Taylor's model of staggered contracts is an influential explanation for nominal inertia and the persistent real effects of nominal shocks. However, in standard imperfect competition models, if agents are allowed to choose the timing of pricing decisions, they will typically choose to synchronize. This paper provides a simple model of imperfect competition which produces stable staggering. Our argument relies on strategic interaction at two levels—between firms within an industries, and across industries—and produces a continuum of staggered price equilibria. These equilibria are strict, and hence stable under a simple adaptive learning process.

This paper analyses the sustainability of inter-generational transfers in Samuelson's consumption-loan model when agents are imperfectly informed about past events. We find that with mild informational constraints, transfers cannot be supported by pure-strategy equilibria. Mixed strategies allow transfers to be sustained even if agents have little information, so that a version of the Folk theorem holds. However, these equilibria are not robust. If each agent's utility function is subjected to a small random perturbation as in Harsanyi (1973), these mixed strategy equilibria unravel, and only the zero-transfer allocation survives as the unique rationalizable outcome. This result is an example of mixed strategy equilibrium of an extensive form game which cannot be purified.

We study stochastic games with an infinite horizon and sequential moves played by an arbitrary number of players. We assume that social memory is finite--every player, except possibly one, is finitely lived and cannot observe events that are sufficiently far back in the past. This class of games includes games between a long-run player and a sequence of short-run players, and games with overlapping generations of players. An equilibrium is purifiable if some close-by behaviour is consistent with equilibrium when agents' payoffs in each period are perturbed additively and independently. We show that only Markov equilibria are purifiable when social memory is finite. Thus if a game has at most one long-run player, all purifiable equilibria are Markov. Copyright 2013, Oxford University Press.

We analyze premarital investments in human capital and housing when individuals are unable to make binding commitments to share their labor income with a prospective spouse. Investments are distorted if there are gender differences in bargaining power over own labor income or marriage market imbalances. Distortions are magnified when ex ante bargaining power favors one sex (e.g., women in China) and ex post bargaining power favors the other (e.g., men in China), since parents of boys will increase housing investments in order to credibly commit to share more resources with the boy’s potential wife, possibly crowding out human capital investments.