A two-state model of strikes, in which both the entrepreneur and the worker randomize their behavior, is developed. The entrepreneur always asks for a wage reduction unaccompanied by a cut in labor services if the state is bad, and he sometimes makes the same request in the good state. The worker sometimes agrees to this request and sometimes threatens to strike. The strike threat is only carried out in the bad state. This equilibrium can Pareto dominate that found in the standard asymmetric information contracting model.

The stationary equilibrium of an overlapping generations economy in which agents trade a single asset is examined. If agents live for only two periods, the selling prices follow an identically and independently distributed process. If agents live for more than two periods, the selling prices follow a Markov process. An implication of the model is that price bubbles can occur in a stationary, rational expectations equilibrium.

The stationary equilibrium of an overlapping generations economy in which agents trade a single asset is examined. If agents live for only two periods, the selling prices follow an identically and independently distributed process. If agents live for more than two periods, the selling prices follow a Markov process. An implication of the model is that price bubbles can occur in a stationary, rational expectations equilibrium.