An inter-governmental body is encouraging the replacement of currency with the objective of discouraging illegal economic activities. This policy is analyzed in a searchtheoretic model where individuals choose legal or illegal production, settle trades via monetary or costly intermediated exchange, and where the government imperfectly monitors monetary transactions. Stationary monetary equilibr...

Authors of experimental, empirical, theoretical and computational studies of two-sided matching markets have recognized the importance of correlated preferences. We develop a general method for the study of the effect of correlation of preferences on the outcomes generated by two-sided matching mechanisms. We then illustrate our method by using it to quantify the effect of correlation of prefer...

We consider general two-sided matching markets, so-called matching with contracts markets as introduced by Hatfield and Milgrom (2005), and analyze (Maskin) monotonic and Nash implementable solutions. We show that for matching with contracts markets the stable correspondence is monotonic and implementable (Theorems 1 and 3). Furthermore, any solution that is Pareto efficient, individually ratio...

We consider envy-free and budget-balanced allocation rules for problems where a number of indivisible objects and a fixed amount of money is allocated among a group of agents. In “small” economies, we identify under classical preferences each agent’s maximal gain from manipulation. Using this result we find the envy-free and budget-balanced allocation rules which are least manipulable for each ...

In the many-to-one matching model with contracts, I show that there is no restriction on preferences weaker than substitutable preferences which guarantees that the set of stable matches is a lattice. Thus, when contracts are not substitutes, removing agents from the economy may decrease the payoffs to existing agents on both sides of the market. I introduce a new necessary condition to guarant...

We study a 2-sided matching market with a set of heterogeneous firms and workers in an environment where jobs are secured by regulation. Without job security Kelso and Crawford have shown that stable outcomes and efficiency prevail when all workers are (weak) gross substitutes to each firm, in the sense that increases in other workers’ salaries can never cause a firm to withdraw an offer from a...

We consider a class of dynamic collective action problems in which either a single principal or two competing principals vie for the support of members of a group. We focus on the dynamic problem that emerges when agents negotiate and commit their support to principals sequentially. A danger for the agents in this context is that a principal may be able to succeed by exploiting competition amon...

Economic decisions have been shown to depend on actual outcomes as well as perceived intentions. In this paper, we examine whether and how the relative importance of outcomes or intentions for economic decisions develops with age. We report the results of ultimatum games with children, teens and students. We find that children and teens react systematically to perceived intentions, like student...

In this note we introduce weak stability, a relaxation of the concept of stability for the marriage model by assuming that the agents are no longer myopic in choosing a blocking pair. The new concept is based on threats within blocking pairs: an individually rational matching is weakly stable if for every blocking pair one of the members can find a more attractive partner with whom he forms ano...

Players bargained over chips with different exchange rates and with different information regarding these exchange rates. Offers generally reflected a self-serving definition of fairness. There is ample evidence that relative income shares entered players utility functions, resulting in predictable variations in both rejection rates and offers. However, offers were significantly more likely to ...