We review previous research showing that representations formed during language processing are sometimes just "good enough" for the task at hand and propose the "online cognitive equilibrium" hypothesis as the driving force behind the formation of good-enough representations in language processing. Based on this view, we assume that the language comprehension system by default prefers to achiev...

We construct a quantitative equilibrium model of the housing sector that accounts for the homeownership rate, the average foreclosure rate, and the distribution of home-equity ratios across homeowners prior to the recent boom and bust in the housing market. We analyze the key mechanisms that account for these facts, including the preferential tax treatment of housing and inflation. We then use ...

Candidates for U.S. presidential elections are determined through sequential elections in single states, the primaries. We develop a model in which candidates can influence their winning probability in electoral districts by spending money on campaigning. The equilibrium replicates several stylized facts very well: Campaigning is very intensive in the first district. The outcome of the first el...

ing from Eq. 7, Corsetti (2008) characterized the natural rate of employment (output) if all prices were flexible (i.e. in the absence of nominal rigidities) by assuming that each firm would maximize current profit by charging the equilibrium markup over current marginal costs:

We consider a team production problem in which the principal observes only the team output and not individual effort. As is well known, inefficiencies may arise when each team member’s compensation is based only on his individual action, so that team members are not penalized or rewarded as a group, as is often the case in practice. We show that it is possible to overcome this problem by specif...

This paper analyzes the role of communication between firms in an infinitely repeated Bertrand game in which firms receive an imperfect private signal of a common value i.i.d. demand shock. It is shown that firms can use stochastic, inter-temporal market sharing as a perfect substitute for communication in low demand states. Therefore, partial communication in high demand states is sufficient t...

This paper suggests a probability-dominant user equilibrium (PdUE) model to describe the selfish routing equilibrium in a stochastic traffic network. At PdUE, travel demands are only assigned to the most dominant routes in the same origin-destination pair. A probability-dominant rerouting dynamic model is proposed to explain the behavioral mechanism of PdUE. To facilitate applications, the logi...

This paper reports a laboratory experiment to study pricing and advertising behavior with costly buyer search. Sellers simultaneously post prices and may incur a cost to advertise this price. In the unique symmetric equilibrium, sellers either charge a high unadvertised price or randomize in an interval of lower advertised prices. Increases in search or advertising costs raise equilibrium price...

This review provides a common framework for researchers thinking about the next generation of micro-founded macro models of growth, inequality, and financial deepening, as well as direction for policy makers targeting microfinance programs to alleviate poverty. Topics include treatment of financial structure general equilibrium models: testing for as-if-complete markets or other financial under...

We examine the relationship between the equilibrium number of the firms entering the market and socially efficient one. Salop (1979) investigates a mill pricing model and shows that the former is larger than the latter (excess entry theorem). We find that, in contrast to Salop (1979), the equilibrium number of the firms can be either larger or smaller than the efficient one. If the entry cost i...