We analyze the effect of homophily in the diffusion of a harmful state between two groups of agents that differ in immunization rates. Homophily has a very different impact on the steady state infection level (that is increasing in homophily when homophily is small, and decreasing when high), and on the cumulative number of infections generated by a deviation from the steady state (that, instead, is decreasing in homophily when homophily is small, and increasing when high). If immunization rates are endogenous, homophily has the opposite impact on the infection level of the two groups. However, the sign of the group-level impact is reversed if immunization is motivated by infection risk or peer pressure. If motivations are group-specific, homophily can decrease immunization in both groups.

Resource wealth induces predation incentives but also conflict-deterring third-party involvement. As a result, the relation between resource value and conflict probability is a priori unclear. This paper studies such relation with a flexible theoretical framework involvin a potential aggressor and a powerful third party. First, we show that, if the third party's incentives to intervene are suciently strong, conflict probability is hump-shaped in the resource value. Second, we theoretically establish that resource value increases the third party's incentive to side with the resource-rich defendant in case of intervention, providing another mechanism for stabilization when the resource value is high. Third, we explain how our theory relates to policy-relevant case studies involving conflict-ridden areas and powerful third parties, focusing on US and Chinese foreign policies.

We study the welfare effects of overreaction to information in markets with asymmetric information as well as the impact of a simple intervention in the form of a tax or a subsidy on trade volume. A large enough level of overreaction is always welfare decreasing: in these situations, introducing a tax can improve welfare. However, a small degree of overreaction can increase welfare. This is because of the interplay of two competing externalities: an information externality, due to the informational role of prices, and a pecuniary externality, due to the allocative role of prices. Depending on the balance of these externalities, a trade volume subsidy may be optimal.  

This paper models firm-to-firm trade in a production network as a set of double auctions. Firms have “multilateral market power”, namely, can affect prices in both input and output markets. The size and division of surplus are endogenous and depend only on technology, network position, and consumer preferences. The standard simplifying assumption of price-taking on input markets (“unilateral market power”) has systematic effects: it leads to underestimate the final price and overestimate the surplus going upstream. These phenomena affect the model predictions for the welfare impact of mergers.

We study how sector-specific shocks propagate in a production economy with input-output linkages and heterogeneous time to build. We show that, depending on the sector and network characteristics, one-time idiosyncratic shocks can induce a non-monotonic response of aggregate output as it converges back to steady state--a phenomenon we term 'endogenous oscillations'--and get amplified over time. We study the conditions on the network structure that generate this behavior. We introduce a measure to quantify the magnitude of such endogenous oscillations generated by a single small productivity shock. We quantify the model on US input-output data, showing that for some sectors a single shock can generate aggregate fluctuations. In particular, the magnitude of oscillations is twice as large as it would be if convergence to the steady state were always monotonic.

To be updated soon

In a production network economy, time to build decreases the volatility generated by productivity shocks, while it increases the volatility generated by demand shocks. This happens because time to build changes the propagation mechanism of demand shocks: since quantities are pre-determined, demand shocks directly affect prices, a channel absent without time to build. 

We consider a version of Pandora's box problem in which the distributions of the various alternatives' utilities are ranked by first-order stochastic dominance and possibly correlated. Under independence, Weitzman's optimal search rule prescribes inspecting the dominant alternative first. We show that, with correlation, this sampling order remains optimal if there are two alternatives, each with only two possible utility levels. Next, we show that, with three possible utility levels for each alternative, inspecting the dominated alternative first can be optimal: we provide sufficient conditions for this to happen. 

The relationship between resource value and conflict in a territory is affected by the interest of powerful third parties, which could deter predators. By employing widely-used measures of resource value and geologic predictors of oil presence, as well as a measures of third party presence, we examine this relationship, providing evidence of non-monotonicity in countries exposed to a powerful third party. We show that conflict probability is nonmonotonic in the value of oil in a country, in areas under US military influence. As we show, US influence in the data proxies for a higher probability of intervention in case of conflict, which may deter predator conflict in countries with large resource value. 

We study the supply-side direction of innovation in human enhancement technologies whose effects are inheritable across generations or confined to the treated individual. In a three-generation framework with heterogeneous agents, binding budget constraints, uncertainty about outcomes, and the possibility of imitation by entrants, inheritability creates a distinctive appropriability problem: a single purchase generates benefits for future descendants, but firms cannot charge those future beneficiaries. This intergenerational non-appropriability can reverse the private ranking of projects relative to their social value, leading decentralized research to favor non-inheritable enhancements even when inheritable ones maximize welfare, under high risk and limited entry to tilt excessively toward inheritability. We characterize equilibrium timing, the conditions under which innovation is inefficiently directed, and how inequality shapes adoption and profits. We also extend the model to competing researchers and show that standard congestion effects do not eliminate the core wedge between private incentives and social efficiency.