Cover -- Half-title -- Series-title -- Title -- Copyright -- Contents -- Contributors -- Preface -- CHAPTER 1 Auctions and Efficiency -- 1. INTRODUCTION -- 2. THE BASIC MODEL -- 3. AUCTIONS -- 4. AN EFFICIENT AUCTION -- 5. THE ENGLISH AUCTION -- 6. MULTIPLE GOODS -- 7. MULTIDIMENSIONAL SIGNALS -- 8. FURTHER WORK -- ACKNOWLEDGMENTS -- APPENDIX: BUYER 1'S PAYMENT WHEN ALLOCATED BOTH GOODS IN A TWO-GOOD, TWO-BUYER AUCTION -- References -- CHAPTER 2 Why Every Economist Should Learn Some Auction Theory -- 1. INTRODUCTION -- 2. USING AUCTION-THEORETIC TOOLS IN ECONOMICS: THE REVENUE EQUIVALENCE THEOREM -- 2.1. Comparing Litigation Systems -- 2.2. The War of Attrition -- 2.3. Queueing and Other "All-Pay" Applications -- 2.4. Solving for Equilibrium Behavior: Market Crashes and Trading "Frenzies" -- 3. TRANSLATING LOOSER ANALOGIES FROM AUCTIONS INTO ECONOMICS: ASCENDING VS. (FIRST-PRICE) SEALED-BID AUCTIONS -- 3.1. Internet Sales vs. Dealer Sales -- 3.2. Anglo-Dutch Auctions, a Theory of Rationing, and Patent Races -- 4. EXPLOITING DEEPER CONNECTIONS BETWEEN AUCTIONS AND ECONOMICS: MARGINAL REVENUES -- 5. APPLYING AUCTION THEORY TO PRICE-SETTING OLIGOPOLIES -- 5.1. Marginal-Cost Pricing Is Not the Unique Bertrand Equilibrium -- 5.2. The Value of New Consumers -- 5.3. Information Aggregation in Perfect Competition -- 6. APPLYING AUCTION THEORY (AND ECONOMICS) TO AUCTION MARKETS -- 6.1. Important Auction Markets -- 6.2. Applying Economics to Auction Design -- 7. CONCLUSIONS -- ACKNOWLEDGMENTS -- APPENDIX 1: COMPARING LITIGATION SYSTEMS -- APPENDIX 2: DIRECT PROOF OF MONOPOLY-THEORETIC VERSION OF PROPOSITION IN SECTION 4 -- References -- CHAPTER 3 Global Games: Theory and Applications -- 1. INTRODUCTION -- 2. SYMMETRIC BINARY ACTION GLOBAL GAMES -- 2.1. Linear Example -- 2.2. Symmetric Binary Action Global Games: A General Approach.

2.2.1. Continuum Players: Uniform Prior and Private Values -- 2.2.2. Continuum Players: General Prior and Common Values -- 2.2.3. Discussion -- 2.3. Applications -- 2.3.1. Pricing Debt -- 2.3.2. Currency Crises -- 3. PUBLIC VERSUS PRIVATE INFORMATION -- 3.1. The Publicity Multiplier -- 3.2. Limiting Behavior -- 3.3. Sufficient Conditions for Uniqueness -- 4.THEORETICAL UNDERPINNINGS -- 4.1. General Global Games -- 4.2. Higher-Order Beliefs -- 4.3. Common p-Belief and Game Theory -- 4.4. Robustness to Incomplete Information -- 4.5. Noise-Independent Selection -- 5. RELATED MODELS: LOCAL HETEROGENEITY AND UNIQUENESS -- 5.1. Local Interaction Games -- 5.2. Dynamic Games -- 5.2.1. Dynamic Payoff Shocks -- 5.2.2. Recurring Incomplete Information -- 5.2.3. Herding -- 6. CONCLUSIONS -- ACKNOWLEDGMENTS -- APPENDIX A: PROOF OF PROPOSITION 2.2 -- APPENDIX B: THE FINITE PLAYER CASE -- APPENDIX C: PROOF OF LEMMA 2.3 -- References -- CHAPTER 4 Testing Contract Theory: A Survey of Some Recent Work -- 1. INTRODUCTION -- 2. CONTRACTS AND BEHAVIOR -- 2.1. Testing for Asymmetric Information -- 2.2. Experiments -- 2.3. Natural Experiments -- 2.4. Explicit Modeling -- 2.4.1. Econometric Tools -- 2.4.2. Structural Models of Regulation under Adverse Selection -- 2.4.3. Structural Models Involving Moral Hazard and Selection -- 2.5. Using Behavioral Dynamics -- 3. ARE CONTRACTS OPTIMAL? -- 3.1. Static, Complete Contracts -- 3.1.1. Managerial Pay -- 3.1.2. Sharecropping -- 3.2. Multitasking -- 3.3. Incomplete Contracts/Transaction Costs -- 3.4. Dynamics of Contracts -- 3.4.1. Dynamic Models of Asymmetric Information -- 3.4.2. Symmetric Learning -- 4. CONCLUSIONS -- ACKNOWLEDGMENTS -- References -- CHAPTER 5 The Economics of Multidimensional Screening -- 1. MOTIVATION AND INTRODUCTION -- 2. A REVIEW OF THE ONE-DIMENSIONAL PREFERENCE MODEL.

2.1. The Parametric-Utility Approach -- 2.2. The Demand-Profile Approach -- 3. THE GENERAL MULTIDIMENSIONAL SCREENING PROGRAM -- 3.1. A General Discrete Formulation -- 3.2. The Continuous Case -- 3.3. Tractable Discrete Models -- 4. AGGREGATION AND SEPARABILITY -- 4.1. Aggregation -- 4.2. Separability -- 5. ENVIRONMENTS WITH ONE-DIMENSIONAL INSTRUMENTS -- 6. ENVIRONMENTS WITH RANDOM PARTICIPATION -- 6.1. A General Framework -- 7. COMPETITIVE ENVIRONMENTS -- 7.1. A Variety of Demand-Profile Approaches -- 7.2. A Specific Approach: Location Models (Hotelling Type) -- 8. SEQUENTIAL SCREENING MODELS -- 9. PRODUCT BUNDLING -- 9.1. Some Simple Bundling Environments -- 9.1.1. The Case of n =m =2: Similarities with the One-Dimensional Paradigm -- 9.1.2. The Case… The Homogenizing Effect of the Law of Large Numbers -- 9.2. General Results on Product Bundling -- 10. CONCLUDING REMARKS -- ACKNOWLEDGMENTS -- References -- A Discussion of the Papers by Pierre-Andre Chiappori and Bernard Salanié and by Jean Charles Rochet and Lars A. Stole -- 1. ROCHET-STOLE AND CHIAPPORI-SALANIÉ -- 1.1. RS: Multidimensional Screening -- 1.2. CS: Capturing (Endogenous) Heterogeneity -- 2. TOWARD A CONSTRUCTIVE DIALOGUE -- 2.1. More Theory or More Facts? Necessity of a Dialogue -- 2.2. Omitted Variables -- 3. REVISITING SOME EXAMPLES -- 3.1. The Risk-Incentive Trade-off -- 3.2. From Fixed Wages to Piece Rates -- 3.2.1. Incentives Matter -- 3.2.2. Outside Options Matter -- References -- CHAPTER 6 Theories of Fairness and Reciprocity: Evidence and Economic Applications -- 1. INTRODUCTION -- 2. EMPIRICAL FOUNDATIONS OF FAIRNESS AND RECIPROCITY -- 2.1. Where Does Fairness Matter? -- 2.2. Experimental Evidence -- 2.3. Interpretation of the Evidence -- 3. THEORIES OF FAIRNESS AND RECIPROCITY -- 3.1. Social Preferences -- 3.1.1. Altruism -- 3.1.2. Relative Income and Envy.

3.1.3. Inequity Aversion -- 3.1.4. Altruism and Spitefulness -- 3.2. Models of Intention-Based Reciprocity -- 3.2.1. Fairness Equilibrium -- 3.2.2. Intentions in Sequential Games -- 3.2.3. Merging Intentions and Social Preferences -- 3.3. Axiomatic Approaches -- 4. DISCRIMINATING BETWEEN THEORIES OF FAIRNESS -- 4.1. Who Are the Relevant Reference Actors? -- 4.2. Equality Versus Efficiency -- 4.3. Revenge Versus Inequity Reduction -- 4.4. Does Kindness Trigger Rewards? -- 4.5. Summary and Outlook -- 5. ECONOMIC APPLICATIONS -- 5.1. Competition and Fairness-When Does Fairness Matter? -- 5.2. Endogenous Incomplete Contracts -- 5.3. The Optimal Allocation of Ownership Rights -- 6. CONCLUSIONS -- ACKNOWLEDGMENTS -- References -- CHAPTER 7 Hyberbolic Discounting and Consumption -- 1. INTRODUCTION -- 2. HYPERBOLIC DISCOUNTING -- 3. THE CONSUMPTION PROBLEM -- 3.1. Buffer-Stock Assumptions -- 3.2. Hyperbolic Preferences -- 3.3. Equilibrium -- 4. EXISTENCE AND UNIQUENESS -- 4.1. Technical Assumptions -- 4.2. The Bellman Equation of the Hyperbolic Consumer -- 4.3. The Finite-Horizon Case: Current-Value Functions -- 4.4. The Finite-Horizon Case: Consumption Functions -- 4.5. The Infinite-Horizon Case: Existence -- 4.6. The Infinite-Horizon Case: Uniqueness -- 4.7. The Finite-Horizon Case: Robustness -- 5. GENERALIZED EULER EQUATION -- 5.1. Heuristic Derivation of the Hyperbolic Euler Relation -- 5.2. Exact Derivation -- 6. NUMERICAL SOLUTION AND CALIBRATION OF THE MODEL -- 7. PROPERTIES OF THE CONSUMPTION FUNCTION -- 7.1. Pathologies: Violations of Continuity, Monotonicity, and Concavity -- 7.2. Sufficient Conditions for Continuity, Monotonicity, and Concavity of the Consumption Function -- 8. CONSUMPTION APPLICATIONS -- 8.1. Model Summary -- 8.2. Simulation Results of ALRTW -- 9. NAIFS VERSUS SOPHISTICATES -- 10. NORMATIVE ANALYSIS AND POLICY IMPLICATIONS.

10.1. The Value of Commitment -- 11. EXTENSIONS -- 11.1. Asset Uncertainty -- 11.2. Continuous-Time Hyperbolic Models -- 12. CONCLUSIONS -- ACKNOWLEDGMENTS -- APPENDIX PROOF OF THEOREM 4.5 -- References -- A Discussion of the Papers by Ernst Fehr and Klaus M. Schmidt and by Christopher Harris and David Laibson -- References -- CHAPTER 8 Agglomeration and Market Interaction -- 1. INTRODUCTION -- 2. MODELING STRATEGIES OF ECONOMIC AGGLOMERATIONS -- 2.1. Breakdown of the Competitive Price Mechanism in a Homogeneous Spatial Economy -- 2.2. What Are the Alternative Modeling Strategies? -- 3. CORE AND PERIPHERY: A MONOPOLISTIC COMPETITION APPROACH -- 3.1. The Framework -- 3.2. A Model with CES Utility and Iceberg Transport Costs -- 3.2.1. The Core-Periphery Structure -- 3.2.2. The Symmetric Structure -- 3.3. A Linear Model of Core-Periphery -- 3.3.1. A Model with Quadratic Utility and Linear Transport Costs -- 3.3.2. The Debate Agglomeration Vs. Dispersion Revisited -- 4. FURTHER TOPICS IN ECONOMIC GEOGRAPHY -- 4.1. On a Intersection--Shaped Relationship Between Agglomeration and Transport Costs -- 4.2. Welfare Implications of the Core-Periphery Structure -- 4.3. On the Impact of Forward-Looking Behavior -- 4.4. The Impact of a Heterogeneous Labor Force -- 4.5. Intermediate Sector and Industrial Agglomeration -- 4.6. On the Formation of an Urban Hierarchy -- 5. SUGGESTIONS FOR FUTURE RESEARCH AND POLICY IMPLICATIONS -- ACKNOWLEDGMENTS -- References -- CHAPTER 9 Nonmarket Interactions -- 1. INTRODUCTION -- 2. THEORETICAL MODELS OF NONMARKET INTERACTIONS -- 2.1. A Model of Nonmarket Interactions -- 2.2. Some Examples -- 2.3. Equilibria with Continuous Actions -- 2.4. "Mean Field" Models with Large Populations and Discrete Actions -- 2.5. Choice of Peer Group -- 3. EMPIRICAL APPROACHES TO SOCIAL INTERACTIONS -- 3.1. Variances Across Space.

3.2. Regressing Individual Outcomes on Group Averages.