Sunk Investments Lead to Unpredictable Prices

By George J. Mailath, Andrew Postlewaite, and Larry Samuelson

American Economic Review, September 2004

We study transactions that require investments before trading in a competitive market, when forward contracts fixing the transaction price are absent. We show that, despite the market being perfectly competitive and subject to arbitrarily little uncertain...

Dynamic Pricing in the Presence of Antidumping Policy: Theory and Evidence

By Bruce A. Blonigen and Jee-Hyeong Park

American Economic Review, March 2004

Antidumping (AD) trade protection policies allow government agencies to recalculate AD duties based on foreign firms' most recent pricing behavior. We examine the resulting dynamic pricing problem of a foreign firm facing such policy. We show that the exp...

Resolving Conflicting Preferences in School Choice: The "Boston Mechanism" Reconsidered

By Atila Abdulkadiroğlu, Yeon-Koo Che, and Yosuke Yasuda

American Economic Review, February 2011

Despite its widespread use, the Boston mechanism has been criticized for its poor incentive and welfare performances compared to the Gale-Shapley deferred acceptance algorithm (DA). By contrast, when students have the same ordinal preferences and schools ...

Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status

By James P. Smith

Journal of Economic Perspectives, Spring 1999

This paper sketches theoretical reasons why health may alter household savings and provides evidence on the empirical impact of health shocks on household wealth. The impacts on saving are quantitatively large and only partly explained by increased out-of...

The Multi-unit Assignment Problem: Theory and Evidence from Course Allocation at Harvard

By Eric Budish and Estelle Cantillon

American Economic Review, August 2012

We use theory and field data to study the draft mechanism used to allocate courses at Harvard Business School. We show that the draft is manipulable in theory, manipulated in practice, and that these manipulations cause significant welfare loss. Neverthel...

On the Political Economy of Urban Growth: Homeownership versus Affordability

By François Ortalo-Magné and Andrea Prat

American Economic Journal: Microeconomics, February 2014

We study the equilibrium properties of an overlapping-generation economy where agents choose where to locate and how much housing to own, and city residents vote on the number of new building permits every period. Undersupply of housing persists in equil...

The Capital Asset Pricing Model: Theory and Evidence

[Symposium: Fortieth Anniversary of CAPM]

By Eugene F. Fama and Kenneth R. French

Journal of Economic Perspectives, Summer 2004

The capital asset pricing model (CAPM) of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990). Before their breakthrough, there were no asset pricing models built from first...

Doing Well by Doing Good? Green Office Buildings

By Piet Eichholtz, Nils Kok, and John M. Quigley

American Economic Review, December 2010

This paper provides the first credible evidence on the economic value of "green buildings" derived from impersonal market transactions rather than engineering estimates. We analyze clusters of certified green and nearby buildings, establishing that "rated...

The Economics of Dowry and Brideprice

By Siwan Anderson

Journal of Economic Perspectives, Fall 2007

Payments between families at the time of marriage have existed throughout the history of most developed countries and are currently pervasive in many areas of the developing world. These payments can be substantial enough to affect the welfare of women an...

Anticipated Banking Panics

By Mark Gertler, Nobuhiro Kiyotaki, and Andrea Prestipino

American Economic Review, May 2016

We develop a macroeconomic model with banking instability. Sunspot runs can arise that are harmful to the economy. However, whether a run equilibrium exists depends on fundamentals. In contrast to earlier work, the probability of a sunspot run is the outc...

Family Inequality: Diverging Patterns in Marriage, Cohabitation, and Childbearing

[Symposium: Inequality Beyond Income]

By Shelly Lundberg, Robert A. Pollak, and Jenna Stearns

Journal of Economic Perspectives, Spring 2016

Popular discussions of changes in American families over the past 60 years have revolved around the "retreat from marriage." Concern has focused on increasing levels of nonmarital childbearing, as well as falling marriage rates that stem from both increas...

Housing Booms and City Centers

By Edward L. Glaeser, Joshua D. Gottlieb, and Kristina Tobio

American Economic Review, May 2012

Popular discussions often treat the great housing boom of the 1996-2006 period as if it were a national phenomenon with similar impacts across locales, but across metropolitan areas, price growth was dramatically higher in warmer, less educated cities wit...

Incomplete Contracts and the Theory of the Firm: What Have We Learned over the Past 25 Years?

By Philippe Aghion and Richard Holden

Journal of Economic Perspectives, Spring 2011

Sanford Grossman and Oliver Hart used the theory of incomplete contracts to develop answers to the question "What is a firm, and what determines its boundaries?" in their path-breaking paper on "The Costs and Benefits of Ownership: A Theory of Vertical ...

Labor Supply and the Extensive Margin

By Richard Blundell, Antoine Bozio, and Guy Laroque

American Economic Review, May 2011

In this paper we propose a systematic way of examining the importance of the extensive and the intensive margins of labor supply in order to explain the overall movements in total hours of work over time. We show how informative bounds can be developed on...

Models of Energy Use: Putty-Putty versus Putty-Clay

By Andrew Atkeson and Patrick J. Kehoe

American Economic Review, September 1999

How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World's Fairs

By Petra Moser

American Economic Review, September 2005

Studies of innovation have focused on the effects of patent laws on the number of innovations, but have ignored effects on the direction of technological change. This paper introduces a new dataset of close to fifteen thousand innovations at the Crystal P...

Do Immigrants and Their Children Free Ride More Than Natives?

By Una Okonkwo Osili and Jia Xie

American Economic Review, May 2009

Structural Change in a Multisector Model of Growth

By L. Rachel Ngai and Christopher A. Pissarides

American Economic Review, March 2007

We study a multisector model of growth with differences in TFP growth rates across sectors and derive sufficient conditions for the coexistence of structural change, characterized by sectoral labor reallocation and balanced aggregate growth. The condition...

Price Pressure in the Government Bond Market

By Robin Greenwood and Dimitri Vayanos

American Economic Review, May 2010

The Impact of Economic Freedom on the Black/White Income Gap

By Gary A. Hoover, Ryan A. Compton, and Daniel C. Giedeman

American Economic Review, May 2015

Using state-level data from 1980-2010 we examine whether economic freedom, as measured by the Economic Freedom of North America Index, has had any impact in increasing or decreasing the ratio of median income for black households to the median income of w...