We show that, in repeated common interest games without discounting, strong ‘perturbation implies efficiency’ results require that the perturbations must include strategies that are ‘draconian’ in the sense that they are prepared to punish to the maximum extent possible. Moreover, there is a draconian strategy whose presence in the perturbations guarantees that any equilibrium is efficient. We also argue that the results of Anderlini and Sabourian (1995) using perturbation strategies that are cooperative (and hence nondraconian) are not due to computability per se but to the further restrictions they impose on allowable beliefs.

It is well known that unless worker-firm match quality is controlled for, reduced-form estimates of returns to firm tenure will be biased. In this paper, we show that there is a further pervasive source of bias, namely, the comovement of firm employment and firm wages. We argue that firm-year fixed effects must be used to eliminate this bias. Estimates from two large-panel data sets from Germany and Portugal show that the bias is empirically important. Finally, we show that the results extend to tenure correlates used in macroeconomics, such as the minimum unemployment rate since joining the firm.

We study how emergency department (ED) doctors respond to incentives to reduce wait times. We use bunching techniques to study an English policy that imposed strong incentives to treat patients within four hours. The policy reduced time spent in the ED by 21 minutes for affected patients yet caused doctors to increase treatment intensity and admit more patients. We find a striking 14% reduction in mortality. Analysis of patient severity and hospital crowding strongly suggests it is the wait time reduction that saves lives. We conclude that, despite distorting medical decisions, constraining ED doctors can induce cost-effective reductions in mortality.