frictions and product market competition influence firm-sponsored training. Using matched worker-firm data from Dutch manufacturing, our paper empirically assesses the validity of these predictions. We find that a decrease in labor market frictions significantly reduces firms’ training expen...

The newly found interest of private developers and communities to bring back the urban Main Street has brought with it questions about what the Main Street should be. Private developers see the inner city as the next frontier for retail development. Communities are attempting to redevelop their districts both with and without private involvement. The goals of each approach are significantly dif...

Third parties such as trade associations often assist cartels by collecting and evaluating market behaviour at the firm level. Under incomplete information neutral market oversight helps to distinguish defecting from complying behaviour, increasing the effectiveness of punishments for defectors and increasing cartel persistence. We investigate how cartels sort themselves into different organiza...