Equilibrium price distributions (for a homogeneous product) consistent with individual incentives are investigated. They arise in informationally imperfect markets in which the only primitive datum is the distribution of search costs. It is shown that single, multi- and continuous price distributions are all viable long-run phenomena depending on the nature of search costs. A method for computing equilibrium price distributions is also provided.

This paper endogenizes the frequency of major discoveries and the extent of their refinement.Four axioms deliver a one-parameter family of beliefs that guide exploratory effort.Such effort trades off the prospect of major new discovery against the chance of successfully refining discoveries made in the past.The only other parameter is the cost of making new discoveries relative to the cost of refining old ones.The paper derives time-series properties of inventive activity as they relate to the two parameters, and it discusses several specific inventions and their subsequent refinement.In doing so, the paper arguably enhances our understanding of the process of discovery.1 We thank the C. V. Starr Center for Applied Economics for technical and financial assistance.The second

The increasing dependence of individuals on debt financing raises several welfare considerations that we analyze in this paper. We develop a dynamic, competitive model of relationship banking to determine how regulation influences borrowing and lending behavior, and analyze how it affects welfare in the market. We characterize the lending regimes that arise based on public policy, and evaluate the optimal choice by the government to induce particular lending practices to arise. Finally, we consider the effect that a credit reporting agency has on the market. In the paper, we highlight the new empirical implications that the model generates.